Quick Market Update

So far this is just an intraday signal and we still have plenty of time for more than 1 intraday trend to play out.

All of the Index futures 1 min charts are leading positive pretty strongly.

All of the averages have either a 1 or 2 min 3C move that is either leading, but most are not, however they are improving at a very fast rate.

Here's an example of a leading move in ES, SPX E-mini futures.

ES 1 min

As an intraday chart it doesn't make a huge difference to the market update, which I'm still working on as there are some ambiguous or just not very powerful signals, for me at this time it is not a question of whether the uptrend will continue and be as strong as expected, for me it's more of a question of timing and more specifically the timing until the move to the upside resumes in earnest, not a pullback or even consolidation (choppy noise within a trend).

UVXY

I'll get to the market update ASAP, of course a position long UVXY obviously would have market implications, UVXY moves up, the market (typically and I say this because this very strong inverse correlation had an exception yesterday) moves down.

However as I mentioned in the last post about UVXY calls, I said this may be a "Very" short term trade.

 Here;s the VXX (UVXY is the leveraged version of VXX- Short term VIX Futures) in red vs the SPY in green. Note there's typically a nearly perfect inverse (opposite) correlation and for a good reason, if VIX futures are being bid up, it's typically for protection in response to the market moving down.

Interestingly yesterday the correlation didn't hold so well and VXX fell when it should have been rising. Today the correlation is working intraday, BUT, VXX should be in the green today, it's not because of yesterday's activity.

 This is UVXY's 1 min going positive here, you can see clear 3C distribution on the open today.

This is the chart that spurred me to action, the 2 min UVXY which had been in line with price action over the last 3 days seen here, today though it's leading positive in a big way, (even bigger right now)

 An intraday look at the same chart

The 5 min shows where UVXY went leading negative and at the second high, exceptionally leading negative, but now a relative positive. Remember relative divergences are always much weaker than a leading divergence, but this still is important.

 UVXY 10 min showing the 3C divergences at former tops and some accumulation, but what's important now is the leading negative 3C signal at a new leading low. This suggests that the UVXY move up will be short lived, that's in line with market pullback expectations, pullback enough to get the shorts frenzied and entering short, but ultimately the market should squeeze them hard and move to what could even be a new high, but at least a move strong enough to change retail's mind to bullish (they are very fickle).

Just for confirmation, this is the non-leveraged VXX and the 10 min chart, almost exactly the same, the pullback doesn't matter to me as I said yesterday, it's noise, but it's actually helpful in getting shorts to commit, it's this longer term chart that I'm interested in, this is not the ultimate prize, burt as we hitch-hike a ride with the market, it leads right to the ultimate prize.

This is the current 2 mi UVXY chart.

2 min chart at most recent capture.

There's also migration and the 3 min chart is starting to lead positive.

I may also enter a long UVXY equity position as well for the equity tracking portfolio.

Opening UVXY July $70 Call Right Away

This may be a very short term trade, but I think worthwhile.

Charts coming

MCP Update

As you can probably tell by now with that VERY clear MCP triangle, it is becoming a prime candidate for a head fake move, perhaps even a Crazy Ivan (2- head fake moves to clear stops and orders on both sides of the triangle).

Right now the 1 min chart that has been down all day (however the 2 min has been in line-suggesting clearly that the 1 min was all about creating this triangle consolidation), but is starting to move up, it's not bullish as of now, but improving.

This could certainly be a "tell" before a head fake move. The only reason this would matter in my view is for leveraged option positions or getting the very best tactical entry if you have time to watch the market like that. Otherwise as far as the trend in the days and possibly weeks ahead, I see no reason MCP won't head higher.

If we get a breakout/breakdown from the triangle which we will have to get soon as the apex of the triangle is now so narrow, I'll check them right away to see if they are head fake move/moves and what the probabilities are for a leveraged position, where and when.

Quick Market Update

I'll have some charts out shortly, but as you know, I expected a pullback in this area, I don't believe in coincidences as ridiculous as this one would seem to be, but 3:30 could tell us definitively.

In any case, either way, so far I'm seeing EXACTLY what I'd expect from a pullback and what that means is it looks like a pullback, not the bearish action the retail bears (overwhelmingly large numbers yesterday) are expecting. It looks to me so far that this is a pullback as expected and not a reversal of the 3-day move up and yesterday's start to the breakout of the 4+ day base. It looks very much like we will see that strong mover to the upside continue after this brief interlude.

I have to gather a little more data like credit's underlying action, but I'll have charts out shortly.

