At the $22.50 fill, the GOOG puts made +15%.
The bounce in the context of this chart is irrelevant, this is why the GOOG core equity short stays open and maybe is added to if the bounce is decent enough.
7 years ago
Friday, May 24, 2013
GOOG P/L and charts
I expect a short term bounce in GOOG as it will draft the rest of the market, might as well take the Put profits, open the funds up to other positions and re-establish the Puts at a better cost basis when the bounce is ending. You'll see why I leave the equity short, which will suffer very little draw down, open.
At the $22.50 fill, the GOOG puts made +15%.
The short term 3 min chart has a positive divergence and the tell-tale flat range we see with accumulation/distribution.
The longer term 60 min GOOG chart shows a large head fake move, which usually is scaled to the expected reversal as well as the preceding trend, so this break above resistance was a head fake move as you can see solid distribution throughout, it was purposefully planned as you can see the accumulation needed to send GOOG higher. Smart money sells those accumulated shares in to higher prices and exits any remaining risk then enters short positions.
The bounce in the context of this chart is irrelevant, this is why the GOOG core equity short stays open and maybe is added to if the bounce is decent enough.
At the $22.50 fill, the GOOG puts made +15%.
The bounce in the context of this chart is irrelevant, this is why the GOOG core equity short stays open and maybe is added to if the bounce is decent enough.
Quick Market Update
The Yen is still negative, hasn't come down so much yet and there are some contradictions intraday I'm trying to piece together, it may be op-ex related, it may be something else like a move starts earlier. We will not enter anything that isn't high probability with all that it means, not just higher probabilities, but a good trade set up considering price, location, risk, etc.
In any case, here's what we have so far.
Yen negative getting deeper, a pullback in the Yen should send the SPX higher, but the SPX in my view needs to base around yesterday's lows, maybe even make a head fake move below yesterday's lows before it's in trade-able position.
I don't see how the SPX can do this "if " the Yen pulls back intraday- OR perhaps the Yen builds a larger negative divergence that is set up for the eventual bounce.
Timing of the bounce becomes important, I was initially thinking that not too many traders will want to carry long risk over a 3-day weekend, but with the pros already out of NYC, most of this action is going to be retail and I don't think they think like that, they think, "Tuesday's have seen the Dow up 19/19 consecutively so I want to be long today for a Tuesday run".
In that case, we typically see the market freed up from the op-ex pin after 2 pm when most contracts are settled. That could be the time for a move to start and would give retail the urger to go long with limit orders over the weekend for the majority that work 9-5.
The SPY...
1 min looks in line still, the Q's and IWM have slight intraday pullbacks, but not very strong.
I'm looking and hoping the market moves back to the range, if institutional money was operating today rather than driving to the Hamptons, it probably would and a head fake move below would be a great set up, but retail isn't going to do that, that is done to retail by smart money so that's an open question.
5 min shows the range that we look for with accumulation and that we look for as part of the "reversal process"-it's decent size, but it could be bigger".
Bottom line is that I will try to determine what is most likely, but any trades have to be worth while, not just gambling on a "most probable" hunch, we need real, hard evidence and a good set up. I'd rather miss the move than take an irresponsible trade that is based on greed and emotion than facts.
If you are interested in seeing a beautiful head fake move, check out IOC today, one of our shorts and I'm glad to see the HF move.
In any case, here's what we have so far.
I don't see how the SPX can do this "if " the Yen pulls back intraday- OR perhaps the Yen builds a larger negative divergence that is set up for the eventual bounce.
Timing of the bounce becomes important, I was initially thinking that not too many traders will want to carry long risk over a 3-day weekend, but with the pros already out of NYC, most of this action is going to be retail and I don't think they think like that, they think, "Tuesday's have seen the Dow up 19/19 consecutively so I want to be long today for a Tuesday run".
In that case, we typically see the market freed up from the op-ex pin after 2 pm when most contracts are settled. That could be the time for a move to start and would give retail the urger to go long with limit orders over the weekend for the majority that work 9-5.
The SPY...
