AAPL is REALLY Pulling my Strings

It's definitely not in the short term charts, it's this 15 min chart that is killing me.

I'm considering a phased in entry of 1/3 a normal position.

I'm still looking everywhere for near term confirmation, all of the longer term (beyond intraday) charts still seem to agree the market is looking for some positive news and a move to the upside, I still believe that move is limited for the time being, but perhaps it makes AAPL a trade.

Obama to Speak 1:30

OK, who knows what's going to be said, we have seen the underlying trade, implications of that and now an initial favorable reaction from the market.

If there's a solid upside market reaction, I'm looking to capitalize off it with the SPY/QQQ calls, I will be planning on selling in to strength, of course I'll be watching indications to gauge when the best time may be, but I have viewed "Trend 1" as a short term event, the kind of event that you sell in to while the rest of the market buys.

That's the initial game plan in case we have to move quick, I'll be updating you as frequently as possible.

Volatility & Treasuries Seem to Confirm Underlying Trends

At least when it comes to what I just posted,

 "From the looks of these charts, it seems like the market is already pricing in some resolution in underlying trade."

So far this morning, I have posted quite a few indications that look like there's some expected short term resolution that the market reacts favorably to, this is what I believe to be "Trend 1-the pop to the upside".

Volatility seems to be confirming this as well, although along with some of the other indications, it is more recent, but also quite strong where it needs to be.

 This is the Clear Method (slightly adapted) that a lot of swing traders use to identify what is important and what is noise, the white days in the daily VIX are important, they are the uptrend, the yellow days are noise, but most of the time a reversal is preceded by a noise day, today the VIX is down over -8%, consider the VIX typically moves opposite the market, it would seem that some recent hedges that have been put in place for long exposure protection are perhaps being taken off. The trend line is still in effect at this moment though.

 Friday I told you that when an average or something important like the VIX "Walk the upper Bollinger Band", it's a very strong move, again we are still in the area, but if the VIX is showing sign of hedges being taken off, there's likely an underlying tone of more near term confidence in the market.

 VERY short term I mentioned earlier the VXX and UVXY are positive on the 1 min chart, this suggests intraday weakness in the market or perhaps consolidation, that's very much in line with the market update I posted and used the ES chart as an example. We are in a tight consolidation right now, in fact very tight.

 Slightly longer term, but still within the range of what I have been calling, "Trend 1- the pop to the upside", we have a negative divergence in the Volatility Futures ETFs like UVXY here, this fits well with the 15/30 min positive divergences in ES and NQ I posted today.

 When you go out a bit longer to 30 mins it's not as negative, but slightly, this is kind of the outer limits thus far and this is what kind of keeps expectations more along the lines of what I have been calling, "Short term"- at least what we have right now.

Treasuries... These move pretty much opposite risk assets as a flight to safety trade when th market is not performing well or expected to not perform well.

 The 2 min chart is something I have talked about recently and it's leading negative divergence has pulled TLT (Treasuries-long term) down today.

 There's also a negative 5 min divergence-again, these signals are moving along the same lines as the other indications we have seen.

At 10 min there's a slight negative, it is what I would consider the outer edge of the move, similar to the VXX 30 min chart above.

What I'm saying is it looks to me like the market is pricing in a favorable reaction that is in line with our first trend, a quick, powerful move to the upside, TREND 1.

Leading Indicators and Futures

Leading Indicators today are so flat I don't think I've ever seen them this indecisive, they are nearly perfectly in line with the SPX except for 1 out of about 10, that's High Yield Credit and it's not really that off the scale, it is showing better recent relative performance, but nearly everything else is in what I'd call a holding pattern. This seems to me to be more tactical than strategic, in other words what we have been calling "Trend 1", a quick (quick is relative to the size of the other divergences representing the other 2 trends) pop to the upside. I don't want there to be a lot of confusion over quick as I noted above because it is small or quick looking when compared to the other two trend, trend 3 has been in place for months. This "Trend 1 pop" could still be a very strong move, this is represented by calls in the SPY and as of Friday the QQQ as well, I prefer to use more leverage on moves that tend to be smaller or faster and less leverage on longer lasting moves.

The other indication I want to show you is in futures for the Equity Indices, the S&P and NASDAQ (ES and NQ respectively). They are showing some momentum on charts that are fairly substantial and the momentum is very recent, meaning I suspect it is tied to expectations regarding the market's reaction to the Fiscal Cliff and as I pointed out yesterday, the resolution to the Cliff may not be ideal, it may in fact be horrible, but it's the market's reaction to the news that is important, not the news itself, at least for our purposes.

