Risk Asset Update

I'm sure most of you noticed this by now, but just in case...

I'm sure most traders have picked up on this ascending triangle, it's a bullish consolidation/continuation pattern, volume confirms it, but it's sort of in the wrong place, however given the pivot created yesterday, I could see traders giving it the benefit of the doubt. We want to watch this carefully for breakouts/false breakouts as the SPY and even the DIA now and the QQQ especially are deteriorating rapidly in 3C. Not only that, but our Risk Asset Layout, the assets that "should" either be more bullish than the SPX or at least in line, is also giving us that same signal from last Friday that we have only had 3 times this year, each leading to a reversal, but all had a pivot which is the one thing our averages didn't have until yesterday.

The risk asset update... Pay attention to Credit.

 High Yield Credit is selling off here making a new low as the market is lateral in the triangle.

 The same with High Yield Corp. Credit.

 As well as Junk, as they say, "Credit leads, equities follow". This is not a great sign for the market now that we have pivots in place.

 Despite USO and GLD, commodities are doing nothing, they didn't follow the SPX early today and are flat.

 The longer trend in commodities shows where commodities started to peel away from the SPX after having been in sync, but at least they were moving in the same direction, that hasn't been true since last Friday.

 FCT is just an income fund a member told me about that has leading properties, I back tested it and found it to be true, here's FCT peeling away or dislocating form the SPX.

 My favorite leading indicator among the currencies is the $AUD, for a long time it has been in sync with the SPX until recently.

 The Euro gave some initial support to the market , but that has faded as the Euro dropped for seemingly no reason last night to 3 day lows on no news.

 As for the 3 Pillars, Financials, Energy and Tech, here's their momentum today vs the SPX, Energy was hanging in there, but recently started peeling away on a momentum basis.

 Financials have been nearly perfectly in line so I'll be taking a closer look at them.

Tech was stronger this morning, but like energy is also peeling away.

What ever the break out from the triangle, I don't think it ends well, at least from what I'm seeing in risk assets and the continued deterioration in the averages after having mushy to no signals early today.

Charts...

The QQQ seems to be the most well developed....

 QQQ 1 min from relative negative to leading negative.

 QQQ 2 min from relative negative to a much deeper leading negative

QQQ 3 min migration from the 2 min chart? I'd guess it is likely as the 3 min leads negative, these are nice divergences, doing what they should for a decent signal, I'd still like to see them firm up and more confirmation.

 QQQ 5 min hasn't seen any positive activity today and remains leading negative, in the trend it is much, much deeper.

 The Aug 2nd market wide accumulation day, and the 15 min chart going from a negative relative to a lading negative as the QQQ puts in the pivot I expected to see and AAPL as well yesterday.

 IWM 1 min trend leading negative, not seeing any positive activity

 1 min intraday going more and more negative


 IWM 3 min in a leading negative position

 SPY 1 min also turning down in to a leading negative position

2 min SPY showing no strength and leading negative.

I want to check some other asset classes as well as the Risk Asset Layout.

If I'm a bit slow on the emails today forgive me, whenever there's a quiet day I've found you need to really pay attention as it doesn't normally stay that way long and signals shift very fast.

Quick Update

Remember that quiet markets are dangerous markets. It is starting to look like we are starting to get some firmer signals, thus far they are leaning negative, I'm going to post example charts next, but wanted to get this out as fast as possible.

GLD

Guerilla trading has been pretty successful for our short term positions, Friday we opened GLD Puts and closed them yesterday for a nearly 22% gain in 2 days, this isn't my cup of tea as far as trading goes, but you have to use the right tool for the right job, had I not closed those puts yesterday, they'd be worth a lot less today.

Here's a reminder of why we have to adapt to the market rather than force ourselves and trades on the market which is like running in to a brick wall.


This is nearly 1 month of daily trade in the SPY, WHAT IS THE TREND? Remember, we live at the right side of the chart without the benefit of hindsight.

 There's certainly a lot of chop and it's a virtual meat grinder for anyone trying to trade like a trend trader or even swing trader, in fact from the StockTwits stream, few traders know what to do and are losing money hand over fist.

So here's the puzzle put together...

This is the trend in the SPY and the area in white is the chart above. Sure, you could trade the trend, IF you knew there would be a trend and if you had exceptionally wide stops. July might have caused you some doubts, each one of those candles represents a full 6.5 hours of uncertainty for most traders.

Back to GLD, I want to stick with trading GLD from the short side for now, GLD has been acting as a QE sentiment indicator and with the recent stronger US data and inflation data, both make a September QE3 announcement even more unlikely as I have been saying and as Goldman admitted this a.m., furthermore the election makes an announcement this year even more difficult, so if Gold is a QE sentiment indicator rising when sentiment i hopeful for QE, then what should we expect?

I closed the Put position yesterday with full intention of looking for a higher area to start a new put / short position in GLD.

The charts thus far.

 Friday's Put and yesterday's closing of the Put, that was a timely trade because we waited for and had GOOD SIGNALS. We have to put the probabilities in our favor and that means not entering a position because you think you might miss something or exiting because you are nervous, but having some evidence to base your decisions on and decide if the probabilities are strong enough.

 Short term, this is the 1 min chart showing some accumulation at the lows yesterday and today we saw an appropriate size move up from that accumulation, but there's no negative divergence to justify a short position here, in fact these short term charts are also, like the market this morning thus far, VERY mushy.

 The 1 min chart' trend with reason for entering a put Friday and good reason to close it yesterday, but no reason to take any further action yet.

 The 3 min chart ha a bunch of green arrows, I don't usually feature charts with green arrows as they mean 3C and price are moving together or in line/ trend confirmation. There's no signal here, thus there's no trade yet.