Bottom line is that I will try to determine what is most likely, but any trades have to be worth while, not just gambling on a "most probable" hunch, we need real, hard evidence and a good set up. I'd rather miss the move than take an irresponsible trade that is based on greed and emotion than facts.
If you are interested in seeing a beautiful head fake move, check out IOC today, one of our shorts and I'm glad to see the HF move.
More on Dr. Lumber
It was just a few days ago I showed you the new Doctor in town, not Dr. Copper, but Doctor Lumber and showed you what has happened vs. the SPX.
I was forwarded this article this morning that deals with several issues that CNBC has been pushing like stuffed Teddy Bears at the Carnival, namely homebuilders and the "Recovery in housing".
There's some good information here I didn't cover, but the thrust of the article that was written yesterday (after we had already seen Doctor Lumber's warning). The article starts off and then the first bold print is in this statement...
"However, there is one eye-opening concern that does not support Chairman Bernanke's position about a housing recovery, and unfortunately points to less demand in the immediate future. While many investors do not track lumber prices, the chart below demonstrates the sheer bear market that has befallen lumber futures prices."
Here's the rest of the article from BigTrends, perhaps some weekend reading and further proof that while it may not make the market swing intraday, when we look back, it will look very obvious and everyone will be a genius pointing to this data, but few are willing to consider it when it matters most. I hope you consider it.
I was forwarded this article this morning that deals with several issues that CNBC has been pushing like stuffed Teddy Bears at the Carnival, namely homebuilders and the "Recovery in housing".
There's some good information here I didn't cover, but the thrust of the article that was written yesterday (after we had already seen Doctor Lumber's warning). The article starts off and then the first bold print is in this statement...
"However, there is one eye-opening concern that does not support Chairman Bernanke's position about a housing recovery, and unfortunately points to less demand in the immediate future. While many investors do not track lumber prices, the chart below demonstrates the sheer bear market that has befallen lumber futures prices."
Here's the rest of the article from BigTrends, perhaps some weekend reading and further proof that while it may not make the market swing intraday, when we look back, it will look very obvious and everyone will be a genius pointing to this data, but few are willing to consider it when it matters most. I hope you consider it.
Quick Market Update
I'll use the Q's as an example, the Yen looks to be making a head fake move right now higher, it has had a strong uptrend overnight, it doesn't matter the timeframe, the reason for head fake moves is the same and it applies to all timeframes.
Here's the other side of the view from the market, you saw the Yen, now I'll use the Q's as an example, this is short term trade only...
"A" Yesterday's negative in the QQQ was reason enough to close the AAPL calls and take a small gain, but 5% for a few hours is still a nice gain.
"B" QQQ is seeing some intraday accumulation with a new leading positive divergence just starting, this fits with the intraday charts of the Yen and USD/JPY as seen in the last post.
The 5 min chart of the QQQ shows horrible damage done/distribution as the QQQ makes a head fake move higher on the minutes day a Bernie first says what the market wants to hear and then under questioning contradicts his opening statement. Don't think it was a head fake? Well not in the typical sense of clear resistance traders would buy, but in the momentum chasing sense with no positives to back it up and the NDX hitting 12.5 year intraday highs, traders will buy that.
You can see what happened next, , now we have a relative positive divergence on the Q's, remember the divergences usually start with a relative (weakest), then grow stronger, then move to leading positive and we typically see a head fake move (this would be to the downside, under obvious support, a price pattern or moving average that would be obvious to traders- then we should get a bounce.
I've been asked what will the bounce need to do, how far will it need to go to accomplish its goal, these are not corrective bounces, these have a specific reason and goal. At first I thought it would need to be very strong to shake out new shorts, but the market is overwhelmingly bullish still so it's not so much about shaking out shorts as it is justifying to longs they were right to "Buy the Dip", so maybe some strong momentum, I don't think it needs to be as psychologically impressive as the longs/bulls are already pre-disposed to believing in buying the dip, they don't need any extra convincing, so just enough to make them say, "Ah, see, I was right, Buy the Dip still works".
This will help lock bulls in to this mentality on ever increasingly larger downside moves, they'll look at it as, "Last time we had an ugly day down, I nought it and it worked, so this even uglier day down is an even bigger opportunity".
