Wolf on Wall Street

Tuesday, May 14, 2013

Market / HYG Update

So if you recall yesterday's post or read the link to it posted shortly ago, you know what we expected to come from HYG and what we are looking for...

It's too early to say, but parabolic moves this early in the day rarely hold and the HYG component has been right on track thus far, here's what we have...

HYG (red) vs the SPY...this is the move expected and the catalyst that drove it, HYG, the next thing to look for is HYG under EARLY distribution...

I can't say this qualifies for what I'm looking for yet, but it would be way too early to get that kind of confirmation at this time of day, thus far though, it does look about right.

Also Adding to XLF Put-June Monthly $20

Entering GOOG $890 June Monthly Puts

This ios the move I was hoping for yesterday in GOOG

HYG Follow Up... Market UPDATE

This link to yesterday's 3:18 p.m. market update tells you a lot aBOUT THE HYG, TLT, VXX connection, what I was looking for which we now have and what I'd be looking for next. These excerpts from yesterday's post summarize everything quite nicely and it has played out EXACTLY as thought thus far, the next thing I'm looking for is all in HYG...

The post starts off with the concept...

"if we follow the AAPL theory, then the market should get 1 last move to the upside, HYG will support that move...

HYG 1 min-as an oversold move as cover, HYG's move up would support the SPY Arbitrage model/SPY, if we follow the AAPL example laid out as the model for the market as well, HYG's action makes a LOT of sense."

HYG as a risk asset run or as a lever?

"For instance, although not strong, we do have an HYG positive to 5 mins, at 10 min it stops completely, no hint. What does that tell you about HYG? As a lever, it is being prepped,

as a real asset in portfolios...This 15 min chart tells you everything you need to know, as I mentioned before, they are running, not walking away from risk in Credit."

Timing

"I would think they'd want this move to start before the close today to make the most of it on the open tomorrow."

What to look for next-the most important part...

I would say one of the most important things to watch for is HYG to make its move, that should (with TLT and VXX lower and under accumulation) allow the market to make that move up I envisioned in AAPL-IF THE MARKET MOVE OR ESPECIALLY HYG ARE SOLD PREMATURELY (NEGATIVE DIVERGENCES-EVEN PRICE FALLING) I THINK WE WILL KNOW THE MARKET IS ACTUALLY MAKING THAT CRACKING SOUND.

THAT WILL BE THE TIME TO MAKE YOUR MOVES ASAP, IN FACT I'M GOING TO LOOK RIGHT NOW, I'D RATHER BE A DAY EARLY THAN SCURRYING AROUND LAST MINUTE."

GOOG Follow Up

Yesterday I posted GOOG, for options positions I wanted to see a move above $883, we have that now...

We also have all the longer timeframes in place, we simply need the intraday to fall in to place and confirm a head fake move, making this area a high probability/low risk GOOG short or in this case an options position (long GOOG Put).

I'll be keeping an eye on the intraday charts for the signal of confirmation of a head fake move since this just happened, I'll let you know, but if you see an GOOG Put position is being opened, this is the history of the idea (including the link above to yesterday's post).

AAPL Trade Set-up

AAPL did exactly what we thought it might do, based solely on market behavior alone and then 3C confirmed our thoughts... This AAPL Update contains most of the links to the series of signals, thoughts and confirmed moves...

Essentially, the small H&S fractal pattern shook out NEW shorts just as the larger ones do, this happened yesterday.

The 1 min chart is not quite in line...

This shows AAPL getting ready for the shakeout move and making it yesterday above the H&S neckline where shorts place their stops.

The longer 3 min chart shows heavier distribution

And the 5 min chart shows even heavier.

Some of you entered puts on AAPL yesterday on the shakeout move, I left the AAPL short equity position open, but will look for an opportunity to open new puts after closing some Friday for a 25% gain in anticipation of this shakeout move.

