Leading Indicators

I don't see any real problems with leading indicators whether we are looking at a volatility bounce/rally/shakeout or what comes next. This will probably be the last Leading Indicators post for the day as it takes up some time. Next I'll be focussed on the stocks that may move from one candidate or another, I think this is as good a time as any considering the close.

 Commodities for once are doing pretty well today vs the SPX with Gold and Oil moving well, in fact I'll have to take a look at the gold leveraged long position and see what we might want to do with that as it is at a slight profit.

 Longer term commodities were not that far off the mark during the range section of the market and aren't that far off from Friday's false breakout.

 FCT 5 min from the mid October rally highs was negative as it turns out to be a decent leading indicator, there's a nice positive divergence during the range and it carries on right through Friday and this week.

 Yields are in line today, maybe showing even a little better relative performance on the day.

 Yields which are like a magnet for equity prices were negative at the first and second SPX little triple top and it was positive at the 3rd as well as the range after the 3rd and overall for the near term which is hard to define, but I'd say a move of probably close to a month, perhaps more.

 Long term Yields were one of the signals that got us short in March, April and May 1st, the reversion to the mean at the June 4th low along with all of the positive divergences saw us opening long positions, I decided to keep core shorts (or most) and hedge them with leveraged longs which was based on guess work, but the hedge was near perfect as it actually made money and protected some shorts that later served me well. However the big picture here is a severe dislocation and ultimately the reversion to the mean indicates a VERY nasty move down for the SPX-that is stage 2 of our current market expectations and plan.

 The $AUD as you know is my favorite leading indicator of the currencies, today it's working well intraday.

 The $AUD also was negative at top 2 and became more positive going in to top 3 and the range after top 3 as well as the current positioning, in my view this argues for a move to the upside in the market.

 Here'a little longer look at the $AUD and the signals from confirmation to relative negative, leading negative and positive currently.

 The Euro is a better confirmation indicator among the currencies than a leading indicator, today it has held well with the market intraday.

 As for Credit, High Yield Corporate is working well intraday with the market, surprisingly if I had to guess where it would be without having the chance to look at the market, I'd guess it would be down as traders looked to decrease their exposure to a wild card event.

 Junk Credit is of course High Yield, it is also looking decent intraday.

 HY Credit looks decent through the range and better since Friday's head fake move and everything that has come since then. Again, the fact it's not running to the downside, scared, says something to me.

Sector rotation lately over the last 3-4 days shows a clear trend of risk sectors moving in such as Financials, Energy, Basic Materials, Industrials, even Tech which has been lagging and the safe haven areas like Utilities, Healthcare (which is interesting considering the election) and Staples have been clearly moving out.

Market Update Charts

So far the charts remain really interesting; on the short timeframes I think you have to expect volatility on a day like this. However on the longer term charts that really matter, Friday was an interesting head fake day and just about every average improved incredibly from the lows created from the head fake breakout. The bottom line, although I feel nuts for trying to predict market direction after an election, remains that what we expected going back to about October 19th sis still holding up.

Here are the intraday updates I promised and the interesting charts.

 DIA 1 min showing intraday weakness.

 DIA 5 min showing a leading positive divergence at the lows after Friday's head fake false breakout, currently the 5 min is in line with the price trend.

 The special chart is the 15 min DIA with the move down to the left (and this looked much more serious back then before we could see what was coming after), the relative positive divergence through the range (23rd-31st) and the leading positive divergence to a new local high above mid October's rally high and most of this was all in a day and a half!

 ES/SPX 1 min intraday futures showing an intraday negative divergence, they've lost some ground since this capture.

 IWM 1 min intraday was in line and then went to a leading negative divergence, not horrible, but enough to expect a consolidation or pullback and not the continued uptrend that we had seen earlier today.

