Gold, GLD, GDX & NUGT

For now I'm sticking with a gold and gold miners update, silver looks a bit different, as you know, because of all the manipulation in Silver under JPM's Blythe Masters, it is one of my least favorite assets to analyze and I find it can often be as unpredictable as many biotechs that have drugs in the FDA pipeline.

First let me just establish the correlation between gold and gold miners (GLD and GDX respectively as ETFs).

 This is a daily chart of GLD in green (gold) and GDX in red (Gold miners), you can see the correlation is not perfect, but they are highly correlated, so much so if I were trading my average of about 6-8 positions I would never have a trade in gold and gold miners open at the same time UNLESS I treated them as a single trade, half the position in GLD and the other half in miners, which may give some slight rotational diversification as gold does slip back and forth from time to time between a risk asset or as we saw for a few days at least last week, as a flight to safety, adding miners may smooth out those gyrations.

This is a closer view of intraday trade between the same two assets on a 10 min chhart so you can see they are correlated to a fairly high degree.

It's hard to talk about any position in gold without looking at the biger picture. For all those who feel like, "This time it's different", ask the commoditiy traders and the shipping traders how their unstopable market turned out, ask the AAPL lovers how the invincible AAPL turned out and perhaps as, if not more  (if that's possible) hard core than the AAPL lovers, remember the gold bugs, they NEVER thought gold would so much as do more than pullback to the 150 day moving average. As some of you know, we were calling a top here when it was VERY unfashionable and I reminded you of the story of the fund manager / gold bug who I warned and, well just look at Gold since 2011.

This is a daily chart with a 150-day moving average,  (A) GLD was consistently pulling back to the average and that was the buy spot. We were looking at a position in 2011, even though character had changed as the pullbacks (B) to the average were less and less frequent. When Gold came down to the 150 m.a. in 2011 (D) we passed on a long position, the last run up (C) was too parabolic, character of gold had changed too much and "Changes in character precede changes in trends", this is partly why we called a top in gold with either  an Intermediate or Primary downtrend to follow, the downtrend was a primary bear as you can see the lower lows and lower highs (E) , however something changed this year after a capitulation-like event and it looked like gold was working on a base for at least a counter trend rally, maybe more. At (F) we got our first higher high. (G) may be a higher low or it may see price return toward the low of the year in which case a larger base would likely be under way and a new primary uptrend in gold might be possible, as it sits now, I don't see enough support for anything more than a counter trend rally, but these are some of the strongest rallies you'll ever see so that can be very worthwhile.

The MoneyStream chart shows the distribution at the 2011 high as we saw as well and a leading negative since, but this is a long term chart, it would take quite a bit of accumulation to turn this positive, MoneyStream is at multi-year lows.

The same 2-day chart of 3C shows trend confirmation on the way up and a deep leading negative divegrence in 2011/2012, note the large triangle, traders are faked out all the time by these, but they are almost always tops in this position so a breakout on the upside is often a great short entry, although I still check for confirmation. GLD offered us one of the biggest 1-day trades we had last year, I don't remember the exact percentage, it was triple digit and in something like 3 days.

What we are dealing with RIGHT NOW in GLD is a positive divegrence on a daily chart so it's fairly strong (white arrow).

 This is the 1 day 3C chart of gold futures, note the same leading positive divergence and positive at the lows of the year. I drew in a yellow arrow which would build out a larger base that "could" support a primary uptrend. If not, then we still can get a great move on a counter trend rally.

 This 30 min chart of GLD shows distribution to bring GLD back down to an accumulation range where it was accumulated and printed a break-away gap,  we all know that this market is now relentless about filling gaps, if this were not PM related I'd say the chances of a gap fill are 90%, being it is a PM, I'd say 75%, but a gap fill in GLD or GDX is where we want to look at a possible long position or add to long.

This 10 min chart shows the positive accumulation , note the range at the lows is where it was accumulated as always and the breakaway gap. The fact that there's no negative 3C signal currently at all makes me feel safe with a pullback in to the gap and makes me believe the probabilities are that it's a healthy pullback that is accumulated and thus a great entry or add-to.

 The 5 min gold Futures chart shows what looks like a decent negative divegrence, enough to fill the gao. I'm thinking the entire process would probably take about 7 trading days, but this obviously has a lot of caveats between flight to safety, currency and $USD in particular.

Since GDX and GLD are so closely correlated, I wouldn't expect much different, we (or some of us) have open GDX calls or NUGT (3x leveraged long gold miners) longs.

 This two hour chart is very powerful, it tends to confirm GLD and gold futures with a strong leading positive divergence.

