Market Update-Action

I'm going to look at what 2 or 3x leveraged short ETFs that I have that I might add to or some that I might open new positions.

I think there's enough material deterioration to start adding CAUTIOUSLY and not SWING for the fences at this point.

Always keep your risk management in mind and position sizing. I prefer the 2-3x leveraged ETFs because the make the move down worthwhile, but they limit some of the risk of having too much leverage in Call positions, although if I see the right signals I may consider some speculative calls as well.

For those a little more conservative there's always the ability to short a non-leveraged product. I just think we are getting parabolic, the 3C tone has changed, it's probably a decent, fairly low risk area to look at adding some positions here. I do want to keep a little balance and longs that I like will stay in place, I'll be reviewing those as well to make sure there's nothing terribly wrong with them.

TICK data vs the SPY, note the earlier high in the SPY with TICK hitting +1300, then higher highs with TICK falling at each to the +750 area, intraday breadth is giving way.

 ES 1 min negative divergence, but more importantly..

 The 5 min that has been positive or in line as the market needed support to make these moves is now turning clearly negative in to these nearly parabolic price moves.

 NASDAQ 1 min futures also negative intraday

And the 5 min is certainly changing character for the worse.

Market Update

* I may be a bit slow on emails because there's so much happening so fast that I can't really take my eyes of the screen for more than a minute.


I'm going to use the SPY as an example, but it is fairly representative on all of the market averages and the situation.

Short term the market looks like it's prepared to come down a bit from here, we are still pretty early in the day though so I can't rule out choppy volatility.

Try to envision the following charts in this manner, the long term charts like 15, 30, 60 are the most important, the highest probability, they show what the big picture and health of the market looks like, these are negative. Short term charts have been positive recently to hit these targets in the IWM and QQQ, but they are starting to deteriorate, they will start to deteriorate at the fastest timeframe like 1 min first and then if it is strong enough they move to negative 2, 3, 5, 10 min charts. The long term is already set in place, so when the short term charts deteriorate, they kind of meet in the middle and it's like a two part epoxy (the long term side and the short term side) meet up and mix and create the effect or activate.

 SPY 1 min leading negative intraday

 That has migrated across and to the 3 min chart so the divergence appears to be real, it appears to be strong and perhaps getting stronger as the target has at least been met in the QQQ.

 The 5 min chart is still in line with price which it has had to be in recent days to keep the market moving up, eventually I suspect the 3 min chart will deteriorate enough that it will effect the 5 min chart and then we are pretty close to extremely high downside probabilities.

 The 10 min chart was already established as negative, it doesn't need to go more negative, but if the 5 min goes very negative then the next timeframe, 10 min should get worse. The 3 min is like the one side headed to the right and  the 10 min chart and those above are like those heading to the left, the 5 min is the only thin wall separating them and when they clash in to each other, we have high probability downside move that we have ultimately been expecting.

 SPY 15 min in leading negative position, it did move in line with the market, but has stayed in leading negative position.

The 30 min chart's leading negative divergence, none of the recent accumulation needed to send the market to the targets on the upside made it to these longer term charts, at best they moved in confirmation of price, they did not go positive.

I didn't include the 60 min because it is redundant.

I can't be sure how intraday trade and the QQQ break above resistance play out technically, whether it's a fast change and reversal to the downside or whether the Q's spend a couple of days in the area, I just know that with the way things are developing, the gut feeling i had that a reversal would be very quick is supported by these charts so far.

FXP (China FTSE 25 Short)

I've had some requests about this one, while it does tend to move the opposite of the market directionally, it is not a mirror opposite, but I think for swing moves and longer moves, the signals in the market are valid for FXP Analysis, after all if the US markets go down, the world tends to follow in the broadest sense of the correlation.

I also had to use the long version of the ETF, FXI for some shorter term charts because the volume in FXI is much larger than FXP. In any case, they are mirror opposites (FXP the short, FXI the long) so we can do that.

Here's what I see thus far which is not surprising...

 Notice a familiar price pattern on the daily chart of FXP (short the China FTSE 25)? Notice a move below that with huge volume? Why do you think that is? Orders, as technical traders are so predictable they literally place stop and limit orders pennies below or above resistance/support levels making it very easy for Wall St. to run their orders, that's why volume surges on the first day below support because all of the pent-up order were hit and triggered at once.

As usual the red arrows are what Technical traders expect to see and they wait for confirmation of the brea down, that is why volume is much higher on the first day of the break below support and not before or after. If this triangle's price pattern implied target were hit, FXP would be much lower.

 This is a 4 hour chart of FXP, it shows a positive divergence building during the descending bearish triangle and a leading positive divergence as price breaks below., remember the break created a lot of supply at cheap prices, it's an environment in which accumulation is super easy.