This will lock them in to buying lower lows until they realize they've lost a 50% retracement of the move from 2009 lows, then they panic and sell en masse, by then their assumptions that all things stay the same will have done them in.
Bottom Line- I think there needs to be a move strong enough to give them gratification, but since they already believe they are doing the right thing and it will work out, they don't need as much evidence as it would take to shake shorts loose, the fact is there just aren't that many shorts out there so the psychological warfare doesn't need to be as extreme when the opponent is already buying what you are selling-literally.
Here's the other side of the view from the market, you saw the Yen, now I'll use the Q's as an example, this is short term trade only...
"B" QQQ is seeing some intraday accumulation with a new leading positive divergence just starting, this fits with the intraday charts of the Yen and USD/JPY as seen in the last post.
The 5 min chart of the QQQ shows horrible damage done/distribution as the QQQ makes a head fake move higher on the minutes day a Bernie first says what the market wants to hear and then under questioning contradicts his opening statement. Don't think it was a head fake? Well not in the typical sense of clear resistance traders would buy, but in the momentum chasing sense with no positives to back it up and the NDX hitting 12.5 year intraday highs, traders will buy that.
You can see what happened next, , now we have a relative positive divergence on the Q's, remember the divergences usually start with a relative (weakest), then grow stronger, then move to leading positive and we typically see a head fake move (this would be to the downside, under obvious support, a price pattern or moving average that would be obvious to traders- then we should get a bounce.
I've been asked what will the bounce need to do, how far will it need to go to accomplish its goal, these are not corrective bounces, these have a specific reason and goal. At first I thought it would need to be very strong to shake out new shorts, but the market is overwhelmingly bullish still so it's not so much about shaking out shorts as it is justifying to longs they were right to "Buy the Dip", so maybe some strong momentum, I don't think it needs to be as psychologically impressive as the longs/bulls are already pre-disposed to believing in buying the dip, they don't need any extra convincing, so just enough to make them say, "Ah, see, I was right, Buy the Dip still works".
This will help lock bulls in to this mentality on ever increasingly larger downside moves, they'll look at it as, "Last time we had an ugly day down, I nought it and it worked, so this even uglier day down is an even bigger opportunity".
This will lock them in to buying lower lows until they realize they've lost a 50% retracement of the move from 2009 lows, then they panic and sell en masse, by then their assumptions that all things stay the same will have done them in.
Bottom Line- I think there needs to be a move strong enough to give them gratification, but since they already believe they are doing the right thing and it will work out, they don't need as much evidence as it would take to shake shorts loose, the fact is there just aren't that many shorts out there so the psychological warfare doesn't need to be as extreme when the opponent is already buying what you are selling-literally.
Yen Looks Like Market sees Short Term Support-Bigger Picture Here Too
First lets go back and look at yesterday's Yen/SPX correlation, a lot of people didn't believe this was a valid correlation or made any difference, it's amazing how people need immediate intraday gratification and miss the big picture, the big opportunities, it's what I called, "Getting Lost in the Lines", missing the forest for the trees essentially.
Yesterday's correlation, perfect...
Yen in orange/SPX in green on a 1 min chart of yesterday to 4 p.m., that's a nearly perfect 1.0 correlation.
Fast forward through this morning...
You can split hairs, but no other currency correlation is so high, this in part has to do with the "Carry trade" that is Yen based through multiple pairs going south and getting more expensive or even causing losses at leverage that can be 200:1. This is how institutional money ramps up leverage of their AUM to try to outperform, but leverage cuts both ways.
Now the reason I say the SPX/market could get near term intraday support and the bigger picture-this doesn't mean the "Far off picture", it's here, it's just the big picture we have been following, it's the real opportunity in this market that may be once in a lifetime.
Yen 1 min intraday is starting to show an intraday negative signal after moving up on Nikkei weakness all night.
This would suggest intraday support/strength for the market.
Yen 5 min also shows the same signal, not big, but enough for intraday support.
Remember the Yen and SPX move opposite.
Yen 15 min, showing the right side of the rounding bottom, remember last week I said the rounding bottom was more than halfway complete? This is the right side as it moves up and punishes the carry traders.