Now we are back below the neckline, but the former low may offer temporary support. I want to open a put in AAPL on upside momentum and fading 3C charts so I'll watch for a bounce off the yellow support area which is weak, we may get a shot at this today.

Quick Market Update

I don't like to get too caught up in a.m. trade, it's notoriously unreliable as there's a lot of game playing, but not only are none of the averages confirmed on this early HYG inspired move, most are clearly negative and that included 2 of the 3 Index Futures.

HYG-As suspected

The last several days after HYG (High Yield Credit and one of the 3 levers for the SPY Arbitrage model) has been down severely, it has seen low level accumulation-moving the asset type, not buying of HYG for investment, more or less, using it as a lever.

Take a look at HYG vs the SPY

HYG (green) vs SPY (red) 1 min chart

TLT-a flight to safety and VXX-a flight to protection have also been under accumulation, but I've figured for days now HYG was to be used in some manner to either run up the SPY or to put off strength in TLT and / or VXX.

VXX green is down, while TLT and HYG are up, a very mixed message at best, but one 3C has said to expect.

Now to see which way each goes in underlying trade, but HYG is the lever used this morning quite obviously.

Pre-Market

Again the same pattern of the last 4-days showed up overnight in Index futures...

NQ shows it somewhat...

TF shows it well, strength, even slight, is sold and of course ramped up again, I believe that may be on an FX move, EUR/USD? I'll check.

And ES in to the open.

Yes it was the EUR/USD sending the market higher earlier...

The pair was sent higher, in fact briefly above $1.30 on some German data, note how quickly it was sold.

Both Carry Pairs were weaker overnight as the Yen hit a new high for the week on that next leg up before pulling back so it does have the power to move the things that count, we'll just have to keep an eye on when it's ready to move again.

AUD/JPY sinking overnight-not good for the market....

EUR/JPY doing the same, this didn't help the Index pairs either, all because of the Yen.

Futures Update

As the intraday 3C chart for the Yen looks like it's getting ready for another move to the upside, there's significant deterioration in the AUD and Euro-formerly fairly strong at the last update, the $USD is also seeing a stronger positive divergence, NQ and TF are showing significant overnight distribution as well.

3C Quick Start

Many of the charts you see here at WOWS are my proprietary indicator 3C which reveals underlying institutional money movements and often contradicts price. To understand the annotations made on charts, you must first understand that 3C has no numerical value, it is a pure divergence indicator. Positive divergences represent accumulation by smart money, negative divergences represent distribution by smart money and when 3C trades with price, that is trend confirmation.

The chart annotation system is simple; white arrows represent relative positive divergences, red arrows represent relative negative divergences and green arrows represent trend confirmation. When 3C is in a white or red box, that represents a leading positive or negative divergence, leading divergences are the most powerful.

We analyse 3C in multiple timeframes, the longer the timeframe the stronger the accumulation. 1-2 min timeframes represent intraday moves, a 5 min timeframe can represent a day or two and 15 min timeframes average trends of a swing trade nature. 30 and 60 min charts can move the market for a month or more and daily charts can be over a year.

You'll get use to seeing the charts and understanding how the multiple timeframe analysis works and works well.

Welcome to Wolf on Wall Street.

The trades featured here are meant to maximize returns with the least risk and highest probabilities. Unless otherwise mentioned, all trades are meant to be executed at market. I prefer long-term trending trades which perform well in rising markets, but really stand out in declining markets. However, we get occasional one day gifts 30,40,60% 1-day gains. I'd urge you to consider taking some or all off the table in such cases, the markets don't give gifts like that often or for very long. Most of the returns that make the system outperform so well come in short-entry trades. If you are opposed to short trades, this is not the system for you, unless you are ok with buying an inverse ETF. If you would like more information about the truth about shorting stocks, just email me.

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The MOST IMPORTANT tool you have to bring you long term success is RISK MANAGEMENT. There are plenty of articles linked at Trade-Guild.net on Risk Management. We can be wrong 75% of the time and still outperform the market with solid, consistent risk management.

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