 The 60 min chart with the exact same signals

And this is the opposite ETF, FXI (bullish China FTSE 25) with the exact opposite signal as FXP, a leading negative divergence in to higher high, so we have confirmation on the long term between the two ETFs.

Because volume is much lower in FXP and trade is spottier on the intraday charts, I had to use FXI for the signals, just reverse them for FXP.

 FXI 2 min chart has an overall bearish negative divergence with a very small positive just moving intraday trade, this would be the opposite for FXP.

The 5 min chart has a long term negative relative divergence , again with very small positive divergences moving intraday trade. FXP would be the opposite.

Basically it looks like FXP will be seeing a move to the upside, likely above the descending triangle's apex and for short China coverage in FXP, you simply buy it, you don't short it.

I think the short term signals that tell us when we are very close to an entry are a bit harder to discern, but overall I think we are close and I think you can use the normal market updates as a supplement for FXP short term signals. When the market turns bearish and is ready to reverse to the downside, FXP should be ready to reverse to the upside.

One other short term signal in FXP is a move below $18.50 and then a move back above the $18.90 area, that would likely represent an intraday reversal move.

Feel free to email me for more information.

Q's Hit Resistance

Technically at 11:49 the Q's made their intraday high and just crossed above the resistance zone that we set as out target last week.

I'll have more for you shortly.

AAPL Update

*The QQQ are now $.06 cents away from the resistance area.

As for the AAPL January $525 Calls, I'm going to treat AAPL as its own trade separate from the QQQ even though it is the most influential component in the NASDAQ 100 accounting for nearly 20% of the average's weight, that's about the same as the bottom 50 weighted NDX stocks combined, so 1 stock can nullify the move of the bottom 50 because it carries more weight than all of them combined!

We are seeing some VERY fast changes in 3C momentum, that sword cuts both ways though. For now I will continue to leave the call position open.

Here's te near term trade, some things to watch for and the longer term trade in AAPL.

 This is the bear pennant in AAPL I covered a couple days ago and if I had time right now I'd include the link, but you should be able to find it in the archives on the right side of the member's site. I said I thought this bearish continuation price pattern that suggests a new move in AAPL as soon as it breaks below the pennant (happened on 12/13) would indeed be a head fake move, it would trap bears and help to create an upside reversal with a mini short squeeze, so far AAPL has done EXACTLY THAT as price is now above the red break down trendline where volume increased so there are shorts at a loss and when/if (I think it does) AAPL breaks above the apex of that triangle (yellow trendline), even more shorts will be squeezed and harder.

 Intraday on a 5 min chart there's a bullish consolidation/continuation symmetrical triangle, technical traders trading on these faster timeframes expect it to break to the upside, this is why the chances are good that it breaks to the downside first to shakeout longs and then moves above the triangle, but this is less sure than usual because of the longer term bearish scenario of the bear pennant in transition. Either way, it looks like the triangle will break one way of the other soon.

 The intraday charts are negative, but only slightly here. The 1 min above could go negative just to hold intraday upside momentum and create this lateral consolidation, but...

 When the 3 min chart is also with a small negative intraday divergence, it suggests probabilities are for a downside shakeout of AAPL.

 The 5 min chart has a longer term, larger positive divergence so no matter what happens with the triangle above, I do believe that AAPL will eventually make it' way higher (eventually doesn't mean a long time, it could be in a matter of hours).

 The 10 min chart was negative at the top, AAPL moves somewhat like we expected the market to move (although AAPL was a bit sharper on the downside), the market had a few other things in which it could make money (IWM/QQQ break above resistance). AAPL is now starting to show a 10 min positive divergence, it's in and around the area I expected it to hit on the downside before the longer bullish base that has been under development since October, could take effect, so AAPL may be a case of its own, there are many interesting ways to view the end of year trade for hedge funds in AAPL, but I won't get in to that now.

AAPL 15 min chart did make the new low like I suspect/expect the market to make on the downside, it broke below support at the yellow trendline and effected a shakeout, it may not be large, but it was all that was technically needed to get AAPL started back on an upside move that the 30 min chart has shown to be developing for some time.

As you can see we also have  leading positive divergence in AAPL right now, so I'll keep these calls open for the time being.

Market Update

Now the QQQ are only a mere $0.22 from the resistance level. Across the board in just about all of the averages, the 1, 2, 3 min intraday charts are going negative, especially the IWM.

The 5, 10 and in some cases intraday 15 min charts are still in line and still look good.

So are we seeing the start of the deterioration of the trend as the QQQ nears the breakout area? How long could the Q's linger in that area? There are a lot of questions.