 IWM 2 min shows the negative divergence and head fake / false breakout on the gap up opening last Friday, prices fall fast as they are supposed to, "From failed moves come fast moves" and a positive divergence at those lows. In my opinion either the market wasn't quite ready for the cycle to breakout or it had to do with weekly op-ex or something else, but the fact it seems they accumulated the lows seems like maybe they weren't quite finished with the cycle preparation-curretly in line.

 IWM 10 min from the mid-October negative divergence (note it looks similar in all the averages), the relative positive divergence through the range (22nd-31st) and last Friday's head fake negative divergence leading to a much larger positive divergence at the reversal lows-currently leading positive very quickly, very strong on an important timeframe.

 QQQ 3 min shows Friday's head fake move, note as usual the head fake is ABOVE resistance, which allows smart money to sell to buyers buying the breakout, they need demand and the breakout provides it, just think about what smart money needs to move in to large positions, not 100 lot orders.

Then we have the positive divergence at the lows from Friday's move like everywhere else and a small relative negative divergence intraday now. We may have to wait until Wednesday or so before we see how these positive divergences pan out, but I see no reason to close the leveraged longs we bought during the range last week.

 QQQ 15 min from leading negative at the mid-October decline to leading positive from Friday's head fake decline with a relative positive divergence during the range, this is an impressive move on an impressive timeframe.

 Interestingly, take the QQQ 2 hour which is leading negative in its trend and zoom it in, this is the first positive divergence since the September highs rolled over after the QE3 announcement, that's pretty impressive.

 SPY 2 min intraday leading negative.

Just beyond that though at the 3 min, there's no migration of the negative divergence suggesting it is intraday and not much stronger.

Market Update

It looks like we have a pretty serious looking negative intraday divergence, watch for downside very soon, it may offer some opportunities to pick up longs tactically if we get a reversal in the signal. Charts coming.

WYNN Trade Idea -Long

I was asked to take a look at WYNN as a short term, long trade and I agree, I think WYNN has good probabilities of an upside move for a long trade and is at an area where the risk is pretty manageable (unless we see a massive gap, but even in that event your maximum position size should limit the risk there). WYNN also looks pretty darn ready to make that move.

Here are the charts...

 WYNN is a channel Buster, many times these will make a move higher before they make the next serious leg lower and that's probably the long trade that we are envisioning. These moves also tend to be volatile so there's likely a decent risk:reward ratio in the trade idea.

 If we use the 2 day Trend Channel a closing price of $112.65 breaks the uptrend, I'm not so sure how important that is to this particular idea being shorter in nature, but holding above that level certainly wouldn't hurt.

 Here are the gaps created recently in WYNN's gap up and down, this leaves a sort of Island top, we don't often see gaps like these left unfilled with HFT's in the market.


 The longer term bearish outlook is hard to disagree wit, but this is a 4 hour chart so this is a really longer term trend, this is the kind of signal in which if I had to make a trade today and not touch it for 6 months I'd choose to go short.

 The 15 min timeframe is more along the lines of what we are looking for in a trade like this, you can see a leading positive divergence before the gap up, that gap up was sold at the second red arrow and the gap down is NOT confirmed, the 15 min chart is still in a leading positive position; this fits well with a shorter term trade to the upside that at least fills the gaps, but probably moves a bit more than that.

 The 3 min chart is leading positive exactly where it should be in a flat range, remember what I said about quiet markets yesterday, they are usually up to something and this chart looks like they've been up to something-accumulating WYNN on the cheap.

 The 1 min trend is the most detailed, you can see the negative divergence at the top and a leading positive divergence at the gap down.

Zoomed in, we see a strong leading positive divergence right now and on the break of minor support this morning, I'd guess WYNN is tradable right in this area. If you look at the daily candles, thus far they are forming a Harami upside reversal, if they close that way and on some volume today, an upside reversal becomes even more probable.

