Here's an example of the intraday ES (SPX futures) chart.
7 years ago
Monday, September 9, 2013
Index Futures
All 3 Index futures, (ES, NQ and TF =SPX, NDX, R2K) have significant intraday leading negative divergences, once again suggesting or at least increasing the probabilities of a failed breakout above the range, better known as a head fake.
Here's an example of the intraday ES (SPX futures) chart.
ES/SP-500 1 min intraday futures going deeply negative and right where we'd want to see it for a fast, strong reversal to the downside (which is a move we expect to see accumulation, allowing us to set up some long swing trades or add to them).
And at the perfect time, the break above the range would be seen as a failed breakout and as we say, "From failed moves come fast moves"
Here's an example of the intraday ES (SPX futures) chart.
FSLRCompletes another leg in a larger triangle
If I could, I'd probably consider taking some FSLR October calls off the table, there's a December position that I'd leave in place.
As mentioned earlier, I thought FSLR may be moving up to create a larger triangle, it looks like that is what has happened.
I likely won't be able to close it because of technical problems, but I'm not all that worried, as I showed in today's earlier update this was the short term likely move, but the longer base is still there, still very strong and this is the big move in FSLR that should set up, again a general market pullback does nothing but help secure a stronger market move that benefits FSLR longer term.
This run to the upside today is what I suggested would likely carve out a triangle that was not so obvious earlier, not it is more so after today's price move. It appears we are headed to the lower boundary of the triangle to give it more shape, this of course has some market implications as well, especially as one of the stronger stocks.
Here's the 1 min chart, the leading negative divergence tells me, "mission accomplished"in creating the triangle.
The 2 min chart also says FSLR heads lower as there is clear migration of the newest divergence
However it is the 60 min base that is most important and should send FSLR much higher, if the market moves in similar fashion, it only helps FSLR and that has been the expectation thus far.
As mentioned earlier, I thought FSLR may be moving up to create a larger triangle, it looks like that is what has happened.
I likely won't be able to close it because of technical problems, but I'm not all that worried, as I showed in today's earlier update this was the short term likely move, but the longer base is still there, still very strong and this is the big move in FSLR that should set up, again a general market pullback does nothing but help secure a stronger market move that benefits FSLR longer term.
Market Update-Leading Indicators, Currencies are the Key
Earlier I thought the only decent way to get the SPY above the range which can set up a failed break out (a head fake move), which tend to reverse very fast and very hard, which could not only bring us to the lower end of the channel, but right through the bottom.
Today has been odd in that signals everywhere are mixed mostly on 1 min charts so I looked at leading indicators and while interesting ultimately it was currencies that seem to be the key and are looking like this will be a head fake move.
As far as leading indicators go, thus far there's a split in our sentiment indicators, FCT thus far is strong, HIO hasn't followed the market any higher than it was at 10 a.m. levels.
The price action in the VXX looks more like VIX futures are being sold than bid, at least intraday and up to this point, which is helpful for the SPY arbitrage.
In Credit land, HYG, JUNK and HY credit are all refusing to follow the SPX, they too are stuck around 10 a.m. levels and will not budge higher intraday which is not a vote of confidence in the intraday move.
Yields have dropped so they tend to act like a magnet, on an intraday basis that would mean stocks would be feeling the pull of yields to a lower level and commodities refuse to participate as well.
While the intraday TICK is useful intraday, the SPY 10 min is more useful in looking at the trend since the range and gauging probabilities.
NYSE TICK intraday from the trend up to a break below the channel, not much has changed since the capture, but this is an early warning area to watch.
The trend of the range in the SPY 10 min chart shows very clearly as we use a longer 10 min to remove some noise, but still have sensitivity that this most recent run to the top of the range has the largest leading negative divegrence of any of the previous moves, really there was only 1 other significant move that defined the range.