****Yen 60 min is a perfect example of several of our concepts 1) A reversal is not an event, it's a process, note the positive divergence through the base. 2) Head fake moves occur in 80+% of all reversals on every timeframe. 3) Head fake moves are some of the best timing indicators we have for a reversal if we know the base is real from 3C accumulation. Remember right after I said the base was more than halfway finished, the very next day the Yen broke support for a day under the yellow trendline with 3C accumulation, that was the head fake move confirmed by 3C, right after that, they Yen started to move up on the right side of the rounding base.
Yen 4 hour large leading positive divergence, we already knew from this chart that the Yen would head higher, this is why I wrote Currency Crisis Part 1 and 2 back in the middle of April, it was apparent way back then that we'd see a big change in the market and the Yen and $?USD would be at the center of that change. I wrote this LONG before the Yen correlation became as obvious as it is now, because I knew the Yen was the central currency in the Carry Trade.
The $USD, also addressed in the articles has broken out of a major base since then and made new highs!
This is the 1 min intraday $USD/JPY which was slammed overnight with the Nikkei, the index followed the $USD/JPY wiggle for wiggle.
Now the pair look to head higher intraday ONLY, confirming the Yen intraday signals and suggesting market support.
We'll keep an eye out for opportunities here.
Yesterday's correlation, perfect...
Fast forward through this morning...
Now the reason I say the SPX/market could get near term intraday support and the bigger picture-this doesn't mean the "Far off picture", it's here, it's just the big picture we have been following, it's the real opportunity in this market that may be once in a lifetime.
This would suggest intraday support/strength for the market.
Remember the Yen and SPX move opposite.
The $USD, also addressed in the articles has broken out of a major base since then and made new highs!
Now the pair look to head higher intraday ONLY, confirming the Yen intraday signals and suggesting market support.
We'll keep an eye out for opportunities here.
Overnight Insanity...
The BOJ is already out of control with the biggest, most ambitious QE ever seen, I'll never get why Central Banks think the problem to solving debt and deflation is to create more debt and print more money? I've had debt and I've created more (not as official policy mind you), point is, it didn't make the first debt any smaller. So the BOJ offers to buy up $300 bn Yen in debt with a 10+ year maturity and $600 bn in 5-10 year government debt-ah... They are following the Washington model, then just like Bernie saying, "The F_E_D isn't monetizing the debt" when they hold 1/3 of the long dated treasuries, in similar fashion Abe took a page from Bernie's book and says the BOJ "Isn't directly buying government debt". Well no poo! The F_E_D isn't either, they send the Primary Dealers/Banks to buy it at auction as most Central banks are banned from buying at primary auctions and then they buy it from the banks, so Abe's statement while actually factual, is really just smoke and mirrors.
I read somewhere that the world's biggest stock markets were trading like "Penny Stocks", that's true to some degree, that's volatility, it means things aren't as clear cut as the bulls imagine them to be, we can see the multiple red flags everywhere, they can't see the most basic red flag, "Uncertainty", it doesn't matter what the F_E_D does from here on out, buy or not, they created uncertainty and money managers aren't going to gamble on what the outcome of that uncertainty will be, although I think the F_E_D has made it quite clear what the outcome will be-the end of QE long before anyone expected and the start of policy normalization which has always sent the market in to a bear-tailspin. It's just this time they have the largest policy accommodation ever, so the effects of the tailspin are beyond precedent and I'm by far the only one here in our Wolf pack that has known this, many of you have been sending me articles and videos that have made clear you understood the same things, because you pay attention to what's going on and not just what artificial level they can get the SPX to before dropping the hammer. Does this really look like a healthy, sustainable trend to you or does it look like "Loot the store as fast as you can before the police (read as: consequences) arrive?
Honestly, you have 22 years of SPX trends there including the very parabolic tech move, look at the last year and a half and especially this year, even when we had strong QE and strong hopes it would work we didn't see this kind of move, the different? The market has known since September the F_E_D has figured out it's not working for the economy, it's just blowing massive asset bubbles that must pop and the bigger they are, the messier the pop will be, but was it really that hard to foresee? Has anyone here ever reduced their credit card debt by spending more? Have you ever seen people more willing to spend when their money is worth much less?
