TLT/Treasuries Coming to life

I had a few emails asking hat TLT looked like this morning, I responded that TLT has been in positive position since it broke below support (likely head fake reversal move to the upside), but intraday it wasn't moving much, that just changed.

TLT/Treasuries would be a flight to safety trade, I like to watch them to see what's going on, but they don't have the volatility for me to trade them, but for those who asked today...

 30 min long term is positive both relative and leading at the break below support (head fake moves happen as frequently on upside reversals as they do downside reversals-the entire June to present trend started with head fake moves like this).

The intraday chart was positive, but not flying earlier, now it's leading so the activity appears to be picking up on some intraday pullback/softness.

GOOG Update

GOOG was added as a Core Short to the equities model portfolio and also as a spec trade in the option model portfolio, the Put is close to green, the equity short is green as GOOG was shorted at $671.56; it' a small gain for now, but it's an excellent entry on a trade that look to have a lot of potential.

 Again the concept is the same for APPL, BIDU and GOOG, price needs to give bulls confidence and break out above obvious resistance or a price pattern. I use 3C to determine the probability of the breakout being a head fake move which I want to short because of the excellent entry and less risk or whether the move is confirmed and I don't want to get involved short, nor do I want to chase it. These head fake moves have been some of the most effective short and long entries, but they go against everything that is human nature and are difficult trades to enter and stick with, but at the June lows, EVERY Equity Model Portfolio short was Green and some well over 35% in a month.


 Remember I said head fake moves/reversals occur on ALL timeframes, here's one out of a triangle in GOOG on a 5 min chart from yesterday that has now broken support, the big volume adds a lot of supply to the market and you know what that does to the supply/demand price dynamic, that is one reason head fake moves are so effective.

 The GOOG 2 min negative divergence yesterday.

 Note the 15 min chart going negative in to the breakout and leading negative now, but this is just part of the big picture.

 The 15 min chart zoomed all the way out to resistance areas in orange (2) we can see the 4 stages of a stock cycle in various places, but what interests me the most is the size of the negative divergence at this breakout move, especially compared to the size of the March divergence that turned GOOG. It looks like significant portfolio rebalancing by smart money.


 The 60 min chart gives even more history, again, the main trends are what interest me the most, but you can also see how price got to where it was going and what happens in underlying trade that creates a lot of deception in price alone.

Finally the daily since 2009, and this is one reason I like GOOG as a core short, look at the 2007 top, the 2009 bottom the 2011 top and now how low 3C is at the 2012 area.

ES Update

Anyone who was here from March to May probably recalls the strange persistent negative divergences in ES, I hadn't seen them before and they came right at the reversal area every time and then disappeared.

We are seeing that same thing again, taking with the 3C charts as well as the negative Risk Asset Layout divergences, this is pretty much nearly the exact same scenario as the last 3 major reversals.

 Yesterday this was the second leading negative low in to after hours.

 Scaling makes it difficult to visualize, but that's the negative leading divergence leading even worse in to higher prices at the European open.


And from the European open to the US open.

AAPL Update

AAPL's recent move, which I'm virtually certain is a head fake or false breakout, also known as a bull trap, is no different than BIDU's except in scale, which makes it worse for AAPL, you know that whole, "Bigger they are, harder they fall" thing...

 The point of a head fake breakout, false breakout, bull trap, is to do exactly that, find an obvious area of resistance and break out through it, thereby lifting the bull's confidence, the bulls enter the market providing the demand needed to sell/sell short in to by smart money and as the breakout fails, the string of stops set off causes a snow ball effect on the reversal as you can see BIDU is already down nearly 5% today alone, plus they make money on volume rebates. The BIDU head fake was above a resistance range, AAPL's as a market bellwether was bigger, but the same concept.

 AAPL's was a breakout above resistance too, just to a new high, if that can't bring in the AAPL longs, nothing will and it moves the NASDAQ disproportionately to the rest of the market. The first high to the left is where we started core shorts, AAPL has been added to recently.

 AAPL 2 min intraday looks bad, but, the trend shows the inner working of underlying smart money action in a head fake breakout.

 Note resistance, note what happens to 3C after a break out above resistance, the 2 min chart is near a pre-breakout leading low.


 The 5 min chart with an extremely nasty divergence as I mentioned yesterday, I saw a lot of these and you don't see them this nasty very often.

 The 5 min trend and the breakout level shows the same selling in to price strength at the exact spot where there would be retail demand to absorb the offers. This is leading to a new low well below the breakout point.

