With 30 minutes left until the minutes

I decided to take a quick look at the risk asset layout, there wasn't much out of place except a few of the assets we monitor had some strong volatility in them, like Yields. HY Credit also remains in a fairly bullish place, it hasn't moves much, but hasn't given up much ground either.

I just want to remind everyone, there's almost always a Knee-Jerk reaction to F_E_D policy issues, you can't always count on the first reaction, so expect volatility.

From the charts and many having very strong signals on one timeframe, but laking good confirmation on nearby timeframes, I would interpret that as a warning to be prepared for volatility as it would seem to me different factions are preparing to trade different trends in nearby volatility.

If I was running my own hedge fund right now, my primary course of action would be no action at all. You don't bet on volatility, you wait for high probability trades, as tempting as it is. Thus the Call positions are speculative and can be closed quickly if need be, but also are spread out to take advantage of any trends that may emerge from the minutes.

Just be prepared for volatility.

GLD Update

Many of you know my least favorite assets to analyze are #1 SLV because of the manipulation and more recently, GLD because of the change in trend from a Primary uptrend to an intermediate downtrend with another longer term Primary trend (up) that seems to be developing-DEVEOPING-not there yet.

So GLD is where I'd think to look on anything F_E_D related, but it's just not giving consistent signals, part of that is because of what I believe is a transition in the long term trend, but even the shorter term charts are all over the place. We had some good trades in GLD, trading form the short side, but now I don't see enough confirmed evidence to even support that right now.

I did want to show you 1 chart that is a bit interesting today as we found out with USO yesterday, 1 chart can make a difference (I'm speaking of USO's late day leading positive divergence that sent USO higher today).

 GLD's 2 min chart-leading positive. There's not very good confirmation on either side of this timeframe, but the move itself is worth pointing out. If I was a guru I'd tell you what this means (whether I knew or not), I'm not a guru, I'd rather be a better risk manager and say, "If there's not good confirmation (a strong edge), it's probably best to wait it out until there is, even if I suspect I know which way this is going. That's the difference between gambling and trading.

 Recently I have grown a little more cautious of recent GLD put positions which have done well, the reason for the caution is the improving 15 min. chart, which is also in a recent leading positive position over the last day.

 The 30 min was confirmation of trading GLD from the short side, but now it has a relative positive divergence coming from the 15 min chart-so I'm not so hot on trading GLD from the short side as there are improvements (longer term I believe the primary trend is starting to improve and this may be part of that improvement).

 The 60 min chart was also confirmation to trade GLD from the short side, but it too is improving.

A closer view of the 60 min chart shows again, strong recent improvement the last day or so.

So while I don't see the typical edge in the short term charts in which I'd normally use as confirmation for a trade, I do see improvement and suspect that this whole recent ordeal is probably VERY much about the minutes and perhaps even some leaked information.

Decided-SPY/IWM Calls-Speculative position

I decided to split it and go with:

SPY July 132 Calls and

IWM Aug. $79 Calls

I have some time if need be and the July calls will move faster if this is a quick move.

I REPEAT, this is a SPECULATIVE trade, I wouldn't be swinging for the fences here.

Here we go again-Maybe some short term Calls are appropriate...

It's mostly the SPY, as the other averages (as shown earlier are not doing exactly the same, but have the same theme) are in a similar mode.

I'm thinking about maybe buying some SPY Calls, the only thing is I think you'd need to be very nimble and be able to react quickly to the 2 p.m. minutes release if need be.

 SPY 5 min leading positive

 DIA 5 min leading positive

 IWM 2 min leading positive

QQQ 2 min leading positive

It seems like a quick buck can be made here, I would consider this a VERY speculative trade as we don't have a full picture, but we keep seeing these moves.

I'll let you know what I decide, but obviously it needs to be decided soon.

USO making a move

USO is making a move above intraday resistance, it doesn't seem to be a 3C move or connected to the Euro/Dollar, I would think it has more to do with orders at resistance being hit or... perhaps there's some geo-political news.