Financials in my opinion are showing less underlying strength than Technology, but in a bit of strangeness, I think both sectors look better on intermediate term charts like the 10, 15, 30 min than the market averages on the whole.

You can probably see just by intraday price that the market almost looks as if it is racing to that area, it will be interesting to see what happens when it does hit that area.

While I don't do anything without confirmation, I am thinking about what assets I might like to start positions in or add to existing short positions. I'm also considering plan "B", if things go differently than expected, what positions do I want to move around, this isn't a reflection of changing perspective, it's just good planning, especially with a market that "could" turn very fast, not leaving you much time to make these decisions.

Exceptionally interesting market, this race or stretch to hit the target area almost looks desperate.

Plan "B" is Out- The market is showing a few new things

I have to say that I kind of feel the pressure that Congress and the White House must feel. Some of you know that I'm on the board of our condo association, serving as Secretary. We are right now going through a budgeting process in which by Florida law we need  majority of owner's votes to keep our reserves at "less than" fully funded, which may not sound like a good idea, but if we go to fully funded reserves our maintenance fees that are already double what most associations pay will nearly double again and the delinquency rate ill likely double.

In some ways it almost feels worse than government because there are so many people with agendas (ex-board members voted off, etc.) spreading all kinds of untruths, but there's no media, no one to keep them honest so it's a non-stop fight that we are in the middle of, I don't envy any of these people, but at least they get paid for their service!

OK, so what I wanted to point out after I watched how the market reacted to the press conference is something that I would expect to see considering the view that I have of short term market action and what comes next.

I have received some great emails from members who are thinking outside the box and with forethought, some of the issues include this being an op-ex week, the end of the year window dressing, etc. All great comments and I encourage you to consider all of these things, I however can only bring you what I see and what my interpretation of that is in an unbiased way. I'm not an expert in what could happen and I'm not dismissing any of these ideas, but I'm here to give you the facts as close as you can get to fact in the market.

These charts I found to be interesting within the context of anticipation of near term market action and what comes next.

 TLT-Long Term Treasuries have been heading down as the risk on trade is in place and the markets moving up, Treasuries are a flight to safety trade when anticipation is or in fact the market is heading down. So to see early positive divergences in TLT suggests that some are preparing to move to a more defensive position which is in line with what I expect to happen after this move up that should have the QQQ resistance area as its target.

 On a slightly longer chart the divergence isn't there yet, so it is just getting started, ironically as we come closer to the QQQ area in which I believe a breakout will be a failed move/ head fake , sending the market lower.

 On a 5 min chart there's no sign yet, but remember new divergences start on the fastest charts and migrate to the longer ones, so this makes sense.

 XIV, the opposite of VXX and moves with the market is now starting to show a 1 min negative divergence as are most of the market averages right now, when the market moves down, XIV follows.

 A slightly longer timeframe and we just start to see it, suggesting this is either a new trend just starting or it's part on an intraday move, but because of the TLT signals, I think it's the start of a new trend.

 At 5 mins it's not there, so it seems to be the beginning of planning for what comes next.

 UVXY moves opposite the market so to see a positive divergence just starting there confirms the other charts above.

 3 min chart and it's not there yet, so either an intraday move or the start of a new trend, I suspect the latter.

VXX is the same as UVXY in correlation and has the same signal.

The botto line is as the QQQ approaches the target area in which I believe it will fail, the defensive trades and correlations connected to defensive trades that happen during a market decline are showing early signs of forming.

On Hold, a Bit Nervous in front of Boehner P.C.

Due to start any minute, Boehner will outline plan "B", the market looks very much like a holding pattern, the TICK data has been on the low side all morning thus far.

Early Indications

So far pretty much everything is inline, but most of that was because of the small move this morning and the large 3C move yesterday at the close. I'm not really comfortable with the way the averages look, they almost seem as if they are extending their fingers as far as possible to reach the finish line, which gives them a parabolic look or at least in need of a consolidation, but because I think this move is for a specific reason and isn't necessarily built for durability, it may just continue on until the target is hit-if that were the case, then yes, the reversal to the downside could and should be quite fast and dramatic.

 QQQ daily chart really isn't that far from the target area.


 DIA like the other's is showing early confirmation, but looks very over-extended.

 IWM

 QQQ

SPY

Pre-market Futures

Going in to the open, this is what ES futures look like...

The easiest way to show it is with a 5 min chart because there's been deterioration all night, but it's difficult to see on a 1 min chart.

 1 min pre-market

5 min overnight.

Still AAPL, the Q's and others are set to gap up, volatility always goes crazy at 9:30, we'll see what the opening indictions are.