So here are the trends in futures that are much stronger recently.

 ES 30 min chart with a new leading positive divergence,

NQ 15 min chart with a new leading positive divergence, unfortunately I don't have any more history on the TOS charts to show the bigger picture.

From the looks of these charts, it seems like the market is already pricing in some resolution in underlying trade.

For the time, positioning hasn't changed and I see no reason to change it, the short term trend 1 is covered with more leverage in SPY and QQQ calls, Trend 2 is covered with less leverage so it is easier to hold them without massive drawdown pressuring the position and those are in either remaining core shorts are 2-3x leveraged short ETFs. As for the trend 3, I haven't positioned anything for it, I haven't even wanted to bring it up as I don't think we are there and don't want to confuse people, but certain analysis forced me to at least cover it in some detail.

Quick Market Update

The averages are at best, in line intraday, the SPY, NASDAQ Futures & DIA are nearly perfectly in line, the QQQ are slightly better than in line and the IWM is negative. I think ES (SPX futures) is the best representation at this point of all of these signals taken together.

As mentioned earlier, the first negative divergence is enough to cause a consolidation which has happened as ES moves sideways, but the divergence continues to grow deeper here so I'm leaning a bit more bearish intraday, at least for the next move from here.

The short term 1 min TICK chart isn't horrible, but it doesn't have the strength it was showing earlier today. The short term volatility indications in VXX and UVXY are positive which is negative for the market, again stressing SHORT TERM 1 min charts. It seems the market is still in a holding pattern, waiting for Congress, but it also seems like trend #1 (a pop, likely on some Fiscal Cliff good news) is well supported.

AAPL - 3 Trends - The Fiscal Cliff

AAPL is kind of becoming a bellwether or almost a lading indication for what I consider to be trend 3, but we still would need to see trend 1 (a quick pop up which could come quickly on news of some Fiscal Cliff arrangement and fade as fast with the debt ceiling debate coming up) and trend # 2 which looks to be a move below 11/16 lows. AAPL has been in a long term accumulation pattern, but near term hasn't been signaling that trend is ready yet, although I keep an eye on it for any changes in these trend table assumption.

I'm starting to wonder whether it makes some sense to pick up some shares of AAPL for the longer term, I'll show you why I'm thinking that, where I would consider it and what may hold me back right now.

Friday I posted the bigger picture long argument for AAPL here.

First to understand the 3 trends on the table, I'll use the QQQ as it seems to be the easiest to see and explain the complicated situation.

 Short term as we come close to the deadline for the fiscal cliff we have a short term, but powerful trend on the 2 min QQQ chart, this looks like the market is preparing for some good news, that it will bid the market up on this good news, but ultimately will be a quick move. This is the only move that I have any assumption as to a catalyst , Fiscal Cliff resolution of some sort.

 On the 15 min chart, the cycle to the upside (and remember there's typically 4 parts of a cycle, accumulation, mark up, top and decline-I'd say we are at the top part, close to the decline). The leading negative divergence here suggests a move below the 11/16 lows. I don't know how the Fiscal Cliff resolves, but I'm assuming the debt ceiling may be a catalyst to send the market on a path lower, the logic (after a bounce higher on some resolution) being "Look what a mess the Fiscal Cliff was, now we have to do it again with the debt ceiling!"

As to trend 3, which has been a longer term positive divergence out on a 30 min and some 60 min charts, I don't know what the catalyst could be, possibly F_E_D related?

In any case, AAPL is showing signs of this trend 3 and without resolution in the other signals it makes it hard to be a buyer of AAPL for a longer term move like it's longer term charts are implying, but on the other side of that coin, you also don't want to miss a move that looks like it could be quite powerful because you are nickel and dimming the entry to death.

This is why I have said so many times that this is one of the most complicated markets I've seen, maybe ever as there is at least one or two more trends that are hinted at (4 and 5!)

To AAPL...

I'm not interested in the move intraday in AAPL, in fact it looks to be failing as we speak. The move didn't have near term support and I think it was just more moving with the NASDAQ  and some news.

 AAPL 1 min chart this morning showing an initial negative divergence, this divergence also goes out to at least the 5 min chart.

 However this is the bigger picture on a 15 min chart and it's impressive, it's also part of an even bigger picture...