GLD / SLV Update

There's still no 2 min negatives in GLD or SLV, only the 1 min which as I just explained (and have many times in the past) is a 50/50 chance of an intraday pullback or consolidation, usually it is definitely some correction as we are seeing now, however when the 2 min is added to the miix, then a correction through price becomes the highest probability correction.

Things being as they are, the probabilities are still 50/50 between a consolidation and correction, so far we've had a consolidation.

The 2 min SLV chart is actually leading positive now so it wouldn't be surprising if this consolidation ended and the move to the upside continued.

MCP Charts/ P/L

Fill for the July $5 Calls at just over 25%, the longer MCP moves sideways or down, the more the profit is eaten in to. I always prefer to take the position off the table before the first correction sets in.

That however does not apply to an equity long that does not suffer from time decay and volatility changes.

 The 1 min chart with a negative divergence like this is usually a 50/50 toss up between a consolidation which is a correction through time and a pullback which is a correction through price.

 This is the typical correction through time, a very obvious / clear symmetrical triangle which has no outcome bias on its own, it depends on the preceding trend which in this case is up, so you could call this a small "Bull Pennant" which technical traders expect to break to the upside, which makes the pattern unpredictable as Wall St. likes to use technical analysis against technical traders (i.e. a head fake break below the triangle is something Technical traders would not expect to see and as such they'd take as a failure of the breakout move), even volume is perfect for the pattern.

The 2 min chart is largely in line so it's still a 50/50 toss up as to consolidation or pullback.

It's the 3 min chart that made my mind up that a pullback is a better than 50/50 outcome intraday, this could make for an excellent new position in MCP if it comes.

The 10 min chart shows the start of accumulation, you might remember what I said yesterday about price targets vs. where 3C accumulation started. 

MCP has already surpassed the point in which accumulation on the 10 min chart started, it typically moves well past that point eventually.

With the 15 min chart this strong, I have little doubt MCP will see further upside, I just prefer to rise it out in a non-leveraged position unless we get a pullback that discounts calls and 3C accumulation on the pullback, then I'd enter a new call position.

GLD, SLV and GDX / NUGT

I think by now with gold especially and silver to a lesser degree, dumping right as China opens clearly shows Chinese banks are selling assets to make up for the severe shortage in liquidity that the Chinese financial system has been experiencing this week like the US did in 2008 and a big part of that is because of the same US problem then..., Counter-party Risk.

However there seems to be asset managers who are and have been interested in accumulating the PMs, it's just every once in a while a Fundamental event that's not on the map pops up, that would be the severe Chinese Financial system's Frozen liquidity situation that has seen banks suspend all loans this week.

In any case, whether the PMs were getting ready to pop late yesterday or as I suspect may be the case (or likely both), the F_E_D's new story-line caused it, they have started to pop.

I'm holding positions open in PMs and GDX, but I probably wouldn't enter a new leveraged position at this point until there's a pullback that can be verified as seeing accumulation. Again Williams could easily cause that. Smaller pullbacks, if you are so inclined to enter the trade, seem a bit safer with either non-leveraged or 2-3x leveraged ETFs rather than options, for options, I'd prefer to do what I said above.

Here are the charts...

As of RIGHT NOW, a pullback of any size doesn't seem likely as we have some 1 min negatives, but we are missing the 2 min that gives a pullback a very high probability intraday, that could change of course at any moment, but the consolidation right now I think is just that, a consolidation, not likely a pullback unless the 2 min charts go negative.

IF the market makes a stronger move to the upside, that could do it, but ES is moving up and so far it hasn't changed the 2 min charts at all.

GLD 3 min looks like there may have been some movement late yesterday toward higher prices in GLD, but looking at 1 min charts, it looks as if the F_E_D announcement was the real cause, there was an initial short consolidation that was strongly accumulated and then the parabolic-like move straight up right after.

 The 5 min chart looks more like either they were preparing for a move higher or at least as of yesterday afternoon an accumulation phase was under way that morphed in to a move higher after the F_E_D double whammy this morning, the timing is near perfect.

I'll be holding positions for now for the following reason/s

 The gold futures 15 and 30 min charts showing the same accumulation as GLD (same timeframe) and it hasn't suffered at all, despite Chinese banks selling gold (just look at gold right as China opens)  to create some liquidity.

SLV 2 min has a similar question as GLD, but again

The 30 min chart is less ambiguous, like gold, it's very strong over the entire period. In fact I think if I had to chose again, knowing what I know now about Chinese liquidity, I'd chose silver over gold, but as far as metals being sold, even copper is being sold on China's open, gold is just a stronger asset to increase liquidity fast before the banks have to shutter their windows.
 

 Silver 3o and 60 min 3C futures are very strong, there's been no damage to them.