Energy Update

The long I chose for my energy exposure for this move up we've been expecting is ERX which is up +4.78% today, this is a leveraged long which I felt comfortable with being I'm currently looking for a strong shakeout move to the upside followed by an opportunity to set up shorts for the next and serious leg down. Energy has been the last sector of the 3 important sectors I talked about yesterday, the "3 Pillars" to finally come along and get in to line with the set up that has been forming. We saw this shaping up yesterday, today we are seeing it in action which in itself almost seems like an endorsement of Romney, being it's not just oil, but the whole Energy sector including services.

Many of us used leveraged ETFs as they are the right tool for the move we are looking for; when it comes time to sell them and look at shorts, we'll be looking at non-leveraged individual names for a longer move/trend.

This is what we predicted, this is what has happened across most of the market and the final confirmation of this near term market movement seems to be starting to move in the direction we set up our short term long trades. Since the decline from the mid-October bounce and decline (we got both directions correct and traded both) the prediction was for a range bound market and for that to build accumulation for a shakeout move higher, for the move to be effective it will have to be very strong, in fact when it's done, if done properly, you'll probably be afraid to short anything and that's exactly what we want to see. The white area is the range we predicted before it started, yellow is Friday's head fake move and today we are seeing a break above the range which is the first step in confirming our expectations.

XLE/Energy's 1 min chart is in perfect confirmation of the move higher after weeks of poor 3C readings.

XLE was a late bloomer in the range, it didn't really show a large positive divergence until after the head fake move from Friday as prices dropped below support levels.

The 10 min chart is leading positive which is a good confirmation signal.

This is where the longer term and shorter term expectations come together; this 2 hour chart is a very serious timeframe with very high probabilities, as of now it's leading negative so our expectations are for Energy to see some strong downside and that's why we want to use strength to short in to. There is a possibility that this chart improves and the outlook changes or that we do see a downside move and then a more positive outlook, but we don't have evidence of that yet so we stick with what we see.

Now we see the longer term is very negative, we know we want to use the short term strength to short in to, if we zoom in on the exact same 2 hour chart, we can see recent improvement suggesting a move to the upside in the near term as this chart is leading positive when zoomed in, the chart above is where the 2 hour chart naturally falls so the leading negative divergence is the main signal, but this is also telling us in the short term strength is very likely followed by a move to the downside which is pretty much exactly what we have seen in nearly every industry group and market average.

Market Update

Not sure what caused this pop, but the TICK chart was moving pretty well.

 SPY move...

 The NYSE TICK chart hit +1250 which is a very strong move.

 The 1 min chart still isn't in line, but...

Price is moving up to the leading positive represented by the 3 min chart.

Opening Indications

So far the futures aren't providing anything too interesting. The averages seem to be in non-confirmation mode on the early open, but there are some interesting charts that have strengthened up since yesterday, I'll include some of the charts that are what I'd call, "out of the norm' and therefore possibly telling us something.

While guessing at the election is probably a fool's errand, I can't help but wonder if indeed smart money is a lot smarter than we give them credit for, I'm going to check out a few of the perceived winners and losers if either candidate wins and if there's something that stands out like the homebuilders stood out as the next big winner during the 2000 Tech Crash a full 2-3 years in advance, then I'll bring that to you, today is an opportunity to advance what we know so I'll be at least taking a look.

I already have my list of Bank Stocks, North American Energy companies, Pipeline companies, Green Energy, Coal, Defense, Healthcare-hospitals and Insurance.

If you want to submit a couple of stocks that you feel would be good barometers of either a company that would be hurt or helped by a particular candidate, go ahead, but please keep it down to a few and only the ones you think are the MOST relevant and we'll take a look.

One thing I did in 2000 was to buy Prudhoe Bay and watched that stock go up 700% (actually more) with a 15% dividend when I bought it, with Bush and Chenney coming to the White House it was an easy pick, if the President was a Corn Farmer and previously ran Corn Farms, I would have bought something corn related.