 I think I posted this chart Friday as well, it's a bearish descending triangle, a head fake move to the upside today is not surprising, but the head fake move I'd like to see is a Crazy Ivan with AAPL moving below this triangle's support as traders expect and to be a buyer in that area, I am assuming we'd have to hit trend #2 for that to happen, but that's a gut feeling as of now or at least until the charts between the 1 min and 15 min clear up because as of now, only the 1 5 min is really positive (as you saw the 1 min is starting to already turn down and there's no positive support beyond that in the 2, 3, 5, or 10 min range. I'm also assuming a move below support would bring those 3C positive divergences in those timeframes which would confirm that is where I want to buy. The trade would be coming to us, it would have less risk and higher probabilities.

This is what would have to happen.

The thing that has me a bit edgy is how good the 15 min chart looks, today's move I could care less about, it's that longer chart.

I always try to make decisions based on objective data and high probabilities, for now, I'm going to hold off on AAPL and hope to see the charts from 2 min to 10 min. fall in line with that positive 15 min chart, that's where the probabilities are highest, I just have a bit of an emotion called Greed or maybe even Fear (fear that I'll miss the move) creeping in.

And that's where we are at with AAPL, with some hints about the market in there as well as potential Fiscal Cliff and Debt Ceiling reactions.

HLF's Controlled Short Squeeze

Remember this one, a bunch of large institutions short HLF (they are going after the multi-level marketers) and the chances for a short squeeze?

Last week, Friday I believe I posted this, "HLF-Controlled Burn" because this isn't acting like a normla short squeeze, but is seemingly being expertly managed by the institutional shorts. I mentioned how it is seeing moves in quick +5-7% bursts and how you can probably make some money if you pay attention to the pattern and are nimble in getting in and out.

I suspect that professionals like these (who were and maybe are still) short HLF, don't let it slip they have a huge short position like this on accident, they aren't going to try to purposefully attract a short squeeze and shoot themselves in the foot just to tell all of us how they are positioned, they let that information out for a purpose, as of now I can't figure out what exactly the purpose is, but this is not acting at all like a typical short squeeze and more like a controlled burn, a little here, a little there.

I suspect in the end they intend to go after HLF again as it seems like the government will be cracking down on multi-level marketers like HLF, but that's just a hunch.

For now if you are trying to take advantage of this trading pattern of quick bursts up and then consolidation, I would keep it nimble until we figure out exactly what the plan here is.

On that note, it's made a decent move this a.m. as it typically does in the a.m. so you might consider an intraday trailing stop if you are long HLF.

Opening Indications

This morning's opening indications are telling us less about the market this morning and more about the way the market really works in a much larger sense, although there are some early hints worth mentioning.

As you know from Friday, while the market was plunging, 3C would normally follow if the smart money underlying trade was selling off as well, instead in many assets they seemed to be accumulating the sell-off which was strange given the perception of the Fiscal Cliff being solved are very negative.

We saw this in ES , the SPY, DIA, QQQ and NASDAQ futures had the strongest signal. Not only is it amazing that the Equity Index futures like ES and NQ maintained a bid under them all night, holding them up, but this morning they have moved up in a most profitable way. This probably has nothing to do with the Fiscal Cliff and more just Wall St. taking the other side of the retail trade (sell-off) and making money on it. This is the bigger lesson, this is Wall St.

We'll look at opening indications as well as that is the point of the post, but they are telling us much less.

 DIA 1 min backed up to Friday's close...

 1 min this morning with a very slight negative divergence, this is along the lines of a consolidation unless the divergence grows larger, but not telling us much as of this moment.

 S&P E-mini Futures are closing in on the pre-plunge levels from Friday  and also have a slight 1 min negative divergence, I think I know why- I'll show you at the end.

 NASDAQ E-mini Futures which saw the strongest 3C positive divergence during Friday's plunge have now moved above Friday's pre-plunge levels, a definitive profit for those that accumulated the plunge.

 The QQQ also had a positive divergence during late Friday, over all the 1 min chart is slightly leading, but for practical purposes I'd call this more "in line" or price/3C trend confirmation.

 SPY 1 min close up is a little better than in line this morning.

 This is the divergence on the 2 min chart since Friday.

The slight negative divergences here and there are likely because of the FX pair below, EUR/USD...

Overnight as the pair lost ground while the Futures didn't budge (which is strange in itself under normal circumstances), but as the EUR/USD lost ground, they too saw a positive divergence in to their own p;lunge, it wasn't quick like Friday's, it lasted all night, but the pair shot up just before the open, now they are losing some ground and I suspect that is what is causing the initial 1 min negative divergences in a few averages, but here's another bigger picture lesson of how the market really works, cheaper prices all night are accumulated and then a quick surge when volume is higher and they can easily sell in to it and make money.