 As for miners, just as we saw a divergence between GG and GLD as well as SLW and SLV, GDX has been acting better recently (yesterday is the specific period I was talking about for Gold, Silver and Miners).

The 10 min GDX divergence is strong with no damage so I think we have a bigger move (much bigger) in store, I do think it will be choppy depending on how the equity market moves and of course the situation in China, but there's a counter (bullish) situation in India as well so it's hard to try to balance the scales for forecasting purposes between the market, a total unknown such as China's financial liquidity lock up- maybe it lasts a week, maybe like the US it just gets worse until the PBoC has to step in, but they are no where near as happy to do so as the F_E_D was in 2008/2009.

GDX 15 min also shows more upside, I think SLV/silver still has the edge.

NUGT 3x long Gold Miners ETF shows an intraday  1 min negative , if anything, this is the closest to an actual pullback rather than consolidation, and it's on a pullback with verified accumulation I'd consider opening a new NUGT long or adding to an existing one.

 NUGT 30 min seems to clearly have quite a bit of upside ahead of it.

This is the 3 min chart, it is perfectly in line so any intraday pullback has a very high probability of seeing accumulation in to the PB, making it a decent add to or new position.

MCP Position Management

I'll have some charts up after the Gold/Silver post coming next, but I've decided to close the MCP July $5 calls for now, I am leaving the MCP long Equity position OPEN and will look for an area to add the options back.

In other words, I'd like to take the momentum in MCP as intraday it doesn't look like I'll be seeing more AT this point, but the larger picture still looks awesome and with the criminal inquiry closed, there's nothing to hold MCP back.

The F_E_D Giveth and Taketh Away

Good morning, I've had a little "connectivity problem", but that;s sorted out now.

Being in the market for as many years a I or any of us have, it's hard to believe in coincidence, that's why it's somewhat amazing to have 6 F_E_D speakers in 4 days come out and play the dovish card to give us the best 3-day move of all of  2013, to only have 2, 1 of which was one of the 6 from earlier in the week, Lacker, but it was Stein who got the ball rolling with this gem....


Highlighted portion of the speech that sent futures down...

"Both in an effort to make reliable judgments about the state of the economy, as well as to reduce the possibility of an undesirable feedback loop, the best approach is for the Committee to be clear that in making a decision in, say, September, it will give primary weight to the large stock of news that has accumulated since the inception of the program and will not be unduly influenced by whatever data releases arrive in the few weeks before the meeting--as salient as these releases may appear to be to market participants. I should emphasize that this would not mean abandoning the premise that the program as a whole should be both data-dependent and forward looking."

In case you were wondering, it was the seemingly arbitrary "September" date for being "clear" with the market, so was that hypothetical or was that the F_E_D's clear guidance to the markets? Participants took it this way....

ES at 8 a.m. on the release of the speech.

Then comes Lacker...
"Bond and stock markets fell sharply in response, but that should not be too surprising.The Chairman’s statement forced financial market participants to re-evaluate the likely total amount of securities the Fed would buy under this open-ended purchase plan — in other words, how much liquor would ultimately be poured into the punch bowl....


As market participants gain additional insight from the words of Federal Reserve officials or by policy actions in coming quarters, further asset price volatility seems likely."

And the EXACT reason I have been giving for the end of QE since September....

I seriously doubt additional monetary stimulus can provide much impetus to real growth right now. But further stimulus does increase the size of our balance sheet and correspondingly increases the risks associated with the “exit process” when it becomes time to withdraw stimulus. That is why I have not supported the current asset purchase program..

Remember the statement by former F_E_D member Kevin Warsh,

"Getting in to accommodative policy is easy, it has always been withdrawing it that is the hard part"

So is this "Pullback" that was discussed yesterday in so much detail F_E_D controlled also?

The SPX was not only at resistance yesterday after the slight breakout from the H&S Inverse bottom with heavy overhead resistance, but at one of the clearest Technical signals over the last 100 years, resistance at the 50-day moving average.

I'm not saying either of these matter 1 bit anymore in the real world or market as it is now, but these are what Technicians have been taught for well over a century, this technical set up is one of the most common in Technical analysis, again the VERY simple concept that any 1 month old Technical Trader knows by heart...

The SPX breaks the 50-day and then rallies up to it as resistance and backs off yesterday as you can see with the longer upper candlestick wick, a clear technical set up and one of the most basic.

So as to the question, "Is the F_E_D actually moving this market as I suggested they would Saturday, but to a degree unimagined or coincidence?"

If this was only meant to be a small pullback, we could have our answer at 3:30 when an additional F_E_D member speaks, John Williams...

I'd be shocked if the F_E_D were this blatantly manipulating asset prices for the banks, but not surprised.