SLV-WOW

Any one who knows me knows if there's one asset class I hate to analyze, it's SLV because it gets so manipulated.

I just looked at it for a member and saw something interesting, remember how I mentioned GLD looks like it is setting up a longer term bullish trend, SLV seems to have joined it.

Follow me here, first we seem to be just looking at a head fake move the last 2 days.

 Here we have the typical bear flag, last night I got a sentiment update and the blogs and Twitter stream are strewn with the bodies of bears who went short on BEARISH PRICE PATTERNS THAT ENDED UP BEING BEAR TRAPS. How many times in the last month have I said, "This looks like a bear trap"? In any case, here's a bear flag, a consolidation/continuation pattern which comes after a downtrend in price and is expected to follow the path of the red arrows (the true technical name for this pattern is a "bear pennant"). Instead there was a head fake move to the upside, but guess what, even that was a head fake and the longs got taken out too. Here's the important part, Technical analysis teaches that if a important price pattern fails, you should reverse your trade in the opposite direction. That means the shorts that entered during the formation of the bear pennant not only got stopped out on the move up, but then went long and were stopped out on that trade too, this is what I call a "Crazy Ivan Shakeout" or at least a version of it. The next important part is after all of this happened, SLV seems to have formed a base in white.

 Here's a closer look at what "appears" to be a base in SLV, although unlike GLD (to a degree), this base seems more along the lines of a sub-intermediate uptrend or maybe an intermediate trend, gold looks more like it may be forming a Primary uptrend or bull market. In any case, here in yellow, every time my trend line was violated price fell. I would expect that if this were an actual base, we'd see a strong shakeout move below the range before a move up.

 Now for what seems like short term trade along the lines of prices above the trendline on the chart above, we have a 1 min negative divergence like many others in the recent past as price is above the resistance trendline of what appears to be a base area, but this negative divergence is worse than former ones. Perhaps SLV is going to make a move down that is along the lines of the pullback trend/move down we expect in the market, perhaps even (as I suspect that move may be very sharp in the market), it may even make the head fake move I mentioned above below the range before an upside reversal. If it were to do that, it would put SLV in the same trend category expectations we have for the market, after the pullback, a return to the sub-intermediate trend higher that could be VERY sharp and lead to a short squeeze. This is getting very interesting.


 The 2 min chart looks like SLV is making a small head fake move above the resistance trendline and seeing a negative divergence here.

 The same on the 3 min chart, but again, the divergence now is bigger than past ones.

 The 5 min chart is our first real glimpse of what appears to be accumulation and then distribution when prices get too high, they move lower and are accumulated again, but again we have a stronger than usual negative divergence now.

 The 15 min chart goes on to show us what looks like SLV being worked by professionals to accumulate at a specific price for a large institutional investor or many of them.

 The 15 min chart close up shows the larger than normal positive divergence at the extreme lows of SLV and a negative divergence above the upper trendline defined in the second chart of this post.

 Just look at SLV since the pennant formation of the bear flag/pennant and the overall trend, that seems to tell us something bigger is going on and it falls in line to some degree with the sub-intermediate uptrend expected to follow in the market after the pullback move is over. Note even the head fake move out of the pennant saw a negative divergence and no strong distribution in the pennant as technical traders assumed there would be. 60 min.

 The trend of the 4 hour chart.

And the overall trend of the daily from uptrend confirmation to a negative divergence to downtrend confirmation to a recent positive divergence on a daily chart that is also leading, which is big for a daily chart.

INTERESTING!!!!

WOW

That's quite a move in FB while I was putting together that FB post.

FB Update

The big one! The good thing about simple option buying (calls or puts) is that you can define your maximum risk, the bad thing is that if your not careful in position sizing, your maximum risk can be realized in a day. I haven't found a great system yet for managing risk on options trades, although I know there are some great tools out there. I just tend to go kind of old school and simple and treat options trades as "My risk is maximum risk" on every trade, so the FB position right now (even with a couple of entries at 90+% losses) still only represents about a 5% portfolio loss, which is about 3% bigger than I'd normally like for 1 position, but it's a work in progress.