BPZ Update-All seems well

I started a long (no leverage) equity model portfolio position in BPZ on June 18th.

That position is down a little over 4% right now, but I still like it and it is actually doing what was expected.

 Position down 4.41% currently

June 18th (white arrow) is the entry. In retrospect, knowing there was a bearish continuation pattern and knowing there were a lot of bear traps being set at the time, I should have been more patient and waited for the bear trap below the descending triangle, but I believe I was thinking BPZ might be small enough that it may not see such a move-I WAS WRONG.

At the yellow arrow on July 5th, I posted this update as trade was looking too obvious. In that update I pointed out the pullback to the trendline and said,

" On a 15 min chart BPZ has pulled back to a near term trend line, this is probably a little too obvious as traders would look to pick up BPZ long on a pullback to the trendline which they would view as support, that alone probably is enough to argue for a deeper pullback."


And a deeper pullback is exactly what followed, starting that same day!


I still like BPZ, as you can see it's a speculative long position as I feel most longs should be speculative given the primary charts' tone.


Here's an update on BPZ...

 At the yellow square, that's about where we were when I posted the last update about a deeper pullback, since the pullback has flattened out in a lateral trend, which is where we often see accumulation. The 15 min chart shows a Tweezer top resistance area at $2.45, that's the area to keep an eye on for a resumption of the move up.

 The 1 min chart since the pullback post...

 2 min

 3 min-good migration through the shorter timeframes, however the reason I really liked BPZ was the longer timeframes, this is also the reason I chose a non-leveraged, straight long position as I didn't want to be trading around BPZ with leveraged options, but rather just take a more hands off, longer term approach. Also with the way the longer term charts look, I see no reason for needing leverage on a trade like this. Believe it or not, I'm not a big fan of options and only use them when I feel the leverage is needed to make the trade worthwhile, otherwise I'd rather avoid it as you can probably tell by how quickly I'll move out of a leveraged position in options at the first hint of the trade going the other way, even on a small correction.

 The 15 min chart is looking good, what I want to see now is a strong leading positive divergence run through the shorter term timeframes.

 The 30 min chart probably needs no commentary.


Nor do the 60 min above or 4 hour below and this is the reason I like BPZ longer term.

EIA Petroleum report.

I wanted to short USO earlier in the week, the charts just didn't line up so I didn't take the chance. Yesterday USO was one of the assets that saw late day leading positive divergences and it opened higher this morning, so good thing I didn't make a move there.

Here's the EIA Petroleum report released this morning
Released On 7/11/2012 10:30:00 AM For wk7/6, 2012

	Prior	Actual
Crude oil inventories (weekly change)	-4.3 M barrels	-4.7 M barrels
Gasoline (weekly change)	0.2 M barrels	2.8 M barrels
Distillates (weekly change)	-1.1 M barrels	3.1 M barrels

We have a slightly larger draw than last week in crude inventories, however USO's barely reacted, the biggest reaction was from yesterday's late day positive leading divergence as USO gapped up well before the inventories were released.

Here's the reaction to the release...

 Like I said, barely reacted, the main reaction came from yesterday's positive divergence late in the day (the last hour) as well as the short term positives in the Euro and short term negatives in the $USD, which confirm the move in USO this a.m. as being in sync with the short term move in currencies along the lines of the correct correlation (at least for the short term).

 Yesterday's surprising and very fast leading positive on a 1 min chart

 The same can be seen on the  min with an overall positive trend in 3C, which is why I couldn't open a short position and I'm glad I didn't. This is why patience and waiting for the right set up are important.

 The 5 min chart was pretty much in line the last several days and only went positive late yesterday, it continues positive today-another reason I wouldn't open a short position in USO.

The 15 min chart is negative, not in a huge way, but enough that I wouldn't want to be long USO either right now.

The F_O_M_C_ Minutes?

