Trade Ideas

Rather than spend a lot of time on the market tonight because you already know what I was expecting, we got that move, I'll dedicate more time to positions I think are in good position or areas where I'd consider them

FAZ Looks GOOD

I'd consider if you have time to do the risk management, a partial position long FAZ, I plan on entering tomorrow.

Thoughts Moving Forward

Other than positions already in place, I'd like to wait to tomorrow before looking at entering any new positions, HYG is not only not performing price-wise, but 3C wise, so it's leading well.

I'm trying to watch the close, but also let you know what I'm planning, I will fill out SRTY and enter some other positions, I'll hold SLV for now and IYT opened today. However I am not going to rush in to positions, there's no need for it, there's a bus every 30 minutes.

GS

I know several of you are trading GS, I'll just say real quick that GS is one of the few stocks that has a real and powerful base that can support a real move.

I personally have been watching the base develop for sometime and this is one that I wanted to sync up with the last market move to the upside, get in on the base early just as the market is turning up.

I think it's tough to trade in here as market headwinds aren't the best thing for moving up, I'd love to see it pullback and wait for the market to be at the start of a fresh move up, I'd consider going larger than full size if that were the case.

A couple of charts..

 This is the 60 min base, it's impressive.

This is the 5 min chart, I expect we'll have market headwinds and the GS base looks mature, I really don't know if it will come down and make a larger base or do its own thing, I'd hope that it will come down.

I'd say from some of the 3C charts that the true base is up at the higher trendline, that gives a very large price implied target.

Process vs. Event

A lot of the email questions I'm getting today (interestingly about a wide-array of assets) have 1 feature that I've been pointing out more than anything else today so I figured I'd just address it in a post.

This is about a concept that we talk about here a lot, "Reversals are a process, not an event".

There are reasons for this, a lot of it has to do with scale, turning a jet-ski is a lot easier than turning an oil tanker and when you consider the size of "our" orders and the size of institutional positions, I think the analogy between our typical 100 lot orders and institutional size positions, being a jet-ski vs an oil tanker are probably pretty close to fair.

It's not that they can't execute in micro-seconds, they  can, but there's only so much volume before you start effecting your fill, this is exactly why there are head fakes, to facilitate this process. Read these two articles when you get a chance and you'll see that is exactly why or at least one of the largest reasons why there are head fake moves.

These articles are linked on the members site at the top right for you any time/

#1 

#2

A quick example using AMZN first because where AMZN was in the charting process is not surprising vs where it is in the price process and then quickly the IWM.

 Each stock / asset has its own character depending on size, volume, institutional sponsorship, etc, this is why my Trend Channel self adjusts to each stock rather than have a static setting like Bollinger Bands or an Envelope Channel.

This is AMZN above, bottoms tend to be a little sharper than tops, but there's a proportionality to the moves, like the preceding trend, how long it was, how vertical it was, etc.

The yellow box shows a couple of small reversals, but the proportionality is right on, only the red box has a sharper up and downside reversal than you normally see. I try to explain it this way, "A reversal is more like a "U" or a "W" than a "V" or more of a process than an event".

The orange box is pretty right on, notice the bottom is a little quicker than the top.

In blue I drew in 3 green lines that you can see at the red arrows, if AMZN were to make a move down like that right now it would be out of character considering the preceding move.

The IWM 2 min chart...

Now the same chart with no 3C...

Note the "process" in reversals here.

I'm not talking about the IWM specifically, I'm talking about proportionality because each stock has a little different character.

Transports (IYT) vs DJ-20

I know that seems a little crazy and quick, I can jump through these charts a LOT faster than I can capture, annote them, upload and post them and when the market is moving fast like this one is, it makes it even harder.

I'm not going to comment on these too much, just know that IYT and DJ-20 might as well be like comparing PCLN to HD as far as 3C is concerned, it's working off the signals from that asset including their own unique volume patterns, this is why I use so many different assets and ETFs to confirm a signal.

What looked a little strange to me at first was the 10 min IYT chart, that negative chart didn't look right and at first I assumed it's an anomaly, then I looked at longer charts in IYT and then I looked at the DJ-20.

You'll see what I saw.

 IYT 10 mins.

 IYT 15 mins.

IYT 30 mins.

DJ-20 (Dow-20 Transports) 10 mins.

DJ-20 30 mins

DJ-20 60 mins.

IYT 60 mins.

IYT 5 mins.

DJ-20 5 mins.

IYT 3 mins.

Dj-20 3 mins.

Remarkably similar.

Transports / IYT Trade

I can't get these charts out fast enough, but I'm very close to pulling the trigger at least on a spec size IYT Put.

The DJ-20 looks the same.

Actually I am going to pull the trigger, probably Aug. $113 Put.

 A bit longer at 10 min

Intraday at 1 min.

I'll get some more charts up in just a min, as fast as I can capture them

AMZN Charts

I might be a little too myopic at times about entries and exits especially when we are looking at big picture positions, but I think AMZN looks really interesting, but with it's current position, I want to be as sure as I can be as far as timing, as far as the position itself and the big picture, I still like it a lot.

I'll try to give a run down from macro to micro, there are some really interesting aspects to AMZN, it has built some incredibly strong bases and just some other things that just show patience pays and the big picture is really where it's at whereas I think sometimes we get too caught up in day to day or hour to hour trade.