As for FB Calls, I have Aug 27 and 28 and I see no point in selling them now. There are a few interesting things about the FB chart, but as I warned when we first looked at FB as a long and many of us made a LOT of money on FB when ALL is said and done, the main problem was FB's limited trading history, that was the risk when we first went long at the bottom, that's the same risk on some of the signals now; it worked out fine when we first went long at the bottom, maybe in fact it works out fine again, but that is the risk. Now for the charts, which are also difficult to display as the price scale was just changed and the limited history in FB also makes scaling difficult.

(Also don't forget the RIMM trade that was before earnings, we went long on positive divergences, after earnings RIMM fell about 9% and we held based on positive signals still, a few weeks later they had a major management shake up and the trade turned in to a nice profit, the positive divergences were there for a reason, just not the one we assumed)

 The 1 min chart, speaks for itself I think

 Here's where it becomes difficult to show a 2 min chart correctly because of maximum bars allowed in the software and the actual 3C trend, you'll understand better in a moment.

 For now we'll use the intraday 2 min chart which has been going positive most of the morning.

 Here's the 3 min chart displayed with the same problems as the 1 min chart, but because the 3 min chart is a longer timeframe it has more history, now lets zoom this out to full zoom and check the trend (something we can't do with the 2 min chart).


 This shows the selling in to strength and the reason I wanted to wait on FB and look for positive divergences before adding too much, the 3 min chart seems to show us a pretty positive trend despite today's gap down.

 Now that you understand the scaling issues, I'll just show you what was important on the 5 min chart, the negative divergence, which by the way is not all that negative, but enough for me to want to wait for a more positive set up before entering FB again after a successful initial trade-also the reason I didn't really like the idea of holding FB without positive signals, well today we have some positive signals, in fact a bit longer than just today.

 The 15 min chart shows a pretty long relative negative divergence, but not a sharp leading negative divergence, which makes me question as I did weeks ago, "Just how strong is the actual distribution that took place?" We also have a 15 min positive divergence, interesting.

 A 30 min as well

Now, this is the 60 min chart and I show it to you this way so you can really see the scale of things, that white box at the time, was a HUGE leading positive divergence, REALLY big, that's the reason we got long the world's most hated stock and made good money doing it. So now we have price below that level, but 3C as of now (and maybe it takes some time, but I'd think it would have happened by now if it was going to), is still up quite a bit higher forming what can only be called a leading positive divergence. So yes, I'm holding the FB position, maybe I'd even consider adding, but that would be on the merit of new signals as a new trade.

GLD Update

Why is Gold important right now for the broader market? Because the broader market's only real positive area keeping it afloat for now is "HOPE", hope that QE3 will save the day and gold as a sentiment indicator for QE3 tells us something about the market, almost a leading indicator, in fact I have shown a chart in the last month in which gold has been shown to be a leading indicator.

As for gold itself, last year we thought gold/GLD would turn down in to at least an Intermediate downtrend, IT DID! Recently however I have been telling you how the longer term picture for gold is looking more bullish, BUT that trade is not here yet, in this update you will see we are sort of in the middle of that last thought and also looking very much like the near term expectations for the move up in price to be faded as has been thought since early this week BEFORE the move up even began.

GLD...

 Near term trade first, GLD 1 min trend is deteriorating in a flat-ish area of price.

 Close up of the 1 min chart negative on the open and in line intraday with the move down.

 The 2 min longer term trend

 The 2 min chart close up in the flat-ish trading range, going leading negative.

 3 min trend-confirmation to a leading negative


 5 min chart turned sharply leading negative today

 This is where I've been saying "Lately gold has been improving, I believe it is building a bigger base area for a larger primary trend", but within a base, there's a lot of chop up and down in a range. This 15 min chart is turning negative, however it looks more like it will just turn back in to the range, this is why I only want to trade GLD from the long side and buy on price weakness.

The 60 min chart shows the overall larger picture improvement, but also shows, GLD is not ready yet for any trades in the long term category, it looks to be building that way, but it's not there yet.

Short term it looks like it wants to turn back in to the range it is creating, that would be a negative for the market short term which would be in line with our expectations of short term action.

More Rumors and we hit Target 2-GLD may not be agreeing

In last nights post I posted the actual chart from Tuesday with the 3 most likely SPY targets, yesterday we hit the most likely, today we are at the second, all based on the F_E_D's mouthpiece, but the real QE sentiment indicator may not be in agreement, opportunities may be near.

