Gold / Silver & GDX

Yesterday I put up at least 2 posts dealing with gold and silver, this quote was from one around 10 a.m. yesterday morning...

"Overnight I couldn't get a sense of gold, the charts were foggy for futures there, Silver and Gold futures had different divergences, but both were very close to what I'd call the middle in this case, that's not in line, it's really the worst reading in 3C, the one that has no value, it doesn't tell you much one way or the other "

In another one I said I wasn't even going to put up gold/silver charts because there was no edge in them and I didn't want people looking at them and seeing things like we see animals in the clouds.

While silver has a little improvement, I still wouldn't trade it, gold I still wouldn't post.

 This is the 30 min Silver Futures chart, there's improvement, especially on today's move. I wouldn't enter a position, but it does suggest there's a positive bias or accumulation of silver here.

Before today SLV's chart was just gibberish,  this is why I didn't want to post it, it had no value, but something interesting is starting today.

This may simply be a counter reaction to the market divergences or the start of something that may lead to a trade.

SLV 10 min is largely in line, the pops out of the trend are all on leading negative divergences and all fail. There's a head fake move that "should" have (according to Technical Analysis) made a next leg lower, instead it trapped shorts and popped higher, that was about the last good information.

 GLD 5 min shows good information in to the F_O_M_C, after that, gibberish and still not much to go on.

GDX however is interesting in that a bear-flag and bull-flag both head faked technical traders as we expect and twice in a row. The recent activity from last Friday forward continues to look interesting, I continue to hold the GDX/NUGT positions.

GDX 5 min positive trend last week, but much like the broad market and then a failure below what could be a bearish descending triangle, it seems to have been accumulated.

This 15 min chart shows a bearish bear pennant (like a bear flag) and the break technical traders would expect below the pennant, but 3C remains at a leading positive divegrence, this does seem like a larger head fake than the last two failed flags and I suspect this will be a third failed flag/pennant which is the biggest of them all so a reversal here should come with a pretty hefty short squeeze so I'm sticking with GDX/NUGT longs, I might consider adding if the signals are irrefutable, I'm staying away from gold and silver for the time being.

Market Update and Tactical Use

These market updates aren't just for your information, in fact the reason I first started using the tracking portfolios was to place orders based on market updates alone to show you that the information there was actionable. By showing you trades that made money based on the update alone rather than a trade idea, I was trying to show you that you can use these market updates to trade or plan trades without any official positions being called out as each member trades in a different way, many use the market updates for that exact reason.

I think I may start a trading portfolio rather than the tracking ones, just so I can show you the usefulness of the updates as well as some concepts in risk management, trade management and patience.

For now, after having looked at the futures and the other averages, the SPY is a good proxy for the market so I wanted to give a little more in depth look at what the charts are suggesting the most likely short and longer term paths are, you have to think about how you can use them.

For today, the intraday activity suggests that we can pick up some more longs, the ones we looked at yesterday, but just didn't have enough objective data to place a lot of the trades. These are shorter term in nature as are market theory would go so I prefer some leverage, whether 2-3x leveraged ETFs or options, it doesn't make that big of a difference to me.

 SPY intraday 1 min negative suggests a pullback, this is where we'd be interested in looking at short term long positions.

The 2 min isn't as bad...

The 3 min is even weaker on the intraday negative, this suggests a pullback is likely, but it's not strong distribution so I'd use it to look for longs I like at a discount and lower risk.

 The 5 min chart since the F_O_M_C and last week's accumulation vs. more recent 3C signals

30 min positive currently, this suggests that any short term long positions are now a lot more worthwhile than they were last week.

Like the difference between the IWM 10 min (bullish short term) and IWM 15 min (bearish longer term), the SPY 4 hour is showing the same, this suggests that while short term longs can be profitable, the larger trade is to use any price strength to enter, re-enter, or add to Core Shorts for the next trend which should be a much stronger trending bear move.

Trade Entry / Update XOM / ERX... Long Energy

Yesterday I entered the 5th XOM trade since starting a core short there and the 4th since a counter trend bounce started in late August.

I like the XOM November $85 Call position entered yesterday a lot still, I also mentioned ERX for those who preferred sticking with equities/ERFs, but still getting some leverage on the position.

 I think XOM and ERX are still in a reasonable area for a long position, although yesterday was the better day for XOM calls as the momentum was on our side to discount the premium of the calls.


I fully intend on re-entering the XPM core short, just not yet. This would be the second counter trend long since late August.

 The long term view on a 5-day chart of XOM shows a bearish "Ascending Wedge", these have changed their behavior significantly over the last 3-4 years and act nothing like what Technical traders expect, however are still very easy to trade.

