Industry Group Update

The 3 main Industry groups that are essential to starting and maintaining a risk on move are Financials, Tech and Energy, those are the 3 we'll look at. First I'll show you the bigger picture in all 3 and then what they are doing this morning.

 Energy's big picture 30 min leading positive divergence, this is more than enough to give us the upside move we are looking for to short in to and take profits on longs set up last week.

 Intraday on the 1 min Energy had a relative negative divergence on the gap up open, so a pullback there is not surprising at all, but now we are starting to see a leading positive divergence in to the pullback. This is more of a tactical timeframe and the30 min chart above is more of a strategic timeframe.

 Financials have a longer positive divergence that 10 min, but the 10 min is the clearest, from the negative at the top on the 18th to a large relative positive and a leading positive as Financials made a break lower on Friday that I would consider a head fake move to lock in shorts (Bear Trap).

 Intraday on the 1 min chart there was a very slight negative divergence on the open, this is probably why we saw so little downside movement, just a gap fill and now it has started a leading positive divergence.

 This 2 min chart also shows the very positive divergence at what I am fairly certain was a head fake/bear trap move on Friday.

 Technology also has a longer positive divergence, but again the 10 min is the clearest, from negative to leading negative on the 17th/18th to a relative positive and then leading positive later in the week, this is more than enough for the move up we are looking for.


 Intraday Tech has been nearly perfectly in line (3C with the price trend) or confirmation, this morning's leading positive is the first divergence in Tech since Friday's open.

 The leading positive divergence is also migrating to the 2 min chart.

As well as the 3 min chart, which was also in line until this morning, all in all, a good start and it's building. So far pretty much in line with the opening indications post from this morning.

Market Update

Here are the positive divergences just mentioned in the last post.

 DIA 1 min intraday is leading at the gap fill.

 ES 1 min never went negative and is in leading positive position.

 NASDAQ futures first put in a relative positive divergence and now a leading positive divergence

 QQQ 1 min from Friday's 1 min negative to a 1 min positive this morning.

 This shows Friday's positive around noon, the late day negative and another positive migrating from the 1 min to the 2 min chart, thus strengthening.

And AAPL which started with a 1 min positive that halted the downside and started a consolidation which is a triangle, interpreted by technical traders as a consolidation/continuation/bearish triangle, would likely see a move below the triangle before any upside reversal, but the divergence has migrated from an intraday consolidation timeframe to a longer 3 min leading positive divergence.

Opening Indications and Currency

In my opening Indications post this morning I showed you how I expected early weakness, perhaps gap filling, etc using the DIA as an example, as of now the DIA is the only average of the majors that hasn't filled its opening gap as of yet, but is close.

That same logic or theory can be seen in FX, both the Euro and $USD.

First the pair...

 EUR/USD 5 min-as far as opening trade this morning, it feels very ugly, especially in the NASDAQ, however...

 Take a step back and the defense of $1.29 and the move and pullback in the pair doesn't look quite as nasty as it feels this morning.

As for the Euro (FXE) and $USD (UUP), the 1 min intraday charts are interesting in that they agree with a pullback in the Euro, but the divergence is only intraday, it is not strong enough to even migrate to the 2 min chart.

 Euro/FXE 1 min negative on the open almost looks like a gap fill should occur here.

 The 1 min intraday $USD/UUP chart is exactly the opposite as it should and looks like it should or wants to fill the downside gap from this morning's open, but...

 move to the next timeframe, 2 min (where we'd see migration of the negative divergence if it were strong enough from the 1 min chart) and we see NO migration of the divergence, leaving this as an intraday signal only so far.

The same is true of the $USD 2 min chart, no signs of migration of the 1 min positive divergence, this isn't a big jump to make from 1 to 2 min, but it is not there, which suggests the 1 min signal is enough to move intraday early on as opening indications suggested, but not much more than that.

As for market average divergences that are taking shape right now, the QQQ 1 min and 2 min are going positive and seeing migration of the positive divergence; IWM is inline, SPY is in line; DIA 1 min is starting to lead positive as it just filled the gap and in futures, NASDAQ 1 min futures are seeing a strong positive divergence and ES is also seeing a positive.

Chicago PMI Misses

In one of the few US economic releases today, Chicago PMI missed this morning

Released On 10/31/2012 9:45:00 AM For Oct, 2012

Prior Consensus Consensus Range Actual Business Barometer Index - Level 49.7  51.0  49.5  to 52.0  49.9  The PMI was released 30 minutes early, apparently a mistake by Market News, but this is what I tell you all the time, they have the numbers-just under an embargo, however it's a system perfectly set up for conflicts of interest. While this was a slight beat to the prior, it was a big miss of consensus and in contraction. The employment sub-index fell to 50.3 from 52, only .3 above contraction-this also being the lowest print in 33 months. PMI continues its march across the world in to the abyss.

OPENING INDICATIONS

Amazingly, even after 4 days, the intraday opening indications are RIGHT ON! I'll use the DIA/DOW as an example of what I think is probably early weakness intraday, maybe a gap fill and then the larger trend.

 DIA 1 min saw a positive divergence around noon Friday and moved up with 3C in near perfect price/trend confirmation, the opening this morning carried that on with perfect confirmation.


 A little further out the 5 min chart has an intraday negative divergence so I think we could see a gap fill or some softness earlier in the day based on this, however...