 The 3 SPY targets posted Tuesday of this week, we are at the second, the 3rd would be a break above recent highs which would not be all that unusual as head fake moves are seen about 4/5 times before a major reversal, that's why that specific target was added.


 Here's the SPY on a 1 min chart this a.m. and the upside catalyst? Jon Hilsenrath's take on GDP, in his view it is QE positive which you can guess where that piece was released.


But GLD?

It's not looking as excited. It wouldn't be unusual for GLD to take a dip if this was truly QE positive and be accumulated, the problem is the fastest short term charts thus far are negative and not positive.

I've been very interested in GLD this morning as we've had TWO big news events that could move Gold, 1) the ECB comments and 2) the GDP data, the problem is, both are luke warm for lack of a better word. The GDP data is not that bad and that leaves a lot open to interpretation which can be cast either way. The problem with the ECB talk is that the German Central bank is contradicting it and although Merkel "seemed" to support it, she didn't come right out and support the ECB's view.

I'm looking for GLD to be the tie breaker.

ES / CONTEXT Update

Yesterday our own individual leading indicators / risk assets that are more detailed than CONTEXT were showing what had been previous strength earlier in the week fading off and in to weakness and negative divergences. CONTEXT is an amalgamation of these risk assets rolled up in to one model of what would be considered, "Fair price" for ES, based on how the model's assets are trading and their correlation with ES. We can have ES trading much differently because it is being manipulated or we can have ES trading normally, but the assets that make up the model trading very differently, one thing that is fairly common is that when there's a large diversion away from the mean, it almost always snaps back, but first usually overshoots in the opposite direction.

Here are the charts...

 3C seems to have called all of the ES moves accurately in pre-market from a negative divergence to a positive around the ECB comments to trading in line or confirmation at the green arrow to a new negative divergence.

The CONTEXT model went from the model being positive earlier in the week to the two being pretty close to each other and vacillating slightly above or below the fair value middle line to turning to a deep negative dislocation of the model, suggesting the assets in the model that normally rally with ES are heading in the opposite direction and Es should soon follow.

OPENING INDICATIONS

Early this week, as pointed out in this post last night regarding our early week target areas for the SPY, we had strong short term timeframe positive 3C divergences, this is what led me to believe the market would see a move higher, albeit brief and essentially noise within the trend which I believe is a pullback and a fairly strong one.

Last night I noted that the fast intraday timeframes of 3C that had been so positive early in the week that we came up with a target that was hit yesterday, are now deteriorating. I'm of the feeling that this noise bounce up, that I felt was to confound the greatest number of traders (again explained in last night's post), is on its last leg and should be reversing soon.

The opening indications seem to point in that direction, just keep in mind that the IWM was the strongest looking yesterday and looked like it would move the market higher in afternoon trade, which it did, so it still looks a bit stronger than the other averages, but not as strong as yesterday.

The first chart will show you the change in character from the start of the week until now, all 4 averages show the same, you can see how the IWM was a late bloomer.

 DIA from the start of the week until now, note how strong the positive divergence was on this 1 min chart, this is the basis of what formed our analysis for near term trade and targets.

 DIA 1 min close up of the opening indication, an even deeper leading negative divergence.

 The 2 min in a large relative negative divergence, while leading divergences are more powerful than relative divergences, the power of a relative divergence is largely determined by its size, this is fairly big for the timeframe move we are looking at.

 DIA 3 min in leading negative position.

 The IWM was a late bloomer, it didn't see the same the same move up, in fact it underperformed the DOW (+1.87 vs 2.73 from Tuesday's close until present-the IWM should lead risk on moves)

 IWM 1 min close up showing yesterday's mid afternoon positive divergence I mentioned yesterday, a relative negative divergence on the open.

 IEM 2 min chart in leading negative position, I'll be watching the 3 min chart closely to see if this migrates quickly to the 3 min chart.

 IWM 3 min with a strong positive divergence yesterday and currently in line.

 QQQ 1 min trend for the week

 QQQ 1 min close up with a leading negative position.

 QQQ 2 min chart in line

 QQQ 3 min chart at a relative negative divergence.

 SPY had a large positive divergence earlier in the week, that has now gone negative, this was well on its way to starting yesterday as I warned we should be watching for negative divergences in to higher prices or "selling price strength."

 SPY 1 min close up with a large relative negative divergence, this could actually be considered leading negative.