Technical traders expect price to break below support as the price pattern's support and resistance trendlines converge in to an apex. From there the rule of thumb is, "Wedges retrace their base", meaning somewhere around the green dashed trendline.

However we have seen time and time again this decades old price pattern (really closer to a century)  pull an initial head fake like the move below support, then another Crazy Ivan head fake above the apex before actually breaking to the downside and reaching the same target zone, usually as a minimum target. Think about how each of those head fakes primes the next move and how they can be used tactically and strategically by smart money, to understand this you must understand Technical Analysis' culture which states that, "If a price pattern doesn't do what it is 'suppossed' to, then reverse your trade in the opposite direction".

The yellow arrows are a more likely path for XOM.

 This daily chart shows where XOM "Was" a core short position, around the end of August it was covered, profits taken and a counter trend bounce long was opened and finally closed at a profit. It looks like we'll get another counter trend move higher from here, which would help that 5-day chart see a price break above the apex of the wedge.

Yesterday I entered a new XOM Call position and mentioned ERX as an alternative play in equities/ETFs.

This closer daily view shows the initial cover area for the core short late August and the initial long trade, now price has broken below support, formed a bullish reversal Doji candle yesterday on increasing volume and is still in decent position for new longs.

 The 15 min chart shows the initial core short negative divegrence in July, the BTC in August and counter trend long position and the new positive divegrence for what looks like a new counter trend move, I expect it to make a higher high.

The 10 min chart has a leading positive now as well

Here's a closer look

And the 15 min chart is leading positive too, this is enough of a divegrence for a counter trend move to the upside.

We even have a 30 min leading positive divegrence in XOM.

ERX should work as well (3x Long Energy ETF)

 ERX 60 min shows the ultimate probability of longer term direction and that is for the initial downtrend to resume at some point, but...

For now, ERX, like XOM also has a leading positive on the 10 min. chart

The 15 min chart after a quick stop run and a daily Doji reversal candle yesterday

And like XOM, the 30min is positive too.

This looks like the last decent area to enter these positions.

TLT & Market Update

A move up in TLT "should" see a move down in the market and we do have intraday (mostly 1 -2 min) negative divergences in the averages.

As I said, I expect the move in TLT to be temporary and we may be able to enter at a better price, that means I'd expect the pullback in the market to be temporary as well.

At the $3.60 fill TLT's P/L came out to +16%

TLT 1 min positive looks like an intraday upside reversal will start soon.

We have a 2 min relative positive as well so thus far I think it's only an intraday correction.

TLT 3 min is about as far as we go.

The 10 min TLT chart shows the process of trend confirmation to a negative divegrence, a break of the trend and what will probably be a gap fill before the trend resumes to the downside with my initial target being $102.ish

Closing TLT Nov. $108 Put

I think it may bounce and we'll have another opportunity to enter.

Market Update

If you watched last night's video or late Friday/Sunday's analysis, the trend was, last week saw weak accumulation through the week, but after the Friday op-ex pin was over around 2:00-2:30 positive 3C divergences picked up a lot of strength, the strongest on the week.

I thought this was odd because we were going in to a weekend Congressional session that seemed like there would be no resolution to get around a government shutdown with the Senate not even due to return until the 11th hour so even if the House had put something plausible together, the Senate would have minimal time to consider it and that was purposeful, so why the addition of risk in to the weekend when most traders reduce risk in to a weekend and uncertain events?

It seems the market had already discounted the government shutdown as a done deal, perhaps they think it will extend QE or make the debt ceiling negotiations easier as the American public will be sick to their stomachs with the government shut down, no elected official would dare anger the public again with another impasse with the debt ceiling debate over the next week or so. I really don't know, but we have had increasingly strong signals (remember I added GS calls Friday) the closer we got to this event, last night's video details additional short term strength in Leading Indicators and ESPECIALLY credit.

This is obviously one of those disconnects in the market that doesn't seem to make sense like a company with good earnings selling off. However it very well could be the simple removal of uncertainty, along the lines of, "When the missiles fly, it's time to buy"


War is hardly any more positive for the market than the shutdown, the point is, the uncertainty in the lead up to war is removed once it begins, we may be seeing a similar effect here, the uncertainty (for the moment) is removed and the market can discount, but this seems to have started Friday afternoon .

Some of the accumulation, focussed on last week starting with the 23rd (Monday)

 DIA 15 min with increased 3C positive divegrence in to Friday/Monday

The Q's have been the worst looking in underlying trade, this 5 min chart that is in line, is about as good as it gets.

