AAPL Update

Not that AAPL is the only stock to trade, but with 20% weight on the NASDAQ 100, it alone can move the market and we do have the I-Phone 5 coming out tomorrow, it's more of a 5th average for the purpose of this post.

For newer members, to give you some idea of AAPL's weight which is a NASDAQ proprietary formula that you can receive with a $10,000 a year subscription, if you took approximately the bottom 50 NASDAQ weighted stocks and added AAPL to create the NASDAQ 51 and all 50 stocks other than AAPL were down 2% on the day and AAPL was up 3% on the day, despite 50 of 51 stocks being down 2%, the NASDAQ 51 would close up and in the green.

It's kind of silly that 1 stock has so much power to move the market, but that is the situation and one of the reasons AAPL has long been a favorite of the Wall Street Primary Dealers who made billions of dollars from the F_E_D with virtually no risk, so long as they took the profits from flipping bonds to the F_E_D in POMO operations and bought up the most heavily weighted stocks to mov the market up, even when a majority of stocks were moving down.

 AAPL 1 min is still building, it doesn't look like a failed move.

As is the 5 min chart.

If we go much beyond the 5 min timeframe, there isn't much that is inspiring about AAPL. Perhaps the I-phone 5 disappoints or is just a sell the news event. At this time, I wouldn't take any action on new AAPL positions.

Quick Market Update

There's some notable damage now in the futures, this is also the first place yesterday we saw the positive divergences that led to the overnight move and today's move.

ES

NQ

It's not horrible yet, but it is a change in character.

I'm going to check on some other indicators, Industry groups, etc.

AAPL Update

The head fake move is such a common occurrence before a reversal because technical traders are so predictable, you can pretty much use it on almost any timeframe without any other indicators, almost. You do have to have a general knowledge of what the underlying activity is and 3C is used to confirm that as well as the head fake move, here you'll see an update of AAPL, why the head fake move is so common and why.

 This is the kind of improvement on the AAPL chart that is noteworthy, a leading positive divergence, even though it's only on a 1 min timeframe, remember new divergences have to start somewhere. Look at the exact place the change in 3C character took the most dramatic turn to the positive... right at a move below yesterday's close which is usually first resistance/support other than a.m. ranges.

Why did 3C shape up there? That's where the stops were, that level only needed to be broken to trigger the stops making supply available and at better prices.

As AAPL moved below yesterday's close, it created movement with stops being hit and volume rising, it may not be a lot, but it's probably enough. As there was no more benefit with all of the stops that were going to be triggered, already triggered, volume fell off and there's no point in hanging around the area. Any shorts (I doubt there were many) are squeezed (as a general concept-think about all the timeframes this can happen on and the amount of volume) which creates upside momentum with their covering/buying.

 The 5 min chart that earlier was "Blah", has a leading positive divergence, again it saw that form as a small head fake move was triggered.

Even yesterday RIGHT BEFORE AAPL fell, the very last move was a short burst above resistance as it triggers limit orders, that extra bit of energy created by longs caught in a trap is part of the reason we see these moves so often as they provide extra momentum to the move. It doesn't matter that the move to hit stops was only 5 minutes or so, once that level is crossed, they are triggered.

This 10 min chart also shows there's nothing exciting in AAPL beyond the 5 min timeframe, while I'm pretty quick to take the profit that is available, I also wouldn't be too worried if I wasn't able to based on the fact the divergence didn't move out any further.

Closing AAPL October $675 Puts

I'll leave the others in place, I have a profit here and I think AAPL is shaping up enough that a move is likely.

I'll be looking to replace the position ASAP.

This was the smaller portion of the main position so it's not huge, but with leverage like this I try to trade around volatility as much as possible.

SPY Update

Today's move in the SPY is seeing slippage, I'm not convinced it's over, but I do believe there's additional deterioration in underlying trade or what you might call smart money's actions.

 Early trade on the 2 min chart on an intraday basis is pretty much confirmation in the morning, in to the afternoon there's deterioration, this is basically what I was expecting and hoping to see yesterday o the late day positive divergences.

 The 15 min chart doesn't look like it has added much to yesterday's lows in 3C, but consider where price is now compared to yesterday's close, basic confirmation would have 3C higher, the fact it is right about where it left off yesterday with the SPX up today is in itself deterioration.

As is always the case, new divergences will start on the 1 min timeframe so this is where I want to watch for any changes either positive or negative for the SPY, given the longer timeframes have deteriorated, I'd say the probabilities are for a negative change in character when they are ready.

Financials not looking good here

This is probably an opportunity to look at some financial names as short positions. The SPY generally is not looking very good as the day progresses, as such with about 22% exposure to financials (more than any other average), I thought to look at Financials and found there's weakness there, not only in the Sector, but in individual names, BAC and GS are two I'm looking at right now. Also FAZ is looking good in this area, I'd say it's probably a little too early to make a full commitment to a position there, but it's worth keeping an eye on and maybe dipping your toes in to the idea.