We all know the F_O_M_C releases a policy statement, after that the details of the actual meeting in the form of the minutes come out, this is where investors can get a feel for who's thinking what and there could be some potentially important comments there that were not reflected in the F_O_M_C policy statement, I have to wonder if this "phenomena" we are seeing is connected to the minutes? If so, is it just out of caution, "make no big moves until the minutes are released" or a leak?

Perhaps it has nothing to do with the minutes, but the timing is strange.

Here's an example of what I'm talking about and I don't see anything to suggest any real changes this morning...

 SPY 1 min this a.m. seems to be in line with price, but the 3C moves up were more than in line, this is what gets accrued on the longer charts.


 The 2 min chart looked fine and was telling us to look for a move in to the gap which happened on the open of the 10th, but from there, the 2 min chart should, or I'd expect it would, have confirmed the lower prices, yet it remains in the same leading positive position it was in before we got the short term move up we expected on the 10th. I can only assume from what the charts show here that there's more upside as it appears weakness is being bought, not in a HUGE way, but its pretty solid for a decent move up, which could put us in short squeeze territory again.

 The 3 min chart (the point here is the migration-it's not 1 or 2 timeframes that are giving a strange reading), the first divergence is what we saw and expected to see a move higher from, that happened on the open of the 10th, yet 3C remains in positive position rather than confirming the move down in prices, I can only interpret that as short term accumulation of price weakness.

 The 5 min chart hasn't been effected at all since the 10th and lower prices, it remains in the same leading positive position, with a chart like this, I'd expect a move above the 5th's highs.

 However when we talked about a decent pullback, that was because of the leading negative position of this 15 min. chart which is still in leading negative position. Based on what I see right now, I'd have to say we should still be on the lookout for another short term move up, similar to what we saw on the 10th followed by a decent size pullback, however the caveat now would be that since the short term charts have remained in leading positive position for a longer period of time, they've had more time to soak up shares (accumulation). I would think if the market were just nervous about committing before the minutes out at 2 p.m. today, we'd see a more 'in line" stance from 3C. I can only interpret this as a stronger move higher than the 10th for a longer period, but still within the realm of a short term move (maybe several days-maybe close to a trading week). I'd still expect a decent (larger) pullback after that based on the 15 min chart, unless it changes (either becomes more bearish or strengthens).

Here are some examples of other charts in other averages, the point being, each is kind of unique in the way they have come to be in this position, but overall, each are still in a similar position, like what we see above in the SPY.

 DIA this morning on the 2 min with a relative positive divergence shows this same activity is continuing.

 DIA 3 min, the white arrow told us to expect the move on the 10th, what followed after that though has kept the upside pressure on, or in other words, it still appears the shorter term charts are accumulating price weakness.

 The large leading positive late yesterday in the IWM and many others on a  2 min chart.

 We see the same on a 3 min so it doesn't look like random noise as it migrated to the next longer timeframe as it should.

 IWM 5 min in leading positive position, this is the longest of what I'd consider to be the intrada

QQQ 1 min with yesterday's late day strength and the same behavior continuing today.

The 2 min is also in a positive divergence.

The 5 min QQQ positive divergence.

Overnight and In to the Open

Overnight was unusually quiet, markets and volume have been thing causing a bit of volatility for the most part.

Spain announced 65bn in budget cuts over the next 2.5 years, while their in a deep recession, but that was an example of the news flow overnight.

News or rumor is out that Asian countries have been selling the dollar very recently and buying the EUR/USD pair, which might explain the strange 3C charts in both currencies from yesterday.

The Australian dollar got a boost from overnight Australian Consumer Confidence coming in higher than expected.

In some news regurgitation, Finland reiterated they will not participate in the Spanish Banking bailout without Spanish collateral being offered, which is old news.

Some new news on the Spanish banking bailout, the draft bailout document says Spain will have to cede control of its banking sector to EU institutions and losses will be taken by (local) owners of junior bonds and preferred shares of the banks. This could get interesting as most of the people in this class are Spanish savers and small depositors.

In what I've been talking about for years, the Labor Department admitted that there have been leaked economic reports, I believe "consistently leaked" was used to describe the situation.