Here's where it gets interesting, last night I said that there are 3 carry crosses, the AUD/JPY, USD/JPY and EUR/JPY that can act as short term engines to move the market, in looking at currencies, it is plain to see that the EUR/JPY is the driver or engine behind a lot of today's upside. This in no way suggests the currency move is random or unconnected to what they may be trying to do in the market with the top of the range so close by.
This is the 1 min EUR/JPY, if I compared the SPX futures to this chart you'd see they are very close as this is the former carry pair that is driving risk today, typically though since the cary trades have been closed out, a pair rarely holds out for more than a day without failing or rotating to another pair.
This is the intraday Euro futures, with a large leading negative divergence, this is not good for the chart above and thus the pair acting as an engine for the market, thus not good for the market.
The JPY/Yen has trended down which is why the EUR/JPY could move up with the Euro moving up, but there's a relative positive divergence forming here so the loss of the EUR/JPY is likely the loss of the backbone of today's move, I suspect the use of the FX pair is closely connected to the move above the range (and likely a head fake move as it is the fastest way to send price to the bottom of the range).
Still I want to watch and be ready in case this is a move that can hold and run us up higher as we have been expecting (just with one final move to the bottom of the range first), this move to the upside is the much stronger trade, thus it would be great to see the market to pullback to set up new positions for the move and we have had those indications so it's not at all out of the question, but I have to be open to all possibilities if the data is there to support them.
Today has been odd in that signals everywhere are mixed mostly on 1 min charts so I looked at leading indicators and while interesting ultimately it was currencies that seem to be the key and are looking like this will be a head fake move.
As far as leading indicators go, thus far there's a split in our sentiment indicators, FCT thus far is strong, HIO hasn't followed the market any higher than it was at 10 a.m. levels.
The price action in the VXX looks more like VIX futures are being sold than bid, at least intraday and up to this point, which is helpful for the SPY arbitrage.
In Credit land, HYG, JUNK and HY credit are all refusing to follow the SPX, they too are stuck around 10 a.m. levels and will not budge higher intraday which is not a vote of confidence in the intraday move.
Yields have dropped so they tend to act like a magnet, on an intraday basis that would mean stocks would be feeling the pull of yields to a lower level and commodities refuse to participate as well.
While the intraday TICK is useful intraday, the SPY 10 min is more useful in looking at the trend since the range and gauging probabilities.
Here's where it gets interesting, last night I said that there are 3 carry crosses, the AUD/JPY, USD/JPY and EUR/JPY that can act as short term engines to move the market, in looking at currencies, it is plain to see that the EUR/JPY is the driver or engine behind a lot of today's upside. This in no way suggests the currency move is random or unconnected to what they may be trying to do in the market with the top of the range so close by.
Still I want to watch and be ready in case this is a move that can hold and run us up higher as we have been expecting (just with one final move to the bottom of the range first), this move to the upside is the much stronger trade, thus it would be great to see the market to pullback to set up new positions for the move and we have had those indications so it's not at all out of the question, but I have to be open to all possibilities if the data is there to support them.
SPY Update
The SPY has moved above the range described earlier today and in the last couple of posts, now's the time to watch for the signs of a head fake move.
This is the SPY from this morning's triangle and the resistance line is above in red
This is the intraday as it crossed above the resistance area.
So far this is the TICK channel, these are two of the early indications I'll be looking at, if they start coming in as a head fake move, then this trade starts to look a lot better on a downside move.
I tried to close the IWM position, so far that hasn't gone through on a fill, but will continue to close that out and will be watching a few others.
I'm going to be putting up a precious metals update, but right now we're at a transitional area, when the first strong signals in the market intraday come in, they should come in with PMs as well
I tried to close the IWM position, so far that hasn't gone through on a fill, but will continue to close that out and will be watching a few others.
I'm going to be putting up a precious metals update, but right now we're at a transitional area, when the first strong signals in the market intraday come in, they should come in with PMs as well
Market Update
Since the last update, I have a feeling some high probability, low risk trades are setting up now.