The 30 min chart with accumulation or stage 1, mark-up or confirmation also stage 2 at the green arrow and resistance at the red trendline, note the negative divergence in AAPL, the yellow areas are the first core short and the add-to position.

Market Update

Intraday timeframes are falling apart everywhere...

FB Update

I added to the FB equity long position yesterday to bring it to 2/3rds of a full position size and said I'd wait for a pullback to add the last 1/3rd, that may be soon.

FB is now giving some signals that are spectacular. The first time we traded this and many of you made over 100% with calls, EVERYONE HATED FB, no one would consider going long, but we had evidence showing the underlying trade as being accumulated, now we have some new and interesting evidence in what is still probably the most hated IPO if not stock ever.

 The 1 min chart shows the positive divergence just before take off and then a negative relative yesterday, for now, I'll wait to see how this chart develops before making any decisions.

 The 2 min chart is leading positive

 This is the big news though, at our suspected and anticipated base area, the 15 min chart is leading positive, that's not all...

The same 15 min chart since FB started trading at an all time new leading high.

BIDU PUTS Now Crushing

And to think volatility hasn't even popped yet...

BIDU Sept 130/135 Puts up 85% and nearly 23%

BIDU Positions Up Nice

I often mention Jesse Livermore, considered one of the best traders ever from the first part of the 20th century, using the earliest form of technical analysis, reading the tape. Jesse is quoted as saying (paraphrased), "It was not my being right that made me money, a lot of people were right and still lost money, it was my sitting that made me money", or in other words, having the confidence of his convictions where others may have been right, but couldn't hold out long enough to capitalize on their calls. The main two things that allow you to do this are control over emotions which comes from having good evidence that you trust and risk management, not having a position so large that you make decisions based on the P/L rather than the trade fundamentals.

 I've held this BIDU put at a small loss and today it's up nearly 49%

The core short in the equities model portfolio is also up, but not as much as it was as I added here recently , the original short was closer +16% before I added a larger position here, but that's fine, it should pay off just the same in dollar terms.

BIDU-A Confirmed Head Fake Move

And  I mentioned BIDU several times and how much I liked it right where we were yesterday, take a look today, this is the point of a head fake and it is the start of the downside reversal in BIDU, already down 3% on heavy volume, remember the head fake motto, "From failed moves come fast moves" and we see these on every timeframe before 80% of the reversals either up or down.

 BIDU's downtrend and the bearish triangle/bear trap which was a head fake reversal, then the counter trend rally we expected and another head fake move.

 Here's the latest head fake breakout above resistance that has now failed, although it i the underlying trade action that separates a real breakout from a head fake move.

 Look at the snowball effect as stops are smashed this morning.

 Here's the 30 min chart in to the head fake area, clearly leading negative

And the 5 min divergence at the actual head fake breakout.

Hope you got some BIDU short.

Overnight and in to the open

Overnight a GERMAN ECB member backed the controversial bond buying program that was mentioned over the weekend and then denied by everyone from Germany to the ECB itself yesterday, this sent overnight risk up on the comments.

Spain also had a fairly successful auction, selling more than they had planned and with lower yields, all in the 12-18 month range, the bid to covers of the auction were mixed though.

And the UK posted a very unexpected budget deficit, apparently due to a shortfall in corporate tax receipts.

Greece is found by the Troika once again to have another funding shortfall of up to $14 bn Euros, this ahead of scheduled talks with Junker and Merkel both this week in which Greece will ask for 2 more years to make the cuts agreed on. This shortfall is 20% more than stipulated in the agreed upon bailout terms (latest) and could endanger Greece receiving any bailout funds, especially after the German Finance Minister said this weekend that they can't keep throwing money in to a bottomless pit. Also Germany's Foreign Minister says there can be no substantial softening of the agreement in place.

In the US the only Tier 1 data was Goldman's Retail Sales...

Released On 8/21/2012 7:45:00 AM For wk8/18, 2012

Prior Actual Store Sales - W/W change -0.3 % -1.5 % Store Sales - Y/Y 3.6 % 3.1 % As you can see, there was a fairly sharp decline on the week on week sales.

Opening indications will be up next, but so far we have had a familiar theme in ES that has only been seen at the last 3 reversals with the Risk Asset layout divergent as it is now, that theme, the persistent ES leading negative divergence... This is a divergence rarely seen, so far this year it has happened 3 times, it is 3 for 3 in calling major reversals.

 Yesterday's close and after hours action was deeply leading negative, here it continues in to the European open,

And here it continues in to the North American open