 Daily SPX chart... We had the channel as we've went over before, the channel buster which is deceiving, a nice rounding bottom last week, a head fake low below support running stops/getting shorts in the market and the candlestick formation we expected (a bullish Hammer reversal yesterday on increasing volume).

The Channel Buster is deceiving as it will generally head back INTO the channel before falling in earnest, VERY similar to our IWM situation (10-15 min charts).
 
 SPY 15 min with growing accumulation in to the head fake/ stop run under support which we see 80% of the time before a reversal, maybe more.

GS that I entered Call/Long Friday

IWM w/ an uptrend and then a bullish consolidation/continuation Ascending Triangle, and as expected a head fake shake-out /stop run below the triangle's support before an upside reversal, again the head fake move seen about 80% of the time before a reversal on any time frame).

I have thought since last week that this Ascending Triangle was NOT coincidental or a natural forming price pattern, 3C shows it was built, it comes after an uptrend as it should, it is doing everything we expected from the shakeout to a move toward a breakout. This is what we have been expecting from this pattern, and this is why I keep saying I can show market expectations for the near term and what comes next with only 2 charts, the IWM 10 min and 15 min. UP & DOWN.

Last week's weaker accumulation, then the head fake move sees increased accumulation as Wall St. is able to find more supply on stops being hit at cheaper prices.

It's now, VERY much about what comes next.

First we need to make sure this will hold and breakout as well as manage positions taken up for this move.

Next a large portion of time will be devoted to core short positions if we get the breakout above the triangle or in to the SPY's channel.

IWM Irony

At the end of last night's video I showed 2 charts of the IWM that could in effect explain what we were looking for and expect, you may remember the large ascending triangle in the IWM, the recent head fake / stop run below it and the 10 min positive with the second chart being a longer 15 min leading negative, the implication being, "short term up/longer term down".

This morning as the government shutdown is going on 10 hours, the IWM looks to be trying to make that breakout.

I'm not saying the IWM is much stronger than any of the other averages, although thus far it has the best relative strength, but it does have the most important break-out pattern which it's not too far from.

IWM 10 min, a break above the triangle would seem to be the most likely course before a drop back below it.

Futures are either vary flat or scattered, depending where you look. Interestingly yesterday Gold and Silver didn't really have any solid clues, this morning they were sold off in discount style, not the typical distribution leak lower, but as if the market suddenly discounted the market shut down in both, having previously not decided which way they go in case of a shut down.

It's still very early in the day, hopefully things will clear up, this is why I'm not making any moves unless I have good, specific reason to do so.

Leaving TLT & GDX in Place for Now

The TLT put is up on a gap down and the GDX Call (NUGT long) is down on a gap down, for now I'm leaving both in place.

Something just doesn't seem right with futures activity.

Daily Wrap

I thought I'd do a video for tonight's wrap, I'm using some different software so hopefully the sound and video match up better.

There's an embedded video player below and here's the link to the video on YouTube.

As for futures so far tonight, the 1 min 3C chart for the Index Futures looks very negative, I'd guess they'll see at least some sort of move down in the next hour, however the 5 min charts seem fine, so this should be interesting.

Coming Down to the Wire

In just over 8 hours, 1/3rd or 800,000 Federal Employees will be shut down and out of a paycheck and it doesn't seem like much is getting done to change that eventuality.

Still we have HYG positive on some impressive timeframes, although it has taken on some water in the 5 min range.

There's a VERY slight positive tone or less negative among many of the averages.

In addition TICK data is leaning more positive.

What I found interesting is that the reach for protection via VXX and VIX Futures is not supported as well as you might think, the earlier half of the day had better 3C support and the afternoon has a negative divergence.

Unless something changes enough to really inspire me, I feel like we have a nice set up for long entries, that would be the short term strategic view, however the short term tactical view (the timing of entering those positions) is still off.

AFTER CONSIDERING THIS I'VE COME TO THE UNDERSTANDING THAT DESPITE THE HYG POSITIVE DIVEGRENCE AND OTHERS, AT THIS POINT, WITHOUT THE SHORT TERM CHARTS GIVING A CLEAR TACTICAL ENTRY, I BELIEVE TAKING A POSITION WITHOUT THE INTRADAY CHARTS IS AKIN TO GAMBLING ON THE OUTCOME.

WE ARE NOT GAMBLERS, I DON'T THINK I'LL ENTERTAIN ANY MORE ENTRIES UNLESS THRE IS A SIGNIFICANT SHIFT AND THAT LOOKS VERY UNLIKELY, BUT WHO KNOWS WHAT TOMORROW BRINGS.