 This is the range and the reason I wanted to see AMZN > $287, each timeframe has to be looked at within that timeframes perspective, here on a daily or multi-day chart, this is the obvious range and movement is created as well as opportunities at the obvious areas. It seemed like waiting forever for AMZN > $282.50, but it was worth it. Note also it's not $282.50 or $287, otherwise you could just set a limit order, it's ">" greater than and the reason for that is the range needs to be broken and it needs to be convincing, that's the only way you get sentiment shifts and traders to take action. It's that action retail is taking that Wall St. uses against them or you might say for their own purposes, it's darn hard to fill an order the size they are looking to fill at with a great entry (short in this case) and enough liquidity or volume to fill an order the size they are trading, the best and easiest way to do that is to create these head fakes, whether false breakouts for short positions or sells Wall St. wants to fill or shakeouts/stop runs for longs of BTC positions.

This is one of my custom indicators, it is DeMark inspired, we still haven't named it, but these are sell signals in orange, also note the Bollinger Bands pretty much giving away that move >$287 as the start to squeeze implying a directional move and with a range like that as clear, where do you think that directional move is headed?

 This is a multi-day (3) chart that shows a lot of history, look at the size of that rounding bottom/base  from mid 2000 through 2003, that's years, then there's another strong base from 2004-2007, again years, but very strong divergences so very active accumulation, the last major accumulation area was 2009 at the market lows when just about everything went positive around Q1. Since then at "D" 3C has been in line with the trend, not calling out any major disruptions to it, but at "E" we see the distribution process showing up on a 3-day chart which means it's pretty significant.

Again with institutional orders the size these guys are trading, they aren't closing positions in a day or a week, often it's a process of months and distribution can even hit years just as the accumulation was years.

 The 60 min chart is what I've been watching as far as >$282.50 and now, it's in the right direction, the break out from the range is almost vertical so it's convincing.

At the 1 min chart you can see the same type of cycle (Accumulation, confirmation, distribution) as you saw on the multi-year chart, even intraday we see these same cycles, there's actually 4 stages, most of you know them, but now's not the time to cover them.

A closer look at the 1 min chart shows a pretty strong distribution area at the yellow box and just preceding, there's a move just above the intraday range (we see them on every timeframe) preceding the move to the downside.

What I want to see here is the 1 min chart dig down deep in a leading negative position from here, I want the chart to scream it's ready and if that happened with price moving above the intraday highs on this chart, I'd be fine with that because distribution is either in to higher prices or flat prices, very rarely is it in to downward prices unless someone got caught with their pants down.

 The 2 min chart also shows how strong the distribution at the yellow area was if you follow 3C to that point, it's still negative, but I want to see this chart also lead deeply.

 To the left on this 5 min chart there's point "A" and "B", there's a small relative negative divergence between them that sends price lateral until a positive divergence appears and sends it higher.

What I want to see here is simple, I want to see 3C move to a lower area, a lower low, if it just moves up and is just in a relative negative divergence like the one to the left, then it's not ready.

I think this will all happen soon, how soon is the question and that is what the entry will depend on.

This 10 min chart had a nice leading positive divergence, but it's only so big ands it's on a 10 min chart, not a 60 min so it is about where I'd expect these negative divergences to start getting a lot worse.

There's one other thing I'm thinking of and that's psychological, $300 is only about 3% away, these centennial numbers are like magnets, I'd say the overall market will have a lot to do with whether or not that becomes a factor, but it's something that has to be considered being it's so close.

Right now I'm going to wait on AMZN, but I'm not walking away from it at all, I'm just keeping an eye on it and waiting for it to give a screaming signal that jumps off the chart.

Quick Update

Most of the averages, (some look especially bad intraday like the Q's) and the Index Futures are turning intraday negative here so I'd be looking for a swing down shortly. I'm just finishing up the AMZN chart post, I'll get some other charts out after that.

AMZN Update

I just want to point this out because I like AMZN as a core short position (longer term / trending trade).

I waited for some time for AMZN >$282.50, I don't know if you recall the second target, here's the last update for AMZN on July 2nd 

" I would entertain adding to AMZN above $287, but I'd have to have a more significant price concession and continued negative signals to add to the position from here."

Above $282.50 was the first target to start or add to AMZN and > $287.00 was the second target for a phased-in position, this is not "Dollar Cost Averaging" as dollar cost averaging is an attempt to lower your cost in a losing position, essentially throwing good money after bad. Phasing in to a position is a plan that is part of your risk management before you ever take on the first share.

June 13th I was looking for roughly the same levels so even at the >$282.50 level I had to wait a while for it to get yup there...

"As a short which I'd like to add to (equity only), I'm looking for prices >$282.50-$285."

This was actually during the middle of an AMZN call trade that did well.

In any case, as I go through my watchlist, AMZN popped up at the level I've been looking for. 

I'll prepare some charts and get them out next, but I wanted to get this out to you so you can take a look with your own tools and see if the idea fits your style. Again this is an equity short, not leveraged with options, it's meant to be a longer term position and as such I like giving these some extra room on the stop even if that means taking on fewer shares, I'd rather give the position a chance to work through all of the transitional volatility, but one of the key reasons our core shorts have done well for us in the past is we have been very patient with them and waited for areas that are likely seeing distribution.

Charts are coming up next and I'll probably make a decision on adding the final bit of AMZN today, although I suspect a reversal process would likely be complete around tomorrow for the market in general, we do have Bernie speaking at 4:!5 tomorrow, granted it's a speech on the "History of F_E_D policy" so it's not likely to contain anything too significant, but this is pretty much the market's main focus right now.