Market Update

I have a feeling we are seeing a little more of the true market here when manipulation of the VIX and other methods (like Bloomberg AAPL rumors) aren't working as well, it holds with market breadth, longer term 3C charts, market volume, etc.

There are some better looking short term charts, but not a whole lot better.

 The move since the 5th has a distinct feel in most of the averages, one of distribution as seen here in the DIA,

 Here's the 5 min chart as the DIA hit new highs, distribution

 The 3 min chart confirms the 5 min perfectly.

 On the intraday 1 min it is perfectly in line, no real positive divergences at all here.

 The IWM 10 min over the same period since about the 5th, showing distribution

 The intraday 1 min chart is on line with price too, but there is a passive relative positive divergence in place.

 QQQ 2 min over the period of the last 5 days or so, a mini range is seeing some distribution here

 The 1 min chart is showing an active positive divergence intraday, we'll see what it can do, perhaps we are seeing some rotation, perhaps it's just temporary.

 SPY 5 min over the same period since the 5th which has been an odd-almost parabolic move with no pullbacks, similar to a short squeeze, but it has the same distribution signal

 Intraday the 2 min chart is negative at today's highs

 The 1 min chart is in line, no positives at all, 3C is confirming the price moves to the downside intraday.

Today is the first day in several that the TICK has seen any downside extremes at -1100 so far.

More coming, there are a lot of assets to look at.

GLD Update

This is why I decided to go with April Calls with GLD, in case it was a short term move to the upside we'd still make money, but if it were a larger base forming (which can support a much bigger move), we wouldn't be stopped out of the position or run out of time, the GLD position went from being down probably somewhere around 40% to being just under break-even in the matter of a few days, this is also why I stick with a position so long as there's a good reason and am not run out of it by emotional market moves as we have seen in gold over the last week.  In fact those emotional triggers that are meant to knock you out of your position are often a good timing signal and actually helpful in letting you know you are on the right track, as long as you can confirm that the move is likely a head fake which we were able to. While Wall Street is knocking people out of their positions, guess who's picking up the closed out positions? And what timing they have, this is why these moves are so helpful in timing, I'll show you what I mean.

 This is the 15 min chart of GLD, the market has been extreme for some months now (as in the SPX melting up nearly the entire year without a single healthy correction), but under more "typical" markets, the 15 min chart is an EXCELLENT timeframe and a leading positive divergence like this is a signal I'd trade nearly every time, it's also stayed very healthy so I'm not easily run out of trades on early morning misdirection or 1 to 2 day moves, the market rarely moves in a straight line and when it does you need to be suspicious, the theme of the market is simple, they aren't going to make it easy to hold on and stay in any winning position, that's why a chart like this is useful as it tells me more about what's really going on so I'm not a victim of an emotional move meant to drive me out of the position.

Ask any finance student what moves the market and they will tell you, "Supply and Demand", ask any full-time trader and they will tell you, "Fear and Greed" and these are often created by shorter term market manipulation and taking advantage of the predictability of traders, GLD is an excellent example.

 I have been more concentrated on the rounding bottom area, but the 60 min chart opens the possibility that this is a much larger base than what we are looking at now.

 Here's this morning's gap, you can tell me all the news and why gold or the market did this or that, but the fact is there are people with much better information who have the money to move markets and what they are doing is what I'm interested in, they "Why" is after the fact and doesn't make you any money.

 Remember just last week I said, "I think we are past the mid-point of the rounding base and price action should pick up on the upside as we form the right side of the base"? However, just before that happened, what did Wall Street do? They shook out weak hands and took those shares at a discount and rode GLD over 2% higher in 2 days (and you know what kind of move that can be with some option or futures leverage). This is why a head fake move like the stop run at the yellow arrow, tends to make a good sign post of not only the continued strength, but a timing marker telling us the asset is about to move. Weak hands are shaken out and their shares are taken at a deep discount and we often see this just before a move/reversal, but since the market is fractal, this kind of relationship exists on many timeframes.

 If we look at a 4 hour chart, it backs up the 60 min. chart and suggests the GLD base is bigger than just the rounding bottom (green area) we are currently watching and may extend back to the 19th, maybe even further.

 Here's a daily chart of GLD, remember what I said about head fake moves and the market being fractal, meaning patterns and concepts we see on 15 min charts are also seen on daily charts, 1 min charts or weekly charts, the concepts are the same... this is why multiple timeframe analysis is crucial.

The distribution in GLD at September which turns in to a bearish triangle (suggesting GLD moves to a new leg lower) within a positive divergence reminds me of another market that played out almost exactly the same.

In this scenario, the bearish triangle and break below is the head fake move, the same way the stop out I showed you above, on a break below support during the misdirection of morning trade was a head fake move. The positive divergence in to the break lower as well as the triangle may in fact mean this GLD accumulation area is much bigger than we are currently looking at.