I'm going to look elsewhere for signals, there are some interesting longer term signals such as AAPL which I mentioned late last week, I want to keep a close eye on these.

A Look at the Market Averages From Friday to Present

Most of us think of the market in terms of, "Whoever owned the Q's long Friday, got slammed" (I just used the Q's as an example, use the SPY or whatever), but when a entire move lower is accumulated you have to average that entire move, average any gaps down that may have been accumulated and the market doesn't need to move that much for these larger institutional traders to make money, it is dollar cost averaging, but it's done by people who have the firepower to maintain a bid under a large, expensive market like the SPX and NASDAQ futures all night, so their dollar cost averaging is a much different strategy than ours as they have the firepower to move the market short term and we don't.

So I mentioned several averages (other than just ES and NQ) also had positive divergences in to Friday's plunge, lets look at them and my guess is that whoever was an accumulator through that "Blood in the streets" mini-episode, has probably made a profit on the trade by now or they are close.

The bigger question for us is the other risk assets that held up Friday and didn't follow the market lower, they are in a different boat and may be signaling a more important aspect of this market's underlying trade or something in the negotiations we aren't aware of.

Oh and by the way, whoever was accumulating ES and NQ (SPX and NDX Equity Index Futures) on Friday during the plunge, with that move averaged out, they are in the green on the trade as both market are mere points away from the point just before the plunge as thy continue to move higher since pre-market.

 DIA Thursday and Friday (1 min), but the important area is the late Friday plunge and the positive divergence holding through the entire plunge. The Dow is just moving in to the green, still a distance away from pre-plunge levels.

 The QQQ though (like the NASDAQ Futures which were the stronger of the two futures) are nearly at pre-plunge levels.

 And Friday they maintained a short term positive divergence through the plunge. I almost though to myself Friday, 'This can't be right!", but here it is right in front of our eyes, hopefully this tells you something about how our markets work, even in the face of zero progress on the cliff, they took a position, they are going to make money on it and probably already have.


SPY positive 2 min through the Friday decline.

I'll let you know what opening indications look like soon, Congress should be back to work any minute now.

A Little Movement and No Movement

A weird close on Friday, (  I mean the positive divergence in futures and even some market averages during the late day drop) has led to a strange overnight session, but one that 3C oddly predicted as it was in a leading positive divergence as the market sold off.

I don't predict markets, I just tell you what I see in the underlying trade, so while the Friday close and positive divergence was weird, the overnight session is not strange from a 3C perspective at all, but from a common sense perspective, very strange.

The Senate gave up on negotiations yesterday and decided that they'd get an early start on this big problem at 11 a.m. today! I think the FX market, EUR/USD reacted appropriately, but in more weirdness, that didn't effect the Equity Index futures at all.

Here's the EUR/USD...

 This is a 5 min chart over the last 3 weeks or so for perspective...

This is Friday and this week's open, last night the EUR/USD which was stuck in a flat range with Equity Index Futures, started moving down, but look at what happened to the Futures....

 ES-SPX futures-NOTHING happened except they kept a bid under them all night which is not a normal market reaction, someone was up all night picking up any sales to keep the Equity Index Futures from moving down, which is exactly what 3C showed late Friday, but it was a short divergence, I wouldn't expect it to last all night, but then again, someone accumulating a sell-off is strange too and I suppose would create a strange result.

NASDAQ futures held up all night, but then something even stranger happened....

 Whoever accumulated on Friday is likely now in the green and made money as ES went from the $1405 area late Friday (average the fall from $1405 to $1382 for the average price and consider the price now at $1396) to $1396, over 10 points in a snap. in ES this morning pre-market.

NASDAQ futures did the same, except they even had a leading positive divergence before they moved.

So today will be strange and volatile I expect. I'd love to see the NASDAQ pop quick, take profits on Friday's calls and be done with that and ready for a move lower, if we can get a bigger pop and the SPY calls make a profit, even better and be ready for the next move to the downside.

We do have some positive divergences in the averages in 3C as well, so that should be interesting in regular hours.

We also have more volatility coming as the FX futures and Cash Bond markets close at 1 and 2 p.m. respectively.

I think all we can do is try to follow the money at this point, which I'm happy for, otherwise I'd have no idea at all why this market is acting the way it is.