GS

I had a few questions about GS and how they are doing today on their earnings beat/run.

If I were long GS right now I'd consider taking some off the table, that is not the same as a short call. It looks to me like GS may linger around this area for a little bit, maybe a day, maybe more, it will depend on how the charts continue to develop, but it seems clear that as we approach the end of day, some traders with larger positions are taking some profits. GS also looks like it may have been a decent earnings play, there's definitely something before earnings, I haven't looked at all of the charts so I don't know if I'd call an earnings trade as they are wildcards and need a much higher bar of evidence.

 3 min near term looks like NYSE specialists or maybe even some HFTs were accumulating stock (inventory) of GS prior to earnings, right now there's some lighter distribution or what I'd call profit taking at the red arrow.

On a 5 min chart, which is a big jump in underlying activity from a 3 min chart, there's signs of what would be the first timeframe where we see institutional activity and those are leading positive divergent signals, also profit taking in to the close. Remember they have large positions, they can't take profits in one trade/order, they have to slide out in to demand with a series of smaller orders unless they want to have a predatory HFT pin them and front run the spread.

AAPL Update/Trade Management

So it just occurred to me that I was interested whether our earlier call yesterday on AAPL would mesh with DeMark's call on CNBC last night, apparently it did; which makes me thing about our trend #2 (big move down) and how we are looking for certain things to happen and they are happening and DeMark's prediction or Indication that the US market is right at a top, it's just a matter of a short period of time (maybe days), which is about what we have been looking at so Leading Indicators, etc could move to where we want them.

Interesting. AAPL is up almost 5% today and you know I only like options for very high probability, short duration trades!

AAPL charts...

 This is AAPL's 15 min chart, this is a longer discussion, whether we are at this trade or not, but if we were, I'd drop the options (leverage) and be looking for a pullback to buy the stock itself and maybe juice the returns a bit with short term options trades. We're not there yet.

 As I said last night, there were hints of a positive 1 day divergence all the way out to the 10 min chart, there it is. Also AAPL gaps tend to be excellent to sell in to as you can see to the left, immediate distribution on that larger gap.


 The 5 min chart is really what turned me on AAPL yesterday, no problems here so as far as this chart is concerned, AAPL still has more to go on the upside.


 Very short term, intraday 1 min we do see a negative divergence, this is almost certainly short term traders taking profits. At some point this may lead to a consolidation or correction, but it's no threat to this move yet.

We know the 1 min is no threat because the distribution is light, if it were any heavier it would show up on this 2 min chart so AAPL looks to still be long and strong.

AMZN Follow Up

This is why patience pays. It looks like we will probably have a chance to establish the AMZN short or add to or filling out phased in positions; at better prices.


I'm not posting the longer term charts that are negative and that's here the high probabilities are, that's strategic, we've established that, we are now looking at tactical, actual entry so that's what we'll look at.

Again, full disclosure, I have a higher tolerance for risk than most, but I also try to follow strict risk management rules even with that higher tolerance. I would have no problem shorting AMZN right here, we're just looking for the best price, the least risk and best timing.

Take a look...

 The AMZN5 min negative leading divergence is basically our target, we want the intraday 1-3 min charts to go negative and lead negative like this, that's when we are most likely at the highest area we can enter AMZN short.

 The 1 min chart went negative at the head fake break out highs as the longer charts (higher probabilities) suggested would happen. Since then on the correction to the downside (and remember, every time we cross above or below that area, there's money for Wall St. to make on orders to buy, sell, short or but to cover) we have a weak relative positive divergence and AMZN is turning up intraday from there.

 The 2 min chart is leading a bit intraday and we want to se this go negative in to higher AMZN prices.

The 3 min chart is where AMZN is about in line. Two things could happen, "if" the 1 and 2 min/ intraday positives were strong enough they could swing this 3 min chart from in line to positive. The second is that the 1 and 2 min charts are as strong as they will be and just deteriorate from here, that would take the 3 min chart from in line to a more negative position and possibly make the 5 min worse giving us a more hollow shell in AMZN's price, a better short entry.

Quick Market Update-Futures

This makes total sense considering the NASDAQ's position and AAPL, etc.