And the market it reminds me of? Many of you may remember this one, it was the 2012 market lows which we knew were going to reverse to the upside as the bearish triangle was being formed as 3C was positive in to the formation of the triangle, but retail traders are predictable and they will chase the break down, Wall St. depends on it and the dogma of Technical Analysis.

 Here's the SPY, it went negative in Q1 of 2012, in the yellow box it created a bearish triangle suggesting a new leg lower, but 3C was already positive in to the triangle (there were many timeframes showing us this) so we waited for the break below the triangle and went long as the market made new lows on the year in to June 4th, this was the low and also where we were buying long and closing short positions from Q1 (White arrows).

As is typically the case, the accumulated shares went to stage 2 mar-up where they were distributed in to higher prices, by September 13th and the F_O_M_C's QE3 announcement, we already had a negative divergence suggesting the market would not take off to the upside on the QE3 announcement like the 2 previous times, but would rather head down and it did.

GLD's daily chart has many of the same features seen in the SPY above, the initial distribution sending the market lower, a bearish triangle that was mis-direction, the head fake break below that put retail traders short (while we were covering shorts and going long) and then the move to the upside-once again, just like the 1 day GLD head fake last week, the head fake on the daily SPY chart was a good timing marker to know we were close to an upside reversal, but we needed 3C to tell us it was a head fake move and not a real breakdown just as 3C did when GLD / gold made a move below support last week...

Here's the move in gold futures (in GLD as well), note 3C shows a positive divergence, this tells us probabilities are it is a head fake move to shake out weak hands, it also tells us a move to the upside is nearing. Two days later, today, we have a break out to the upside.

*This is also one of the main reasons I don't get worked up about a.m. trade as its full of mis-direction.

Here's GLD's 1 min intraday chart, it's showing good confirmation in the move up today. The market has been relentless about filling gaps ever since High Frequency Trading became popular so a fill of the gap won't bother me as long as 3C holds up, it might be a great place to go long GLD if you are interested. In any case, so far the rounding base area is acting as expected and we are seeing a solid move in GLD, it may be a lot bigger than we first thought.

Pre-Market

Last night I posted, One Last Look at Futures before turning in around midnight. The Yen was at an overnight or new low (For this week's trade-not a new low overall) and despite Japanese Central bankers / officials at the BOJ doing a lot of talking to try to move the Yen with extra help from  the Nikkei reporting that new easing may happen earlier than expected under Kuroda, and the earlier news that the BOJ may even monetize derivatives, the Yen still followed the positive divergence in the single currency future to a higher level.

 The 1 min chart shows the low that was in overnight when I posted the look at futures last night and the Yen moved higher since on the positive 3C divergence that has been building there.

Here's another look as the Yen seems to be going through the process of an upside reversal (rather than an event as reversals are rarely events and are more of a process). So despite their best efforts to keep the Yen down, someone seems to be buying it, my guess... FX Carry Traders are closing out Yen based Carry trades (this goes back to market breadth being weak, odd moves in the VIX, 3C distribution patterns, etc).

As mentioned at the end of last night's post as I posted the FX pairs, "USD/JPY, this may be interesting the way the single currency Yen futures look"

The USD/JPY fell almost 100 pips overnight!

The area of interest I marked and a nearly 100 pip drop overnight!

This pushed the Nikkei 225 in to the red to end 8 days of gains.

As talked about this weekend in China's warning to Japan, Chinese officials warned the world about a Global Currency war and then went on to drain more liquidity from the Chinese economy overnight using repos, remember after 8 months of injecting money, China recently turned 180 degrees and started draining liquidity using repos. Overnight this sent the SHCOMP -1% lower for its 4th consecutive loss-as I said, China will NOT have the world dictate their inflation even if it means (to the world's detriment) that the primary driver of Global growth douses their economy to contain hot money flows from worldwide central bank easing and devaluation, especially when considering this new pig virus problem which has seen over 3300 dead pigs floating down the Huangpu River, this may be the start of something miuch worse which may contribute to the worst kind of Chinese inflation, food inflation as it is synonymous with social instability.

**By the way, the Huangpu River is the water supply source for Shangjai, even though initial tests have ruled out any disease that may be transmitted to humans, the Chinese have never been forthcoming about things of this nature, can you imagine the repercussions?

I Digress...

As to the other JPY crosses...

 The AUD/JPY saw more volatility which often precedes a top and was what I was trying to point out in last night's capture such as the one below of the AUD/JPY...

 This is the chart of the pair from last night, trade hasn't gotten any better as you can see above, even if it didn't lose 100 pips overnight (yet).

The EUR/JPY is somewhere between the AUD/JPY and USD/JPY with more volatility and a decent plunge.