The IWM is thus far hitting distribution intraday which may be some temporary resistance, it's hard to tell since the intraday charts like 2-3 min are already negative and have stayed that way.
The only charts in line earlier were 1 min, now the IWM 1 min is starting to lead negative, it is of course above a range of the last 6 days and filled the gap that was just previous to that range so this may not be too surprising and may not be too good for the IWM moving forward, thus I want to look at individual positions.
QQQ is looking worse on the 2 min now as it leads further negative
However if we are waiting on anything, I'd think it would be the SPY as explained in the last post.
Here's the triangle and the breakout to the upside as would be expected, the question is whether it is a head fake move, but it's actually just a primer for the larger move above the range, that's the most important move and making sure it's a head fake as it sets up high probability low risk positions, last night I said I wasn't that excited about trading a move to the lower end of the range, but this would make it much more worthwhile.
These are the two resistance points on the daily SPY, 167.43 and $167.30
The IWM is thus far hitting distribution intraday which may be some temporary resistance, it's hard to tell since the intraday charts like 2-3 min are already negative and have stayed that way.
However if we are waiting on anything, I'd think it would be the SPY as explained in the last post.
Market Update
There's only one time I think there are more games played in the market that have little to nothing to do with trends than morning trade and that is Monday morning trade. As mentioned earlier, those who do not trade full-time for a living look at the market overnight and place their limit orders/stops, etc. that they can't execute while at their normal job, the weekend just gives them more time to do this so Monday morning's tend to be even more deceptive as far as price action and its relevance goes than regular a.m. trade, but thus far (other than last week's head fake move that is interesting), there's not much of interest in the way of changes to short term analysis as summed up last night and previously at the EOD post late Friday afternoon.
I'll use the SPY as an example and follow up with the other averages and the VXX / VIX futures.
You'll notice a pattern through out the intraday charts of the averages, this is a carry over from Friday's EOD post, the point is not the 1 min chart, it's the more important 2-3 min charts which are what we are interested in with the EOD posts, again note the trend among all the averages (how similar they are all in this area).
SPY
The first thing to note about today's action, other than being close to the top of the range from 8/14 and subsequently 8/26 which defined the upper boundary, is the very plain and obvious triangle formed thus far this morning.
Technical traders (whatever their current sentiment is, I suspect still bearish, but we'll have an update there soon) take a triangle like this with a preceding up trend (within the context of the timeframe) as a "Bullish consolidation/continuation pattern", the symmetrical triangle is one of the easiest, most common technical price patterns to spot; as such it makes for a great head fake pattern as traders have a strong expectation of an upside breakout leading to the next leg up.
It matters little whether retail is bullish or bearish in this case, they recognize the triangle for what it is, although many disregard the rules of technical analysis for symmetrical triangles as they have no inherent bias other than the trend that preceded them so many traders take the neutral sym. triangle (only the preceding trend determines its bias) and they assign their own biases to such triangles, unlike the bullish ascending triangle and bearish descending triangle (right angle triangles).
This is the SPY 1 min chart within its trend, it's clearly negative, but when looking at intraday action we need to zoom in to an intraday view, however note there have been several significant distribution areas.
intraday the SPY is "almost" in line, although it's still in a relative negative divergence, however I probably don't need to remind you that the 1 min chart, while important for many reasons, is the weakest signal of all of the timeframes.
This is where the Friday EOD post really mattered and where you'll see a trend among the other averages, starting at the 2 min chart which I'd say is probably 2x more significant than the 1 min chart, so there are significant differences even among such similar timeframes.
Note the leading negative divergence on the 3 min chart as well as a relative negative before that, however for early trade this week/today, the leading negative is the most important.
This is a long term 60 min chart with the range defined with the support area at the white trend line and the resistance area at the red trendline. My expectation for the next truly significant trend is for a breakout above the range as you can see 3C is positive in the range showing it has been used to accumulate, but only at the lower end of the range where prices are lowest.