I'll get some charts up, I want to look a little closer and see if there are any specific target areas that would be high probability. I may add to FAZ in the equity model portfolio.

QQQ/DIA example

As I just posted the difference between the DIA and AAPL, I'll show you the same between the DIA and QQQ which is acting a lot like AAPL this morning. It's also worth noting the market averages have come unglued from the high level of correlation that has been a hallmark of the last several months, maybe longer as the Dow-30 is up 2x the QQQ this morning.

 The longer term DIA 1 min chart shows clearly the divergence getting worse in the average until it just breaks (yesterday).

 Looking closer at the very same chart, just zoomed in for an intraday perspective, the DIA is apparently burning through energy or seeing price strength distributed, rather than building it, after yesterday's break and the late post on the divergences present, this is what I had hoped to see, rather than the average gathering strength.

 The DIA 3 min chart looks similar to the 1 min because there were similar underlying trades taking place.

 Zoom in on the same 3 min chart as above and again the DIA is not gathering energy, but burning through it. If I were looking for an average to short, I'd be considering the DIA as it has a decent price entry, less risk, lower premiums and higher probabilities as this move should fail shortly and doesn't materially change the weakness from yesterday (although it could draft off the NASDAQ 100, but that is why I mentioned the break in correlation which makes that less likely).

 The QQQ does not look strong generally speaking, you can see very clearly at the break above resistance how much worse 3C became as selling in to strength was the theme.

 A closer look though intraday of the QQQ 1 min shows it gathering some strength at the lows.

 QQQ 3 min also is gathering some strength, the market makers and really every other pro on Wall Street can see what's happening in order flow with AAPL and I don't mean retail order flow, I suspect that is why the Q's are gathering strength, if for no other reason, the managers of the ETF have to move the Q's to reflect AAPL's weight on an AAPL move.

 QQQ 5 min also gathering some strength.

Even on the 10 min we see the same.

I also want to point out that we use multiple timeframe analysis to look at different trends, the structure of underlying trade, etc. I am pointing out gathering strength in the QQQ's, but most of what we are discussing is intraday and shorter term in nature, this doesn't imply a massive new round of accumulation in the QQQ, so to be fair I'll show you the trend and try to distinguish from short term divergences and the situation with regard to the trend off the June 4th lows.

We saw numerous positive divergences probably about two weeks in advance of the June 4th low which was also a head fake move on a bearish descending triangle that traders expected to break below the triangle and make a new leg lower. We already had information before price broke below the triangle that it was almost certainly a head fake move at the June 4 th lows and that's where hedging long positions were entered in leveraged ETFs to protect core short positions. As this 4 hour chart shows, there's a positive divergence in to the June 4th low with about 2 weeks of notice before hand, the leading negative divergence now is very deep, it's much larger than the June positive divergence, so I don't want to give anyone the wrong impression about the QQQ analysis above, it is shorter term in nature, less important. The dominant trend here is very bearish, but nothing goes straight up or down and especially as volume has dried up the lat couple of years, the intraday and day to day volatility has grown exponentially, this doesn't change the fact that the market is still heading to where it is heading, it just does so in a more volatile manner, which requires multiple timeframe analysis, wider stops, better entries and exits and an understanding of what tools/trades to use at what times, otherwise it's a meat grinder for most traders.

AAPL Update

AAPL is a pretty good example of a few things mentioned yesterday and what we are seeing early in the averages.

 Unlike most of the averages reacting to yesterday's positive divergence on intraday charts, AAPL has remained in a consolidation. I was hoping to see the averages move up early because as long as they are up, the chances of them building a stronger divergence that could give rise to a more powerful or sustainable move remain low. AAPL on the other hand is not moving early and it gives AAPL the chance to build on a divergence to give rise to a stronger or more sustainable move, although not that much strength has built in, I do think it's enough to bounce AAPL and that is where all who emailed me yesterday asking about starting put positions will want to look at starting a position, in to price strength with underlying weakness. Had you opened a put position on weakness yesterday, chances would be pretty good you would have paid a much higher premium and seen draw down today whereas a little patience might offer you a better opportunity at a lower premium today.

 As you can see the DIA's early move has not allowed it to accumulate, in fact the opposite, it seems to be under distribution intraday on price strength and as I mentioned, this is what I had hoped to see rather than let the averages consolidate and build a potentially stronger move. At this point the move in the DIA looks like a technical bounce and that's it.

 AAPL 2 min is building a bit, but this is still nowhere near a strong divergence, it may be enough to get movement and an opportunity, but it is not enough to cause me much in the way of concern.