 Scale out the same 5 min chart and it shows the leading negative divergence from the highs of the 17th/18th and the leading positive divergence of last week, this is the bigger picture.

 IWM 1 min with a positive divergence Friday at noon, a small negative and a small positive and this morning's open in perfect confirmation.

 The QQQ, like AAPL with a late afternoon negative 1 min divergence as it follows AAPL and this morning total confirmation/in line, this will change when AAPL changes.

The SPY was the only that didn't have opening confirmation, but since it has fell in to perfect confirmation, it's amazing after 4 days that price ends up almost exactly where it should be based on the intraday signals from Friday.

AAPL Update

AAPL 1 min is where the divergence would first start and then migrate through the timeframes, like the leading positive around noon on Friday that lifted AAPL from its lows to a "V" shaped intraday move up, we are starting to see the same build on the 1 min chart.

 Friday's negative divergence toward the end of day and this morning a leading positive divergence starting.


As a reminder this is what Friday's 2 min leading positive looked like before AAPL gained about 21 points in 2 hours.

The Euro

In yesterday's post I mentioned how we see the strange effect of divergences in the currency ETFs like the Euro or USD and no matter what happens overnight, the divergences tend to be fulfilled, this is even more amazing, over a weekend and 2 days of the market being closed the Euro has fulfilled, or at least started to, the positive divergences from last Friday and last week! So far this never or very rarely fails, talk about a market that is controlled in these cycles! If this happened once in a while I'd be skeptical, but I can't remember the last time it failed.

By the way, a strong Euro means a weaker dollar usually, which means a stronger stock market.

 The near term 2 min leading positive divergence from Friday in the Euro/FXE, this morning it is hit right on the nose at confirmation!

 The 5 min Euro/FXE leading positive divergence from Friday, also hit exactly at confirmation in intraday trade.

 What  may be more telling and interesting is backing out and scaling the divergences to trend from intraday and you can see the 2 min still has a huge leading positive component that the Euro could or should catch up yo, this is positive 90% of the time for risk assets like stocks.


The same thing is seen on the 5 min Euro/FXE chart when scaled beyond intraday!

AAPL Chart Interesting

Here's a larger update on AAPL.

 From the decline to the bearish consolidation/continuation pattern with a potential head fake break below support of the price pattern, Friday afternoon we saw a strong intraday positive divergence at the bottom of that V as AAPL then proceeded to move higher. A head fake move completed would see AAPL follow the yellow arrow above the bearish price pattern that is very common in T.A.

 The longer term 5 min AAPL chart with the negative sending it lower, confirmation on the move down and a positive divergence in to the bearish pattern with a small negative sending AAPL lower from the top of the triangle and a leading positive in the break down area (potential head fake area).

 Here's this morning's open, triggering some volume as stops and shorts come in.

This 1 min negative divergence at the end of Friday was noted in this AAPL update Friday

We didn't have any idea what that negative late day divergence on a 1 min chart was about, but it seems clear now it was about the management shakeup that AAPL pulled as Hurricane Sandy had everyone's attention.

Right now we need to see the start of a 1 min positive divergence , which is just starting to show up, it needs to build quite a bit to be high probability, but I still think there's a good chance this turns out to be a head fake move.

AAPL 1 min right now

AAPL Pre-Market

After the big management shakeup at AAPL, it's normal to expect some volatility,  pre-market trade in AAPL is down -1.1% at $597-ish.

Compared to last week, you can see where the bid/ask are to the right at the hash marks by price.

While the normal market hours version of 3C is better, we can still get an idea from the extended hours version.

In early pre-market trade AAPL came down from highs of $603.93, 3C (1 min) followed it, but then 3C went to a relative positive divergence and the downside momentum started to subside until AAPL was heading lateral, at the lows of pre-market the 3C positive divergence was picking up steam until it moved to a stronger leading positive divergence and AAPL is starting to see a little upward movement.

The normal hours version of 3C is better for AAPL, but that's what pre-market looks like thus far.

Starting the week - Pre-Market

We're halfway through, but we are finally starting. I hope all of our friends in the North East are safe and comfortable in their homes, I've been through about 9 of these storms here in S. Florida and there are so many things that effect day to day life you never imagined, all of our best to all of you.

As the overnight session began last night and until I went to bed pretty late, there wasn't much to report, ES was pretty flat in a tight approx. 2 point range.

You know what my opinion was from my post yesterday afternoon.

As a matter of fact, we didn't get much movement in ES until the European open at 3 a.m. EDT.

Despite  the September European unemployment rate hitting a new record high overnight at 11.6%, Consumer Inflation staying high, French Producer Prices (margin squeeze) moving higher up, Spanish Housing permits seeing a 37% decline from July to August, the Greek 2013 economic outlook coming in worse than expected bringing Greece to  189.1% debt to GDP for 2013; it didn't matter that Japan cut their economic outlook as PMI (manufacturing) came in at 46.9-the lowest since 2009 and in contraction, it didn't matter that Taiwan cut 2012 GCP forecasts by nearly a third, and we could actually go on and on, IT DIDN'T MATTER.

JUST BEFOR THE EUROPEAN MARKETS WERE TO OPEN...

A Nice positive divergence in 3C on ES lifting ES over 10 points in the overnight session, we're a bit shy of that now, but still at a healthy move up.

Should this hold through the day, I think yesterday's post about cycles being set up and run as well as the FX divergences might be worth raeding again.