Very short term I expect prices to run back to the bottom of the range for likely the last time, this leaves a significant foot[tiny/base that can sustain a strong upside move, although that too is just another means to a larger end which is ultimately the largest trend and very bearish.
For the short term, a move to the lower end of the range should see accumulation and as such charts like this should see 3C move even higher, this would be the next significant area for long trades, although they would still be speculative. I'd also expect a head fake move (Break below the support of the range) just before price breaks out of the range to the upside.
While this area has been much less tradable, it reminds me of the range from August of 2011 to the Oct. 4th low that we traded with an 85% portfolio gain only using 2x leveraged ETFs, but what I'm referring to is how that choppy range which was chewing traders up left and right, but was one of our easiest pay days, was used for accumulation, the October low that we expected as a head fake stop run below the range gave birth to an enormously strong uptrend, this is a similar situation in that respect only and I would not use that time period as a model for future expectations, just concepts.
VXX-Short term VIX Futures
The 1 min chart shows a small relative negative and in line trade today, this trades opposite the market in price and as such 3C signals should be opposite the market for confirmation, the fact both are in intraday confirmation is confirmation itself.
The 2 min VXX chart with a relative positive divergence is confirmation of the SPY's 2 min negative.
As is the 3 min positive
The 5 min leading positive shows that VXX is prepared for an upside move, if the market trades opposite the VXX, that means the same downside move expected from Friday's EOD post.
DIA- now the trends in 3C intraday timeframes should look similar to the SPY's above.
DIA with a beautiful example of a head fake trade, this suggests a move to the upside as we have seen thus far, it's not large enough for a huge upside move or the one we are expecting as the next "SIGNIFICANT TREND", but it does have enough juice to offer the market a little more upside, that's why this morning's SPY triangle and potential for a false break out as well as a head fake move ABOVE the range are of interest.
However to sustain such a move, you need more than 1 min charts and even the DIA 1 min is not positive or in line.
DIA 2 min neg. just like the SPy
3 min also negative like the SPY
The 5 min head fake move and a negative divergence
IWM with a small positive divergence late Friday and in line this morning
However at 2 min it is negative like the SPY and DIA
3 min is the same
We shouldn't go out to 5 min for today's information as of yet, but it's fine for what has recently passed and as well as showing the accumulation of a head fake low, the recently leading negative divergence doesn't give the market much support, thus the opinion presented last night and Friday re: early trade this week that is in line with multiple timeframe analysis' expected trends.
QQQ 1 min with a small late day positive divergence and in line in the area the triangle was being formed, I say was because as I type there's a small-ish upside move from the apex of the triangle
QQQ 2 min, the same trend as the SPY, DIA and QQQ as well as VXX.
3 min with the same trends including accumulation of the head fake low and distribution since.
While I expect a return to the bottom of the range where we will have high probability and low risk trade set ups so long as the charts keep confirming our expectations of accumulation in to the pullback, the most obvious thing o occur at this point intraday is for an initial upside breakout from the symmetrical triangle, I think it's there for a reason.
FOLLOWING OUR REVERSAL CONCEPTS, with price so close to the upper end of the range and an expectation for a return to the lower end of the range, a head fake break out or false breakout from the range would be the highest probability (around 80%) before a downside reversal to the lower end of the range. This is not just a probability, but a tactic that would help the market get to the lower end of the range as any longs who buy the breakout or shorts who cover on it will provide ample supply to send prices lower, THIS IS ALL EXPLAINED IN THE TWO ARTICLES I PUBLISHED AND LINKED ON THE MEMBER'S SITE, "Understanding the Head-
Fake Move"
While I can't say for sure yet because there are no strong 2, 3 min charts, the conceptual expectation would be a false breakout of the top of the range before a retreat lower, again though the intraday charts are so weak I normally wouldn't expect that to be a high probability unless retail took it there and the only way I see that happening in in short covering, once again the top of the SPX range.
SPY 60 min
I'll use the SPY as an example and follow up with the other averages and the VXX / VIX futures.