*I have a LOT to watch today so please keep your submissions to a couple and if you have a reason why that particular company is very relevant, this might be fun like the earning's leaks quarter we did.

As for opening indications...

 DIA 1 min is slightly out of confirmation on the open, yesterday however we saw some pretty impressive 3C action.

 The 5 min chart is nearly the same as the chart above, impressive action yesterday, not confirming early today as of yet.

 What did stand out was the 15 min DIA chart from yesterday which went in to a leading positive divergence and you may recall me mentioning that the action was on the longer, more important timeframes yesterday, this is a great example and it is above Friday's highs where the head fake to the upside occurred on the open.

 QQQ 1 min is also not confirming early action, but it's also not that far off, this looks more like consolidation than anything to me. I do wonder as the day goes on whether smart money's "Professional Networks" or another way to legally say, "inside information providers" have their tentacles in the exit polling and other key information?

 The 3 min chart looks much the same, because it is a longer and stronger timeframe I might expect some backing and filling or a consolidation through price.

 Again, of interest is the leading positive divergence on a 15 min chart yesterday. This is a big move in a short time on an important chart.

 SPY 1 min is not showing confirmation on the open either.

However again we see an interesting chart, this is a 3 min with a large leading positive divergence, we don't see the same above so I wonder if this might be a reflection of the SPX's Financial heavy nature?

Energy

Considering how badly Energy has performed and yesterday's "3 Pillars" post, I have to say I'm impressed with the signals we saw that suggested Energy was about to come back and show some strength giving us the 3 sectors we need for a rally all looking decent as Energy was the holdout. It looks like Energy is up about +.76% so far this morning.

We'll keep an eye on that, you may want to check yesterday's post dealing with the 3C signals for Energy.

In to the open

Without getting in to overnight news, which hasn't changed too much from yesterday save for a Greek strike against the austerity vote yesterday and some more disappointing PMIs, it's about the election today and whether Wall St. is going to run the cycle or not.

The Euro has improved overnight as has ES and NQ futures, but interestingly the $AUD has improved quite a bit.

 Here's ES in to the open, it doesn't look bad, it gained a bit from yesterday's close at 4 pm.

 NASDAQ futures at the bell, also not bad looking.


 EUR/USD at the open of FX trade this week with some overnight strength.

 EUR/USD since the 4 pm close yesterday to the open this morning.

The $AUD is the really interesting move, I haven't had a chance to find out why, but this tends to be an excellent leading indicator for the market.

I have to re-set my virtual machine so I'll be offline for a few minutes, it shouldn't be a problem though.

FOSL Earnings

Over the weekend I was asked about FOSL who was to report this morning before the bell, they did.

Here's what I had to say to 2 members asking about FOSL as an earning's play.

Question: "FOSL reports tues morning .  You see 113-115  or 70-80 post earning?

thanks 

this is always a big mover on ER."

First Answer over the weekend:  As far as FOSL, right now to me it doesn't look much different than the overall market, maybe tomorrow it drops a hint before earnings, remind me tomorrow and I'll look at it again, but as of now it looks like most stocks following the market.

Second Answer yesterday: I probably wouldn't call this an earnings leak, but the trade that has developed today looks a lot more like strength is being sold, that can be nervousness in front of earnings. I just like the intraday trade of the market better than FOSL especially as the day has progressed.I personally don't see it as a big enough signal that I would consider it an earnings leak, those tend to really jump off the chart, but I also don't see the same amount of strength in underlying trade between FOSL and the general market as a benchmark. 

Note how the FOSL charts didn't show much before Monday/Tuesday and then the sudden change, selling strength...

 1 min selling strength this week, Mon/Tues.

 5 min chart

 10 min chart, note everything is in line until this week.

 15 min chart even had strength in September and this week a change of character.

 Again on the 30 min chart...

Finally the 60 min.

FOSL missed on earnings, they are trading down nearly -10% in pre-market.