 SPX futures intraday in to the highs are at several negative divergences.

NASDAQ Futures are in line.

No surprise there at all.

As for the averages, as expected the SPY is negative intraday and the QQQ is perfectly in line with price. The DIA is getting ugly intraday and will probably see downside soon. The IWM still hasn't moved at all.

Leading Indicators Confirming

You know when you hear someone say, "My life s going exactly according to plan"? Yeah, I have no idea what they are talking about or what that feels like either, but as far as the market, Leading Indicators were moving in the right direction, now they are getting in to meaningful areas rather than just moving "in the right direction".

I won't go through all of them, but just the important ones that are moving, you know about the others.

The point of this post is that risk assets are diverging with the SPX, this fits well with the negative divergences and other information and confirmations that we have, it's making our outlook and positioning even higher probabilities and giving us the movement we normally see that makes it a lot easier to say, "This is the spot! Load up the truck!"

 Commodities as a risk asset should follow the SPX (SPX is always in green and is the comparison symbol unless otherwise noted). When risk assets don't move together there's a problem and the move in the market is suspect.

In this case, the EUR/USD is changing and losing the head of steam it had that was supportive of the market, commodities are more closely following that relationship as that is what they are base and priced on.

 Here's the Euro vs the SPX, note the negative divergence in the Euro, which means the SPX/market is moving AGAINST its natural correlation, that happens when there's manipulation and usually in a case like this, they'd be using higher prices to sell in to which is what we have been and still are seeing.

 This is the $USD vs the SPX, at the yellow arrows this is the proper correlation, they trade opposite each other, but look at the last 2 days as both move up together, this is more evidence the SPX and market are moving up totally against their normal legacy arbitrage correlations and more evidence of price manipulation, setting up trend 2 (down), but trend 2 should be much, much bigger so the set up is not a day long as we have seen. I still think when it breaks, it breaks faster than any reversal we have seen since the last flash crash.

 Finally High Yield Corporate Credit is not jst negative and divergent vs the SPX if you look close, now it's showing a clear divergence, remember I said it would start out slow and gain momentum just like the 3C negative divergences last week starting on 1/10? Look at today's trade!

 This is what it looks like with less of my scribbling.

Junk Credit is doing the same.

Things are going according to plan

AAPL Closed Position

This is a partial close, as I said I'd leave some open.

They were opened yesterday at $25.70 and just closed at $35.90 for a 39.7% 1 day gain which is really nothing as I have already seen some member emails that were making +300% on weeklies earlier today at lower prices.

Closing some AAPL calls from yesterday

This is more or less profit taking, the volatility should be pretty decent and that should give a pretty decent price. I'd keep some of the position open as there are still some good signals which I'll update shortly and I believe the Q's need AAPL to get near that resistance level.

Intraday Update

Before I switch my template, I'm going to give you a written intraday update.

The DIA is right around the resistance level mentioned in the last post. The 1 min chart on this last run since about 1 pm, is negative right now, it hasn't quite turned the 2 min chart yet. The 3 and 5 min charts are already in a negative position and they'd need the 1 min to actually strengthen, migrate to re-inforce the 2 min and then still have enough strength to move the 3 and 5 min charts just to be in local confirmation, I doubt that happens, but we let the market tell us.

The SPY intraday is similar except the 1 min is still in line with price, stronger. The 5 min chart is leading negative which will be a problem for the SPY to maintain this move, it did cross resistance though and set off some orders.

The QQQ is one of the averages furthest from it's resistance target, it also has the strongest 1 and 2 min charts. The 3 is negative, but with the way the 1 and 2 look, they might flip the 3 min, in other words, this move looks more sustainable than the others, it has more short term (intraday) support.

IWM IWM daily is forming some kind of doji, an indecision candle. The short term intraday charts saw a LOT of damage done yesterday, but thus far intraday today they are sticking with price which is also apathetic.


It seems the market is taking a shot at the levels mentioned before, the Q's have the furthest to go.

That may make it worthwhile to wait a little bit on filling out short positions.