 The 2 min chart is in a leading negative divergence on our open , a lot of damage came from the negative divergence in to higher prices.

SPY 3 min is in leading negative position.

Overnight and In to the Open

After yesterday's overnight market ramp courtesy of the ECB's Draghi, who made strong comments about saving the Euro, but as pointed out, offered nothing new or substantive to back up the talk (thus the reason my feelings were the Draghi ramp would be faded), here it comes again overnight a desperate attempt to keep Spain from going belly up without actually doing anything.

Le Monde

ECB PREPARING TO BUY SPANISH, ITALIAN DEBT, LE MONDE SAYS


More from Reuters:

"Euro zone governments and the European Central Bank are preparing to intervene on financial markets to help bring down Spanish and Italian borrowing costs, French afternoon daily Le Monde reported on Friday.

The newspaper, which cited unnamed sources, said the ECB was willing to take part in the action on condition that governments agreed to tap the bloc's bailout funds, the European Financial Stability Facility and the European Stability Mechanism.

Under the plan, the EFSF could be activated first to purchase Spanish and Italian debt on the primary market, followed by the ESM in September, after it becomes operational.

The ECB would at the same time buy Spanish and Italian government bonds itself on the secondary market.

The newspaper said the plan was days or possibly weeks away from being finalised and that officials were holding consultations on Friday about it."

ES overnight with the European opening at the green arrow for a 9 point move up from yesterday's close...

 ES from yesterday's 4 pm close

ES to present open

However, as usual, one hand in the EU doesn't know or agree with what the other hand is doing, EVEN IN THE SAME COUNTRY-GERMANY! (you'll understand why in a minute)...

From the WSJ:

"Germany's central bank remains opposed to further government bond purchases by the European Central Bank, but isn't against using the euro-zone's temporary rescue fund (European Financial Stability Facility) doing so to drive down soaring sovereign borrowing costs, a Bundesbank spokesman said Friday.

Germany's central bank regards further bond buys by the ECB as "problematic" and "not the most sensible" instrument for overcoming the debt crisis, in particular because they create false incentives for governments, the spokesman said."

So it seemed/seems like the ECB jawboning was exactly that, or was it?

From Bloomberg:

Draghi Boxes Himself Into A Corner With Bond Signal: Euro Credit

Spanish and Italian bond markets rallied yesterday as investors cheered Draghi’s signal that the ECB is prepared to intervene to reduce soaring yields. Now he has to deliver, or face deep disappointment on financial markets, analysts said. The risk in doing so is alienating key policy makers on the ECB council, such as Bundesbank President Jens Weidmann. The Bundesbank reiterated its opposition to bond purchases today.

“Draghi is damned if he does and damned if he doesn’t,” saidCarsten Brzeski, senior economist at ING Group in Brussels. “He maneuvered himself into an extremely difficult situation. Expectations are very high.”


So perhaps his reputation and credibility are at stake, maybe he does have to deliver. It seems Germany is opposed, at least that's the German Central Bank's position.


But Wait-Stop the presses!!!


*MERKEL, HOLLANDE READY TO DO ANYTHING TO PROTECT EURO REGION


A new alliance between Germany or at least Merkel and France, but the German Central bank?


So at this point, there has been so much talk from so many people that the participants that are supposed to be working together don't even seem to agree and nowhere is this more clear than in the very efficient and effective country of Germany itself where the Chancellor seems to be contradicting the German Central bank!


Lets try something less confusing...


In the US...


US Q2 GDP was released pre-market and beat expectations of 1.4 coming in at 1.5, a drop from the Q1 print of 2.0

Prior	Consensus	Consensus Range	Actual
Real GDP - Q/Q change - SAAR	1.9 %	1.2 %	0.9 % to 2.4 %	1.5 %
GDP price index - Q/Q change - SAAR	2.0 %	1.6 %	1.2 % to 2.2 %	1.6 %

There were also BEA retro-active GDP revisions, for instance 2010 GDP was revised from 3.0 to 2.4, Q3 2011 was revised higher from 3.0 to 4.1. 

The only real question is, "How does this effect the chance for QE3 ?"

Thus far, this is our best answer, it seems for now, the print wasn't quite bad enough to be considered good news.

GLD's reaction this morning...

Market updates on the way...