Here's the gist

I can't put everything together this fast and do it justice, but this is the general idea, we'll look at the SPY as to why a pullback in to Monday is likely and why we have time to wait.

The QQQ will verify this

The IWM is an example (remember, the IWM should be the leader in any move up-it's relative price action alone this year is telling) of how things are looking very bleak for the market.

This weekend I'll give you a more in depth post.

 1 min negative is what suggested prices decline toward the close, they already are.

 2 min negative is what starts to suggest that we need more basing before a move up. The yellow area is a potential buy zone, the lower, the more shares, but still partial, no more than a/2 a normal position.

 3 min chart shows where they have been accumulating, suggests Monday sees prices in the same area.

 This is our move up, the yellow is the interruption of that move, the 10 min is still leading negative, it should need more base, either that or the move will be weaker and shorter than expected.

 15 min leading neg.-this is the trouble that is closer than we think.

 30 min-this is a glimpse of how bad the trouble is, it has built up like a spring

 NASDAQ also suggests more pullback before any move up

 The area they accumulated in and probably will again.

 30 min-trouble is closer than thought

 4 hour, some hint at how bad that trouble will be

 IWM 15 min shows the idea, prices move up in to heavier distribution, the divergence should be horrible by the end of the move.

 Imagine the same on a 30 min chart

Hourly showing the change in character, an idea of how bad the trouble is

Tactical execution of the plan

Don't rush it, there will be plenty of opportunities, if prices come down in to the close, then you may want to consider the leveraged long/partial positions, they appear to be coming down, but don't just buy a discount, it has to be attractive to you, worth your while, otherwise just be patient.

Strategic and Tactical Plan

I'm going to explain this first in case it happens or happens faster than I expect, remember the market is free from option expiration pins around 3 p.m. typically as most contracts have been closed/settled, so the market can start behaving more like it wants to without needing to worry about the pin.

So, as I already mentioned, I think there's a decent possibility that Monday we continue to finish this base area to finish the move up that was interrupted by today's op-ex pin.

The charts for a move higher soon have improved a lot today, but I do suspect we pullback a little bit before the close.

IF WE DO pullback a bit in to the close, I don't want to open new options positions yet, I'd rather miss the trade and be ready for the next set up (which should be the better one) than enter without having all my ducks in a row.

That being said, 2 or 3 times leveraged ETFs will allow me the ability to get some upside coverage in case this move to the upside comes sooner than expected  (early Monday-with no continuation of the basing procedure), since the positions will be partial, it also allows me the opportunity to add to them in case we do get some more basing Monday or allows me to enter more leveraged option positions.

Basically it's some upside exposure just in case, but not so much that a continuation in this range will cause any major draw-down or losses, it seems to be a good compromise for where we are right now.

I'll post charts trying to better explain it, but we have little time left today for this leg of positioning if you are interested, there's nothing wrong with patience either.

The positions I'd consider, especially if prices come down are 2-3x leveraged longs of the major averages, UPRO (3x long for the SPX), TQQQ (3x long for NASDAQ 100), URTY (3x leveraged long ETF for the Russell 2000).

I only want partial positions, maybe 1/3 to 1/2, so normal full position size is $15k, then these I want at $5k to $7500 at max and max is only if prices come down lowering risk and signals are good, which if I post them as new trades, signals will be good.

AMZN

AMZN is acting more and more as I suspected, at first glance I was thinking a dead cat move and not looking too much further ahead, I figured once we get past that, we'll see what it looks like, however after putting AMZN in to context via market analysis, here's what I'm thinking...

AMZN will likely make what appears to be a dead cat bounce, the indicators today are improving, but rather than be just a dead cat bounce, I think it could be 1 solid move that takes us right to the area we want to be in, above $282-$284  in that area and on the way there, the distribution should be intense. By the time we are there, AMZN should have a strong leading negative divergence making the price move an easily recognizable head fake move and that is where we'll likely find the prime short set up.

Market Opinion & Leading Indicators

*If you'd rather skip some of the analysis and go straight to the theory/conclusion, just skip down to the bottom of the post*


I'm going to have to wing this as the market is moving fast and making a determination whether we are getting the positive divergences in to a pullback as we expected (see yesterday's posts) for a 1-day decline for op-ex or they are building, but it's more than a 1-day decline is VERY difficult to determine, especially on an op-ex day.


As far as HYG-High Yield Credit, it and Junk Credit have been very supportive intraday. Regular HY Credit today has been supportive of the continuation of the move up as I have expected.

Both FCT and HIO we use as sentiment indications, both are leaning more toward a risk on posture (market positive).

The $AUD has been largely in line, the Euro has been more supportive today, which may explain some of today's activity, the market can do strange things in front of a Central Bank policy announcement (ECB next week). The $USD today has been relatively weak, the market should act stronger, this tells me a lot of today's weakness was options expiration related as suspected. The Yen has been moving in line with price action which tells us nothing.

Intraday Yields have been weak (market negative) and overall (bigger picture) they are weak, but this can be related to the move down I expect after this move up that we have been seeing this week, finally completes. I do think the Yield weakness is related to the downside coming after our cycle up is complete (yesterday before any pullback today, I estimated the move up to be at least half way done).


Commodities intraday are fairly supportive of near term higher prices, larger picture as in comparing the previous SPX all time highs with this recent high, commodities are extremely negative hinting at the nastiness of the major downside move to come.

To make things even more confusing, the SPY arbitrage has been going negative so this last move intraday to the downside in the SPX makes sense, at the same time CONTEXT for ES is going severely negative, now at a -12 point negative differential, it has more than doubled today, however it can keep going negative in to rising prices, this is what creates the large 40+ point negative differentials and the sharp moves down which is something we are expecting to come soon any way so this may be part of that process.