Market Update

First as far as skin deep predictions go, the rotation between the IWM and QQQ this week thus far has been flawless, even last night's call was the Q's would outperform the IWM, but they weren't quite as strong as the IWM was as of Monday's signals and thus yesterday's percentage gain. So far the Q's are up +.39 and the IWM down -.29 (at the time of this writing).

The market is definitely getting more complicated now at least when looking for the best spot to enter shorts/ exit longs. If we simplify things, the market is very simple, the probabilities are heavily skewed toward the downside which is in line with Trend #2.

Here's a simplified example.

Looking at the 60 min SPY (one of the strongest 3C signals), price is around the same area as September after QE3 was announced, 3C is at the deepest leading negative divergence on the chart.

When I talk about 3C analysis and the near term action is ambiguous, I always say the same thing, "Go out to the longer term charts, that's where you'll find the trend and the highest probabilities".

I sometimes wonder whether we should apply that concept to positioning, things are getting complicated as we get closer to the end of trend # 1 and to add to that complication the market is fractured and moving in different directions rather than the typical risk on/risk off relationship; for example the performance of the QQQ and IWM yesterday and then today. It was easy to predict the last couple of days and may be easy to predict as the signals develop with trade as the day goes on, but we are really starting to get in to micro-management and there's a very thin line between the best entry and getting lost in the lines.

If it's just me, I'd probably be at about 75% of my intended short position, but we have so many members and some trading in options and weekly options need the closest point I can provide.

I think overall it's pretty safe to add and fill out shorts in the area as long as you have decent risk management and are using it.

Now here's what I have, it may have already changed as things are moving fast and it's more complicated than usual because we can't look at analysis as "The Market", it's the NASDAQ, the S&P, the Dow, the IWM, Sectors, etc. Then there's the AAPL chart, AAPL accounts for nearly 20% of the NASDAQ 100, how can the NASDAQ fall with AAPL having strong signals? It can, it's just more difficult.

Starting with the NASDAQ/QQQ (This may be a little confusing a each average is different and approached a bit differently-just remember that the longer timeframe the divergence, the stronger it is, the intraday movement is found mostly on the 1-3 min charts and new divergences start on the fastest chart (1 min) and if they are strong enough they move or migrate to longer timeframes, where they eventually stop tells us how strong the divergence is).

 QQQ long term 15 min chart since the trend #1 pop higher has not only been range bounce which is a common area for distribution, it is showing the signals of distribution with a strong and deep leading negative 3C divergence. The thing I see in the QQQ is a trend line/resistance that has money above it in the way of the bid/ask spread, volume rebates, short term market maker trading, setting up larger positions, all the head fake things, etc. So I'd think the highest behavioral probability is a move above that range like the IWM did yesterday which creates the momentum for a downside reversal with a bull trap and then the downside reversal-ironically it's very similar to the AMZN analysis and situation we just looked at.

Probabilities though for the larger move are very negative.

 Looking at the 15 min chart closer on more of an intraday basis, we see where the Q's were weak earlier in the week with a negative divergence at the highs, then a small positive at the lows and an in line status. I'd think the 5 min, then 10 min would go negative and then finally the 15 min on an intraday chart like this goes negative and that's a good signal, especially if we get the move mentioned above, first.


 The QQQ 5 min is in line right now so I don't think it's quite ready to turn the 15 min chart negative, this makes some sense as the AAPL positive divergences were so strong, yesterday I even said I thought we were seeing positive QQQ signals short term (1 day) because of the positives in AAPL.

 Now the 3 min QQQ is negative as of this capture, if it gets worse it moves to the 5 min, then to the 10 and then finally the 15 min at the top and we are ready to break, Since this chart was captured, this divergence is a little worse.

Bottom line, I don't think the Q's are quite ready as AAPL is probably a big part of the reason. Whether that should dissuade you from entering a short you may like such as QID or SQQQ, I can't say as it depends on your risk tolerance and patience. I'd want to have a good chunk of that position already in place, as far as filling it out, if I had the time (which I don't), I'd probably try to wait a bit, not only for potential better prices, but whenever your money is in the market it i at risk no matter what the probabilities are, the only time it's not at risk is when it's out of the market so there's that and there's the fact that most days are noise days that do nothing to contribute to the trend, for the trade they are dead or wasted days.