I DIGRESS
The Nikkei has moved nearly 2000 points from high to low over the last 2-days, gone are the recent days of nothing but green closes in Japan. After the CME 33% margin hike on Nikkei related anything that trades futures, I said yesterday, "Watch the Nikkei", one of the largest markets in the world, it moved up 3% and then down 3% and closed just barely green.
European markets were trading near their lows just after a better than expected, German IFO Business Climate Survey was released? Why? The EU has no real QE per se, not like we do and for the US now, any good news is bad news as it hastens the F_E_D's ability to exit, which is the biggest QE Europe has, it also means their CB, the ECB is less likely to cut rates.
European Sovereign Yields widened to worse levels, why? The funding for Sovereign EU Bonds has come almost exclusively from the Yen based Carry trade which is fallen apart and being unwound as I showed hints on months ago. Guess what that means? More Yields above the unsustainable 6+% and more bailouts needed "Coming Soon to an EU member nation near you" So the mess gets messier as Central Planning turns out to be the farce everyone on the opposite side of Krugman have been saying for decades.
Today should be a light day for the US with a 3-day weekend, NY city traders will be slamming the trunks of their Cadillac Escalades shut around noon for their trip to the Hamptons.
My guess right now, timing is sticky with an op-ex day and a 3-day weekend, is that something like this will unfold...
SPY 1 min intraday may or may not fill the gap, it will tell us something either way, but isn't that important, if it's not filled the bounce I think we get as a shakeout goes up in probabilities as the gap needs to be filled at some point, whether today or on a bounce.
The 5 min chart shows the recent extreme damage, but also a mellowing around this range, watch for a head fake move below the range, that will be good for positioning if we confirm it is a head fake move which I give about a 75% chance to now.
We'll just pick and chose our battles for some nimble, hit and run trading while building out the big picture positions that are doing well this week.
I read somewhere that the world's biggest stock markets were trading like "Penny Stocks", that's true to some degree, that's volatility, it means things aren't as clear cut as the bulls imagine them to be, we can see the multiple red flags everywhere, they can't see the most basic red flag, "Uncertainty", it doesn't matter what the F_E_D does from here on out, buy or not, they created uncertainty and money managers aren't going to gamble on what the outcome of that uncertainty will be, although I think the F_E_D has made it quite clear what the outcome will be-the end of QE long before anyone expected and the start of policy normalization which has always sent the market in to a bear-tailspin. It's just this time they have the largest policy accommodation ever, so the effects of the tailspin are beyond precedent and I'm by far the only one here in our Wolf pack that has known this, many of you have been sending me articles and videos that have made clear you understood the same things, because you pay attention to what's going on and not just what artificial level they can get the SPX to before dropping the hammer. Does this really look like a healthy, sustainable trend to you or does it look like "Loot the store as fast as you can before the police (read as: consequences) arrive?
Honestly, you have 22 years of SPX trends there including the very parabolic tech move, look at the last year and a half and especially this year, even when we had strong QE and strong hopes it would work we didn't see this kind of move, the different? The market has known since September the F_E_D has figured out it's not working for the economy, it's just blowing massive asset bubbles that must pop and the bigger they are, the messier the pop will be, but was it really that hard to foresee? Has anyone here ever reduced their credit card debt by spending more? Have you ever seen people more willing to spend when their money is worth much less?
I DIGRESS
The Nikkei has moved nearly 2000 points from high to low over the last 2-days, gone are the recent days of nothing but green closes in Japan. After the CME 33% margin hike on Nikkei related anything that trades futures, I said yesterday, "Watch the Nikkei", one of the largest markets in the world, it moved up 3% and then down 3% and closed just barely green.
European markets were trading near their lows just after a better than expected, German IFO Business Climate Survey was released? Why? The EU has no real QE per se, not like we do and for the US now, any good news is bad news as it hastens the F_E_D's ability to exit, which is the biggest QE Europe has, it also means their CB, the ECB is less likely to cut rates.