 Now at 5 mins we see some stronger leading signals.

Also at the important 15 min timeframe we see some more important leading positive signals. Could a long position be taken on these signals? Yes. Do I feel that is trading with the probabilities? No, but if you are nimble, that seems to be where the short term probabilities are and that's also exactly what we want, price strength and then 3C weakness in to that price strength, letting the trade come to us.

I don't care if GLD breaks down in 5 mins for a 10% fall, if I don't have some evidence to base my position on, there are a lot of other stocks to trade.

USO Update

"If" I didn't already have exposure to USO on the short side, I would consider opening a partial position with a wide stop allowing for the break above resistance to add to the position, that's the pivot, the thing is oil is not as easy to manipulate as a stock.

Here's USO thus far, you already saw the longer charts so I won't post those again, the big difference between this post and the earlier is the leading positive divergence has seen USO move up to it and it is now simply in line, also there's been NO migration of the 1 min divergence as the intraday charts remain in leading negative positions.

I'm happy I have exposure to USO short already and I'm really hoping we get this move above resistance, I'll just be patient and see if the trade comes to us.

 The bearish descending triangle that  was a head fake move in yellow, the reversal day as an "almost" bullish hammer with the volume increase needed for a reversal day.  To the right, resistance and what I'd like to see short term with a move above to short in to.

 The 1 min leading positive divergence is now in a green box meaning it is now trading in line, I'm not sure USO can make it much higher without some divergence supporting it here as this one was used up on the EIA release and subsequent move.

 As mentioned, even at 2 min there is NO migration of a positive divergence, this is leading negative, this is what I wanted to see, just with price a bit higher.

The 3 min is even worse, leading negative.

Market Update

The market today is VERY mushy, tiny little changes in 3C are the signals and there are a lot of tiny changes in what I would call fast moving underlying action, in fact I would guess most of these charts have already changed as they were changing while capturing them, especially the 1 min charts so where appropriate, I try to add some perspective. This could be due to the much lighter volume, especially since 8/6 and of course a large part of the European markets closed today.

 DIA 1 min as mentioned earlier looked a little better than the SPY, positive on the open with a current positive divergence as DIA fools around the unchanged mark.

 DIA 2 min intraday with a weaker relative positive divergence on the open and price / 3C in line, normally price/trend confirmation, but there isn't much of a trend, thus the mushy market.

 You can see on this next capture the 2 min divergence was sending the DIA higher intraday at a minute later, the 3 min chart is not seeing any strength from the 2 min and is in a negative position, however slight intraday.

 ES overnight had almost no interesting signals, this pre-market to current negative divergence is the biggest signal of the entire overnight session and even this is very mushy.

 IWM 1 min positive on the open and then to a leading negative divergence.

 2 min is in leading negative territory and intraday, negative, not in line.

 The IWM 3 min in leading negative territory.

 QQQ 1 min positive developed pretty quickly, which doesn't give me a lot of confidence in it.

 As you can see it developed so quickly that there's no migration of the divergence to the 2 min timeframe.


 The 3 min with a relative positive on the open and a relative negative at the intraday highs.

 For some context, the 5 min QQQ trend, deeply leading negative, as always, when in doubt go to the longer timeframes and solid trends.

 SPY 1 min positive on the open, negative t the intraday high and in line since.

SPY 2 min in leading negative position and not even close to confirming intraday

I'll update as we get some real signals that are tradeble, these are very mushy.

USO and EIA Report

 EIA Report was just released showing a draw...

Released On 8/15/2012 10:30:00 AM For wk8/10, 2012

	Prior	Actual
Crude oil inventories (weekly change)	-3.7 M barrels	-3.7 M barrels
Gasoline (weekly change)	-1.8 M barrels	-2.4 M barrels
Distillates (weekly change)	-0.7 M barrels	0.7 M barrels

I have no idea what consensus was as they don't seem to publish that like they do for NAT Gas, but USO liked it.

The reaction on the report release.

Now take a look at the USO charts and then 1 more.

 Here's the 1 min, it almost seems as if the report was leaked which we use to see with some frequency.

 However, after the 1 min positive, things go down hill from there, the 2 min leading neg.


 3 min leading neg.

 5 min leading neg.

Now you see why I wanted to see a short term pop above resistance to short in to?

 The 15 min at relative price levels with a leading neg. divergence.


 The more important 30 min above and 60 min below, both negative.

Below is a chart of the weekly change in inventories, we are near the top end of the historical range for the EIA, we have summer and it would seem a diminishing chance of military action in the Middle East before an election which is what has helped keep oil higher. I'm willing to take a calculated risk on USO short in adding to the already established positions, but I want a move above resistance for that risk.

* Data in graph are as released and do not reflect subsequent revisions.

EIA Petroleum report out at 10:30

I was hoping yesterday that USO would break above the $35.40 area to look at adding to a short and put position.

The 1 min in USO is positive, everything after that is negative so there's a chance we may just get such a move which would create the pivot I'm looking for.

Quick Opening Indications Update

Normally I'd post all of the charts, but I want to get this out quick. Below are the SPY 1, 2 and 5 min charts, most every average looks or has the same theme, the DIA is a little stronger which may be due to some rotation or just an anomaly, it's not that big of a difference. On the open on 1 min charts there was a positive divergence and thus we saw the early move up, that DID NOT migrate to longer term intraday charts like 2 or 3 min charts, which are mostly all still negative and not looking good.

Basically we have a mushy market right now, but there's no underlying strength thus far at all behind the open.

 SPY 1 min

 SPY 2 min

SPY 5 min