You'll notice a pattern through out the intraday charts of the averages, this is a carry over from Friday's EOD post, the point is not the 1 min chart, it's the more important 2-3 min charts which are what we are interested in with the EOD posts, again note the trend among all the averages (how similar they are all in this area).
SPY
Technical traders (whatever their current sentiment is, I suspect still bearish, but we'll have an update there soon) take a triangle like this with a preceding up trend (within the context of the timeframe) as a "Bullish consolidation/continuation pattern", the symmetrical triangle is one of the easiest, most common technical price patterns to spot; as such it makes for a great head fake pattern as traders have a strong expectation of an upside breakout leading to the next leg up.
It matters little whether retail is bullish or bearish in this case, they recognize the triangle for what it is, although many disregard the rules of technical analysis for symmetrical triangles as they have no inherent bias other than the trend that preceded them so many traders take the neutral sym. triangle (only the preceding trend determines its bias) and they assign their own biases to such triangles, unlike the bullish ascending triangle and bearish descending triangle (right angle triangles).
Very short term I expect prices to run back to the bottom of the range for likely the last time, this leaves a significant foot[tiny/base that can sustain a strong upside move, although that too is just another means to a larger end which is ultimately the largest trend and very bearish.
For the short term, a move to the lower end of the range should see accumulation and as such charts like this should see 3C move even higher, this would be the next significant area for long trades, although they would still be speculative. I'd also expect a head fake move (Break below the support of the range) just before price breaks out of the range to the upside.
While this area has been much less tradable, it reminds me of the range from August of 2011 to the Oct. 4th low that we traded with an 85% portfolio gain only using 2x leveraged ETFs, but what I'm referring to is how that choppy range which was chewing traders up left and right, but was one of our easiest pay days, was used for accumulation, the October low that we expected as a head fake stop run below the range gave birth to an enormously strong uptrend, this is a similar situation in that respect only and I would not use that time period as a model for future expectations, just concepts.
VXX-Short term VIX Futures
DIA- now the trends in 3C intraday timeframes should look similar to the SPY's above.
However to sustain such a move, you need more than 1 min charts and even the DIA 1 min is not positive or in line.
While I expect a return to the bottom of the range where we will have high probability and low risk trade set ups so long as the charts keep confirming our expectations of accumulation in to the pullback, the most obvious thing o occur at this point intraday is for an initial upside breakout from the symmetrical triangle, I think it's there for a reason.
FOLLOWING OUR REVERSAL CONCEPTS, with price so close to the upper end of the range and an expectation for a return to the lower end of the range, a head fake break out or false breakout from the range would be the highest probability (around 80%) before a downside reversal to the lower end of the range. This is not just a probability, but a tactic that would help the market get to the lower end of the range as any longs who buy the breakout or shorts who cover on it will provide ample supply to send prices lower, THIS IS ALL EXPLAINED IN THE TWO ARTICLES I PUBLISHED AND LINKED ON THE MEMBER'S SITE, "Understanding the Head-
Fake Move"
While I can't say for sure yet because there are no strong 2, 3 min charts, the conceptual expectation would be a false breakout of the top of the range before a retreat lower, again though the intraday charts are so weak I normally wouldn't expect that to be a high probability unless retail took it there and the only way I see that happening in in short covering, once again the top of the SPX range.
FSLR Update
As the market continues to range around from 8/14 to present this morning, the 1 min charts are largely in line, everything in intraday timeframes beyond that is as it was Friday, so not much has changed on that front since last night's update, once a.m. trade (and a Monday at that) starts to burn off, things will become more clear as the morning trade is typically reserved for taking money from retail players who typically have another job and have placed a multitude of limit/stop/etc. orders before they head off to work.
FSLR has a nice "looking" breakout, but I'm slightly less impressed with the immediate implications of it and more impressed with the longer term implications of FSLR. There are long equity as well as calls (Oct.) in play so again I'll be looking to make a decision as to whether to take profits in FSLR or let it stay in place as it is a longer expiration.