European Sovereign Yields widened to worse levels, why? The funding for Sovereign EU Bonds has come almost exclusively from the Yen based Carry trade which is fallen apart and being unwound as I showed hints on months ago. Guess what that means? More Yields above the unsustainable 6+% and more bailouts needed "Coming Soon to an EU member nation near you" So the mess gets messier as Central Planning turns out to be the farce everyone on the opposite side of Krugman have been saying for decades.
Today should be a light day for the US with a 3-day weekend, NY city traders will be slamming the trunks of their Cadillac Escalades shut around noon for their trip to the Hamptons.
My guess right now, timing is sticky with an op-ex day and a 3-day weekend, is that something like this will unfold...
The 5 min chart shows the recent extreme damage, but also a mellowing around this range, watch for a head fake move below the range, that will be good for positioning if we confirm it is a head fake move which I give about a 75% chance to now.
We'll just pick and chose our battles for some nimble, hit and run trading while building out the big picture positions that are doing well this week.
TBT P/L
Lesson: Don't ignore the volume-this would have been a much bigger gainer if there were any liquidity in the issue.
The fil was $3.70 so the gain was +7.25%, I made 3-4x that with the non-leveraged TLT because it had liquidity.
The fil was $3.70 so the gain was +7.25%, I made 3-4x that with the non-leveraged TLT because it had liquidity.
A Bunch of Strange Stuff Overnight
Basically Global Stock market volatility continues, when the US sneezes, the rest of the world catches the flu it seems.
The Index futures lost ground last night, but it seems to me that so far our theory yesterday that a bigger accumulation zone would build (the reason I closed AAPL calls as it was too early) on a pullback-maybe it won't launch until Monday, but I do think that is the highest probability.
I'll tell you more about the craziness overnight in the next post, but for now I'd still remain nimble, there may be some quick day-type trades (even as small as AAPL's +5% yesterday) that are still worth it and I suspect we will find out if it is worth taking on some bigger positions in anticipation of Tuesday, we'll have to have some strong signals for that, but if we are building a second day of a base, then that raises the probabilities, it does nothing for the "forrest view", things are broke and broke bad". We are seeing the entire world is broke and broken bad.
The key word right now is "Volatility", you can either sit it out or use it, this is a time in my view to use volatility in small trades and make some $, as well as using the spikes up and down to set up the larger strategic trades, adding to positions, etc.
More in a moment.
I'd expect we'll end up somewhere near the bottom of yesterday's range and perhaps a head fake below it before any possible bounce can play out, but they will almost certainly take the shorts out and reward the longs for their ignorance just long enough to lock them in to buying dips as the market continues to sink lower, that's what is going on right now, you know why, it's not just what I see in the markets, it's exactly what I would do. Retail is their for a reason, they call GS The "Vampire Squid", if GS is the vampire, who are they feeding off other than their own clients?
The Index futures lost ground last night, but it seems to me that so far our theory yesterday that a bigger accumulation zone would build (the reason I closed AAPL calls as it was too early) on a pullback-maybe it won't launch until Monday, but I do think that is the highest probability.
I'll tell you more about the craziness overnight in the next post, but for now I'd still remain nimble, there may be some quick day-type trades (even as small as AAPL's +5% yesterday) that are still worth it and I suspect we will find out if it is worth taking on some bigger positions in anticipation of Tuesday, we'll have to have some strong signals for that, but if we are building a second day of a base, then that raises the probabilities, it does nothing for the "forrest view", things are broke and broke bad". We are seeing the entire world is broke and broken bad.
The key word right now is "Volatility", you can either sit it out or use it, this is a time in my view to use volatility in small trades and make some $, as well as using the spikes up and down to set up the larger strategic trades, adding to positions, etc.
More in a moment.
I'd expect we'll end up somewhere near the bottom of yesterday's range and perhaps a head fake below it before any possible bounce can play out, but they will almost certainly take the shorts out and reward the longs for their ignorance just long enough to lock them in to buying dips as the market continues to sink lower, that's what is going on right now, you know why, it's not just what I see in the markets, it's exactly what I would do. Retail is their for a reason, they call GS The "Vampire Squid", if GS is the vampire, who are they feeding off other than their own clients?