European data was mixed with Greek Industrial Production down -4.8% vs 0.9% previously, German CPI printed 1.5% higher (at consensus) while Spain sold $830 million more in 6.5 month bills (consensus $5.5 billion expected), Spanish Yields on the bills fell slightly while Italy $7.75 bn auction of 1 year bills saw the yield rise. UK Industrial Production fell -1.2 on consensus of a 0.1 rise and down from +1.1 previously while UK Manufacturing fell -1.5% (consensus unchanged) as the BOE is expected to engage in more QE once Carney takes over at the BOE-CUE CHINA'S RESPONSE in 3, 2, 1....

In the US, the next headline is the SPX hits a nominal all-time new high which as of yesterday's close was 9 points away. Does anyone find it interesting that the SPX WAY outperformed the Q's that needed an AAPL dividend rumor to get the Q's in to the green while the R2K couldn't make it green no matter how hard they monkey hammered the VIX, even at the close? I'd say the market is weak all around, but all the attention is being thrown at the SPX as it is the next and only hope for a new market headline.

As for last night's futures which I almost didn't post...

ES stayed choppy, holding on to as much as it could after being pushed toward it's new high...

 ES's new high for this week printed yesterday on everything they could throw at the market to move it higher.

NASDAQ futures fell on the negative divergence, as I showed in the last post there was a fairly large intraday 1 min positive divergence this morning in NQ which has sent NQ higher, although the QQQ are still yet to close the opening gap down as it appears they got as much mileage out of the AAPL dividend rumor from yesterday-perfectly times to push the Q's in to the green after spending most of the day under Friday's close, there's definitely a foul odor from that AAPL/QQQ push which was all rumor (AAPL dividend declaration) .

 Yesterday's NASDAQ lever-AAPL dividend rumors...

AAPL yesterday and this morning... It looks like they got all the mileage out of AAPL they will get thus far as it seems distribution was evident toward the close and this morning as AAPL is in the red right now as Jeffries so BRAVELY "Slashes " their AAPL target to $420.

You saw last night's futures for the averages, even with an intraday positive divergence in the NASDAQ, RUSSELL 2000 and SPX futures, all of them are red right now. Believe me, I think they'll try hard to get the SPX 9 points higher, but why is the market struggling so bad right now with Dow all time nominal new highs just a week ago and the SPX near them? 

I'll bring you more on the futures as they develop, but I'm glad I did put them down in screen captures last night, we may be revisiting that post very soon.

Pre-Market Futures

Last night I wasn't going to post the last post looking at futures, but I'm sure glad I did, in the next post you'll see why.

As far as pre-market futures, overnight the market followed the divergences I posted late last night, there are some positives intraday, but wait for the more comprehensive post coming up. We look like we'll gap down in certain averages, the NDX and R2K being two of them, which just so happened to be the weakest yesterday needing an AAPL rumor to get the QQQ up with the R2K closing in the red.

Here are pre-market futures.

 ES slid overnight, but has a 1 min intraday positive near the open sending it a bit higher.

 NASDAQ fell overnight as well, started going intraday positive around the European open, but is still weak.

 R2K futures slid overnight and have the smallest intraday 1 min divergence-WAIT FOR THE NEXT POST for context.

Gold futures snapped higher, but have an intraday negative divergence-Again, WAIT FOR THE NEXT POST which will be more comprehensive.

One Last Look At Futures

Before I turn in, here's what futures look like, a bit interesting actually.

 ES 1 min intraday has an interesting look, rather than the normal chop or range, this is more of a larger rounding pattern with a negative divergence through the entire pattern.


 The ES 5 min chart is leading negative

 NASDAQ 1 min is also in a deep 1 min negative divergence, very long in duration vs the normal overnight futures.

 The NASDAQ 5 min is also leading negative

 Interestingly, the Russell 2000 1 min futures have the same look, a large, long leading negative divergence

 And again, the 5 min is leading negative.

 The $US Dollar Index futures are leading positive

The Euro futures are in a large relative negative divergence.

Yen futures...

 The Yen Futures 1 min are leading positive

The Yen 5 min chart is in a large, multi-day leading positive divergence, quite impressive actually.

As for the pairs... all of them are in an interesting area, they can certainly put in a significant signal from the areas they are in and by looking at the single currency futures, I wouldn't be surprised.

 EUR/JPY

 USD/JPY

AUD/JPY

 EUR/USD, $1.30 remains the area of interest.

 EUR/JPY in a consolidation or ?

 USD/JPY, this may be interesting the way the single currency Yen futures look

 AUD/JPY daily , the increasing volatility should be clear

 The daily close of the AUD/JPY is close to an "Evening Star" downside reversal candlestick pair.

AUD/JPY intraday, also a consolidation or perhaps...? I suppose that depends on what the Yen does, it certainly looks interesting on the Yen Futures above.

Breadth and volume are clearly off, even more than they have been recently as can be seen in the last post. We'll see what they look like in about 7 hours.