The charts...
This is where FSLR is really impressive, the longer charts which are the more important, 30+ min.
The base in price is clear, I'd guess at least half way complete if not more and the 3C positive divergence running through it is substantial, that doesn't mean it's ready to fulfill its possibilities/probabilities, although there can still be significant gains even within this area, the calls right now are in the double digits, but moving around quite a bit.
This 5 min chart's smaller negative divergences appears to me to be a price pattern under construction rather than any true distribution.
Similar to MCP, a small triangle Friday saw late day accumulation and led to this morning's breakout of the price pattern.
However when viewed this way, it looks like this morning's move is part of building a larger triangle price pattern, that's my gut feeling based on the charts and where the base is.
The 60 min chart shows the extent of the positive divergence within the base area and also that the base is past the half way point, with these types of bases, the right side develops much faster than the left as most of the accumulation is done by the time the lows of the base are in place. Any consolidation patterns after this point are more tactical to align a breakout in the stock with a breakout in the market, it's much easier for the stock to move higher when the market is doing the same, it's like water passing through a narrow hose which is more constrictive vs. a wide diameter hose which is more free-flowing.
My guess is that FSLR is building a consolidation/holding pattern until the market catches up, although I do like FSLR as a stock that can stand on its own feet as well, I'm just judging this more from the perspective of the maturity of the base.
FSLR has a nice "looking" breakout, but I'm slightly less impressed with the immediate implications of it and more impressed with the longer term implications of FSLR. There are long equity as well as calls (Oct.) in play so again I'll be looking to make a decision as to whether to take profits in FSLR or let it stay in place as it is a longer expiration.
The charts...
The base in price is clear, I'd guess at least half way complete if not more and the 3C positive divergence running through it is substantial, that doesn't mean it's ready to fulfill its possibilities/probabilities, although there can still be significant gains even within this area, the calls right now are in the double digits, but moving around quite a bit.
My guess is that FSLR is building a consolidation/holding pattern until the market catches up, although I do like FSLR as a stock that can stand on its own feet as well, I'm just judging this more from the perspective of the maturity of the base.
MCP Update
MCP is a current long (equity or Calls) and has broken out of a second triangle this morning, this is what the market use to trade like before Technical Analysis became popular and Wall St. started using it against Technical traders.
It remains to be seen if MCP can withstand an ebbing tide in the market, but this is one of a handful of longs that I have long thought could stand on its own feet without need to draft the market, still the market's directionality is a strong magnetic pull accounting for about 2/3rds of a stock's movement. I'm guessing we'll find out soon (as morning trade dissipates) whether MCP can hold the 4+% gains of this morning thus far.
A second bullish consolidation triangle broke out this morning on volume, this was a common site before 2000, there was still a head fake move late Friday, but that's a common shakeout feature to get rid of weak hands and pick up shares on the cheap just before a move occurs (at least 80% of moves are preceded by some sort of head fake move in our experience).
This is the breakout this morning, there's good volume which is a good sign.
The longer term charts are strong with MCP unlike many others, these stretch out to 60+ min positives.
Thus far the intraday chart is confirming the move up as 3C is in line with price, the move looks real thus far.
And here's Friday afternoon's positive divergence in th the head fake move getting ready to launch MCP this morning.
Congratulations to MCP longs, I may take profits on Sept $6 calls, but that is because they are options and I haven't made any decision, for a long equity position, I'd feel very comfortable holding MCP.
It remains to be seen if MCP can withstand an ebbing tide in the market, but this is one of a handful of longs that I have long thought could stand on its own feet without need to draft the market, still the market's directionality is a strong magnetic pull accounting for about 2/3rds of a stock's movement. I'm guessing we'll find out soon (as morning trade dissipates) whether MCP can hold the 4+% gains of this morning thus far.
Congratulations to MCP longs, I may take profits on Sept $6 calls, but that is because they are options and I haven't made any decision, for a long equity position, I'd feel very comfortable holding MCP.