Credit is not there yet so I believe that CONTEXT will continue moving to a more extreme negative differential even or especially in to short term higher prices.

The most useful 3C charts on an op-ex day are during the last hour which doesn't allow much time to analyze and position, but from what I see now, I don't think there's a need to be in a big rush.

Conclusion: Rather I should say theory, I think that the market may very well indeed be getting ready to make that final push higher, I also think it may base, which means continue in this general range/area on Monday to get ready to finish this upside move off, I think we'll be able to close positions if need be then and I think we'll have enough time to open new positions with high probabilities.

One thing I notice is the charts that support a nasty downside move are getting a lot stronger and a lot closer. When I said I thought the move up may be half way done in terms of time, it may be further along than that.

In other words we may be a lot closer to that nasty break lower than thought. I'd expect, especially if the market continues to build a base for the final push to the upside on Monday, that the move will be impressive on a percentage move basis, I also think that will offer us a great opportunity to enter or fill out short positions.

Bottom line, I don't think it's as urgent that we make big decisions on big commitments today, the signals for those moves will be very clear when they are ready.

Quick Update

I may be quiet from time to time, but I'm looking at 20 charts a minute on my end.

I see some intraday downside, there are some signs the market is building for a move higher, but we expected this all along, even last night, the question was, would the build for the continued move higher be a 1-day pullback on op-ex (today) or a longer pullback? I still can't answer that, but I'm ok with the AMZN and NFLX positions in options, I'm glad we flattened out in the index options, you can even do so on an intraday move down like we are seeing now if you want to flatten out on some put positions.

I do believe we will be opening some call positions or longs for the continued move higher before it fails and we get a very nasty move lower, the question is timing and I'd rather be flat and have time to make the best decision than worry about missing a trade.


We have an incredible ranking right now in the Options Tracking Portfolio and nearly doubled the return this month alone for the entire portfolio, I want to keep on making smart choices and not worry about missing the moves.

I will be silent for 15-20 minutes as I go through currencies and leading indicators to get a fell.

Here's our current Options Tracking Portfolio Ranking for the week/month.

QQQ/IWM Put P/L

Both of these were opened yesterday...

The gain for the IWM puts is +33%, the QQQ gain is +16%

Not bad for a day

Market Update

Today is pretty crazy, you should be making decent money though.

Here's what's going on. As I said earlier, we are either getting downside to bring the averages in line with options expiration Max Pain or there's a bigger downside move coming (perhaps a couple of days).

What I need to watch for today are signs that it may be an options expiration move only, in which case the market should start to see positive divergences in to the move down that build and we would likely continue on with the move up.

If there aren't strong enough positive divergences, then it's likely that the most probable outcome according to the charts as of yesterday is that we have a few days of downside before the move up finishes.

The only way to tell is to look for new divergences and new divergences always start on the fastest chart, the 1 min and if they are strong enough, they migrate to longer timeframes.

In today;'s case, if there were no new positive divergences, it would be highly likely that we continue down for a couple of days, but if new positive divergences form and especially if they migrate to longer charts, then it is more likely that today's move down was options expiration oriented only and we can expect the move up to commence shortly, likely early next week (Monday).

The reason for closing IWM/QQQ Puts is 1 the leverage and 2 the positive divergences formed quickly and strong on the IWM/QQQ charts. It remains to be seen where we go from here, but I'd rather you take a profit than a loss.

Charts...

 IWM 1 min. As you can see, the new positive divergence is there, it is strong and leading as well as fast.

 The 2 min IWM chart has not seen the same yet, if it does, then we are likely to continue on the move up with only a 1-day interruption to the move up (today).

 QQQ 1 min the same...

QQQ 2 min the same, not confirming (at least not yet).

We'll watch and see what comes out of this.

I didn't close FAZ or UVXY because they did not have adverse divergences

Closing IWM and QQQ Puts for now-Leaving UVXY and FAZ long open

AMZN Charts

The covered position was at a +5.71% gain.

The charts...

 On the daily chart, I've wanted to see AMZN move at least above the $282 area and even better the >$284 area before considering filling out the position.

The volume on today's move qualifies for either a break away gap or a short term capitulation move, I've seen VERY few breakaway gaps over the last 4 years.

Here's the intraday 1 min chart with a leading positive divergence and also a rounding bottom, as you know I believe reversals are a process, not an event (except with fundamentals like earnings), however AMZN's fall today qualifies for a parabolic move and they often reverse in parabolic fashion so the rounding bottom would not need to be very big, in fact for a parabolic recovery, I'd say the bottom would be more than half done already.

A head fake move that dips below the red trendline on volume and then recovers back above, would be a strong indication of an imminent reversal to the upside.

The intraday chart's rounding bottom

Note the volume as well.

2 min leading positive divergence

 Look at the leading positive position of the 2 min chart, this is a fast chart and could easily have confirmed price lows by moving to a similar low, but it hasn't, this is very suspicious.

In other words, it looks like there's more strength in AMZN on today's move than you'd think by looking at price alone.

3 min leading positive

Even the 5 min chart is in leading position and yes, this chart, by this time of day could have easily confirmed the price lows by making a similar low, but it's no where near the level. I suspect the price movement today is retail panic helped along by Wall St., I do not think it is Wall St. panicking, in fact they seem to be doing quite the opposite.

Even this 10 min chart by now would or could have confirmed weakness in the move, but refuses to do so.

Also note on this chart that has called every reversal up and down with divergences, there was NO DISTRIBUTION IN TO YESTERDAY'S HIGHS. Why would that be? Well if you were accumulating a position and could grab more shares at a -7% discount, why would you sell shares you have been accumulating?

Something more than meets the eye seems to be going on in AMZN