 The 3 min chart's divergence thus far is a weak relative positive divergence, as I said, it may be enough to get movement for some potential opportunities, but it is not enough to overcome the degree of damage that was done yesterday.

 The 5 min chart is barely positive here.

At 15 mins, the damage is clear from yesterday, if this were scaled out you'd see it's bigger than it appears.

Opening Indications / AAPL

First let me deal with AAPL because so many emailed me yesterday asking if it was a good time to pick up Puts, my answer is no, we wait for the trade to come to us as there is less risk, the premium on the Puts is lower and the probabilities (so long as they are confirmed) tend to be higher. That said, AAPL does have enough of a positive divergence and lost enough ground yesterday in a parabolic fashion (I'm consistent with how I feel about parabolic moves up or down), that there's a reasonable expectation for AAPL to bounce even on an oversold bounce as charts in the intraday timeframe have enough positive divergences to lift AAPL, I personally would be patient and see if the trade will come to you on your terms.

As for the market and the single time frame positive divergences from yesterday as well as the futures overnight, here's where we stand.

The Euro got a boost overnight from what is assumed to be the German High Court dismissing another ESM complaint which should keep the court's ruling on the constitutionality of the ESM on track for release tomorrow. This of course effected risk assets overnight, but I don't see too many areas yet in which there's been much improvement from where we closed yesterday which left us with the assumption that we would see early higher prices in the averages, this also leads those higher prices open to being faded later in the day unless the charts below can improve and for the most part they haven't.

 ES futures overnight and in to the open with the European open at the green arrow, note the positive divergence in addition to late yesterday's right before the European opening and a slight negative 1 min divergence. I wouldn't read too much in to the present divergence yet.

 NASDAQ mini futures look very similar except the current divergence looks worse than ES.

 The EUR/USD currently, that's quite a parabolic move, I don't expect it to hold too long.

 The first chart of each of the averages as the DIA above is the positive divergence that was visible as of yesterday's close as posted here. The same divergence from yesterday that was positive is having trouble staying in line with price this morning, it's not leading negative yet, but it isn't confirming price action either.

 The next timeframe, which is where I want to watch to see if anything build, thus far isn't doing anything, this is 3 min.

 Here's a closer look at the same chart on an intraday basis, it is actually negative so it is not building further strength, although I will keep an eye on it, thus far we don't have much more than a technical bounce from yesterday's divergences in the late afternoon.


 The 1 min chart is not even confirming.

 IWM 3 min from yesterday, it is not confirming and showing underlying weakness.

 The next longest timeframe looks worse so there's no building on yesterday's divergences in the late afternoon, again suggesting not much more than a technical bounce at this point, we can expect to be faded.


 IWM 1 min is about in line after a small opening positive divergence.

 Yesterday's QQQ 2 min positive is building a bit on the 2 min timeframe, this may have something to do with AAPL as it represents 20% of the weight of the NASDAQ 100 or about the same as the bottom 50 NASDAQ 100 stocks combined.

 There's also a little building on the 3 min timeframe.

 1 min is in line with price thus far.

 SPY divergence from yesterday is about in line with price this a.m.

 There's not much going on in the next longest timeframe of 3 mins as of yet, I'll keep an eye on it.

And there appears to be some mild deterioration setting in on the 1 min, we'll see if that grows and moves to the longer charts.

The market may draft off AAPL, that would give us some good information about near term and longer term conditions. I would loo for a bounce in AAPL today, we'll see if and when a good time to fade that comes.

Overnight Futures

Thus far overnight futures have made good on yesterday's positive divergence in the afternoon and fulfilled the highest probability giving us what looks to be a gap up this a.m. which makes sense being the average already had at least 1 positive divergence and that should be fulfilled during regular market hours.

 ES overnight with a second positive divergence and a move up in to the European open, right now 3C is in a strange spot as it is officially negative, but hasn't made a definitive turn down yet, it could keep moving up a bit more.

All the same is true of NASDAQ futures, although they look a bit more negative right now, they could still move up a bit more or rather 3C could.

This makes sense with the positives in the SPY, QQQ, DIA, etc.

It also makes it more difficult for those averages to add to their existing positive divergences from yesterday on a gap up as buying is almost always in to flat or falling prices, so we may very well see an opening gap faded at some point in the day.

Thus far futures risk on is broadly in line with moves in the EUR/USD overnight, if that be the case and the catalyst, then I suspect we see some weakness build in to the open.

While the ES/NQ 3C divergences aren't 100% clear yet, the EUR/USD which rallied in to the European open has a more defined negative divergence.

The pait is losing ground quick, a gap up opening would be the best outcome for short positions rather than a lower opening that allows for the average to build on their intraday timeframe positive divergences.