Now the IWM.

 The daily IWM did cross above resistance yesterday and so far today it's putting in a bearish downside reversal candlestick patter, Harami. If it stays that way near the close and volume exceeds yesterday's, it's a high probability reversal, but they carry no target-it could be a day or the final reversal. As for the break through resistance, it's not only the Q's that haven't made it, it's the SPY and I'd say the Dow as well.

 Here's the Q's under that resistance level.

 IWM 10 min chart since trend 1 started and since we got the move above SPX Jan 4 highs on Jan 10th, we find the leading negative signal expected. Intraday note it is negative unlike the QQQ.

 The IWM 5 min in in line earlier today and slightly positive at this capture, right now it's slightly more positive, the intraday 1-3 min charts are meaningless right now.

SPY

 Since the November 16th cycle lows that started this entire move and especially since the pop of expected trend #1, the 15 min leading negative divergence is huge, as I pointed out in the post the other day, "Nerve Racking", this is a huge divergence and we've seen bad breaks in the market on much less.


 The 10 min chart here also is more or less in line like we have seen above, now if I zoom out and show you the trend, it's more like the 15 min chart above, it's horrible in a deep leading negative divergence, but we are trying to look at near term trade, we already know what the longer term probabilities are.

The difference is between strategic views which are set and tactical action which is what we are looking at.

 SPY 2 min chart doesn't look good here, it's leading negative and despite some intraday improvement, it remains leading negative. It needs to migrate to make it to the 10 min.

 SPY 5 min is leading negative, as of this moment the SPY is moving up (1:35) and this chart is still leading negative, so that's good, that' telling us that any strength is being sold or sold short.

DIA

 It's also ironic in the URRE post we talked about wedges and how they have been manipulated to shake traders out, like this ascending bearish wedge that is expected to break down at the apex and retrace its base, but instead it runs a head fake, knocking out all of the shorts, moving up, suckering in longs and then trapping them-but the bigger picture is what I said before, they build tops so they are still bearish, they just don't act like Technical Analysis says they should.

The other point is the SPY has an area of resistance it could break through locally and a much bigger target which I doubt, but it is worth pointing out around $136.

DIA

 Long term 15 min is leading negative, the intraday 15 min was in line, it's now moving negative.

 This 10 min chart also looks more negative since its capture-kthis is likely some Dow rotation like the IWM/QQQ.

 The 5 min chart is negative and that is what has changed and migrated to the 10 min above making it more negative than it was at capture.

 This is all hardly a surprise as the 3 min chart was leading negative, so this is an example of a negative divergence strong enough to migrate to the 5 min and now the 10 min charts.

I'd like to look at leading indicators too before I make any big decisions today.

AMZN Update

AMZN is a partial (short) position that were we waiting for a set up to take place that consisted of a break above $269 first since that was clear resistance as well as a new high.

The Jan 14th AMZN update lays out the scenario pretty well.

In essence we are looking for the move above $269 to be revealed as a head fake move and use that price strength to add to the short (which was a phased in position from the start).

 The yellow arrow would be the head fake move, of course a move below that former resistance would help create a bull trap.

I think we had (before the move up) and have enough evidence to say it's a very high probability head fake / Bull trap move. I'd like to look at adding, but I first want to take a look at the broader market and leading indicators again as I'd prefer all were in line. I will say as I often do, if I was forced to make a decision right now about adding to the AMZN short or missing out totally, I'd add right now, but that's not the case or situation, but I think it helps give you an idea of how I feel about it.

 30 min was negative before the move even came about, that's why we were waiting for the breakout and the clear resistance zone made the breakout move an almost certainty.

 The 10 min chart is negative in to the breakout as well, there is a little area (white) that I'd like to look at closer and see if anything evolves from there as far as timing and possibly a better entry.


The 5 min chart looks pretty ugly as do all of the intraday 1-3 min timeframes, none seem to support that 10 min chart, but like I said, I'd prefer a market update and another look at leading indicators before filling out the position there.