As for the US, the F_E_D  or rather F_O_M_C minutes are due at 2 p.m. today which may indeed be interesting.

Overnight trade was about as interesting as the news flow...

 The EUR/USD gained since the 4 p.m. close yesterday.

 It's still pretty flat on the new week

 And here it is since the start of July.

ES was choppy, but only moved about 1 point overnight so it's not even worth showing, however this small positive divergence going in to the open is.

I would call this a relatively quiet markets and long term members know how I feel about quiet markets, they're like quiet kids, they're usually up to something and you don't want to be caught flat-footed with your guard down when that something occurs.

Hopefully we'll have more data today to see just what the heck yesterday was about, perhaps the F_O_M_C minutes now that we can confirm for sure that huge market moving reports from the government are routinely leaked.

Strange day

After spending hours tonight looking all around for clues as to what was unfolding today, I'm no further than when I summed up what was seen late in the day.

In terms of price expectations based on charts from before Tuesday, expectations were met, a quick intra-day move in to Friday's gap area and that move failing-all of that happened today, however on the way down, the charts I'd expect to weaken did not, that would generally be the intraday charts from 2-5 minutes, while most of the 1 min charts were in confirmation of the move down as would be expected. Late in the day there were some very new and some very strong leading positive divergences, the trouble is they were late in the day which didn't give them time to develop to give us an idea of what exactly they were.

The most common conclusion might be something like the market is not done fooling about in this area or perhaps in the gap from Friday. The more far fetched theory would be that there was a dramatic shift in the market based on some insider knowledge and we were seeing the leading edge of that activity, again not having enough time in the day to let them develop and give us a better idea of what we were looking at.

It may just be something as benign as the first option, I don't think however it was what I initially thought, noise. The reason being is that it was so pervasive through so many asset classes, each a little different in how they behaved, but each behaving strangely.

One of the first things I did was to look at GLD to see if it may be some QE based rumor, while GLD's 3C chart didn't look as bad as price action itself, it didn't jump out as being the answer. Treasuries, at least on the long end where the F_E_D has been busy, showed some 3C weakness in to their normal move up on a market move down, again suggesting that as treasuries gained as a flight to safety trade, there was some underlying selling in treasuries, which again suggests some kind of risk on move, whether that be the market making a short term move like today in to the gap area or whether it is the start of something bigger and we just saw the very leading edge.

What I can say is that although expectations were met today price wise based on very clear 3C charts from Monday and late last week, the accompanying 3C action today did not fit well with the price action.

I would say something is going on. Throughout the day the intraday timeframes from 2-5 minutes did not deteriorate as I would have expected and late in the day, the last hour, we saw some unusually strong moves in various risk assets. The problem being, those moves have the potential to tell us a lot, but they didn't have enough time in the day to tell us much other than they were unusual, thus we'll have to wait for Wednesday's trade to see how they develop.

If this is something bigger brewing like some sort of QE leak, GLD is not making it obvious, Treasuries are not making it obvious, MBS have been strong price wise for the last week, but again the underlying action there doesn't confirm anything right now.

I've decided to do the only thing that can be done and wait for the message of the market to reveal itself. I don't want to get too far ahead of myself and start assuming that there's some QE-type leak out there, although that was my initial impression, there just isn't enough evidence to support something like that.

I also don't want to scrap the outlook of the various trends that have developed in 3C over days, weeks and months and thus far have been accurate based on some strangeness throughout the day and some very strange activity during the last hour. It's always interesting to see something you didn't expect to see or to see Wall Street react to some inside information and have that knowledge before most anyone else on the retail side, but for now, the responsible thing to do is not to make assumptions, but rather let the market tell us. Wall Street is like a large ship, it doesn't stop and turn on a dime, we can, so we have the luxury of being patient and letting the message reveal itself, whether it is nothing more than a short term blip or the leading edge of something bigger unfolding in the market, but I do feel pretty confident that it wasn't just noise.