The 15 min chart shows a pullback that was accumulated before the last pop higher and it's in good shape.

 However on the shorter, weaker charts, we do have a 2 min leading negative which is perfect for a pullback move to fill the gap, the 15 min positive suggests the pullback would be accumulated and therefore a good entry long (for either GLD, GDX, or NUGT).

 I looked at NUGT (the 3x leveraged version of GDX) and the 1 min chart confirms the uptrend, goes negative for a pullback and pops a little in to a stronger negative. This too, like GLD and GDX short term charts suggests that gap will be filled as they so often are now unfortunately as they use to be some of the best support/resistance areas you could find.

I also checked DUST (3x leveraged short GDX) which is the opposite of NUGT, it has as you can see, a trading range (that tells us something by itself) with a leading negative divegrence and that pulled DUST back, but the positive divegrence on the 1 min chart suggests the gap down will be filled, the mirror opposite of GLD, GDX and NUGT so I think that's good confirmation.

I would not trade against the highest probability/strongest charts and try to short any of these for a gap fill, I would however set alerts for price moving toward filling the gap and we'll confirm our expectations and I think we'll have a very strong long position.

Quick Market Update

Since I'm getting ready to put all the captured gold, GLD, GDX and NUGT charts together in the PM post (I'm leaving silver out for the moment), I just wanted to get a quick update out. The action still looks to be all intraday jiggles, but as I mentioned before, while I wouldn't trade it personally, it can be good for other things like set ups, if we get good confirming data. Most of the time we need some movement to see what's really going on in underlying trade except for ranges as you know.

As soon as I get the gold post out, I'll do a check of currencies, treasuries, credit and leading indicators.

The SPY 1 min positive has turned the average to the upside, but there's no migration of the divergence (strengthening), the 2 min chart is still negative.

 This is the SPY range earlier, these are almost always indicative of something going on, accumulation or distribution, this one was intraday positive as shown earlier and lifted price rather than a lateral correction through time, the 2 min chart still hasn't joined the 1 min in turning positive.

 The Q's have a triangle like pattern (as of this capture), that will be read as a bullish consolidation/continuation pattern because of the preceding trend, however as such a common technical price pattern, it's also a great set up for a head fake move for a downside reversal, keep in mind the scale of this triangle when considering the downside move, but also keep in mind we are only dealing in intraday charts at the moment.

The 3 min QQQ (remember earlier I said the Q's and DIA were the two that were not positive) is seeing even uglier action out to the stronger 3 min chart so this does suggest if we saw a breakout on the upside from the intraday triangle, it is likely to be a distribution event / head fake move and as such, a decent trade set up, but we'll cross that bridge when we get there.

 DIA 1 min was pretty much in line earlier, nothing special, it does have a small leading positive right now so I'm guessing this intraday leg is not done.

The 2 min DIA offers NO SUPPORT at all and is in fact the opposite in a deep leading negative divegrence so any intraday upside here is likely to be distributed as well.

The IWM is where there is some more interesting (still intraday) movement, the 1 min chart went positive earlier and is in line now.

This however is the same 1 min chart zoomed out to put it in to context, the area is in a leading negative position with an intraday positive inside of it, this too would suggest intraday upside will be distributed.

The 2 min IWM chart is slightly leading positive and certainly confirming for now.

And IWM 3 min is about as far as it goes. This isn't a very big deal, but as I said it may turn in to a tactical advantage or at least some good analysis.

The Index Futures are mixed sort of like the charts above, usually when there;'s a risk on or off move, everything looks similar and there's not a lot of dispersion, here that's not really the case.

Intraday Market Update

As I mentioned 2 posts back when looking at TLT, HYG and VXX, I said there's a intraday positive in TLT which is usually either a consolidation signal or an intraday correction , in this case a bounce.

Looking at the market averages, half of them have this same  1 min intraday positive feature now; the exceptions are the QQQ and DIA, however I think TLT and VXX make up for those two.

Since the intraday positives are pretty much contained to the 1 min chart, there's usually a 50/50 chance it's a correction either through consolidation (through time like a triangle or trading range) or a correction through price (like a bounce). If we were to see the 2 min and longer timeframe charts join in, the probabilities would shift dramatically toward a correction through price rather than time, but we do NOT have anything on the 2 min charts, in fact they are becoming more negative from the 2- 5 min timeframes.

Here are the charts with these signals, if anything I think they are useful to see what signals we get on a potential bounce since there's not much to consolidate, if we get continued distribution, then it may make for a lower risk, better entry price on something like SRTY or SPXU long, if not, then we know to be patient.

 VXX and UVXY with a singular 1 min intraday negative, not a big deal, but it obviously can move the market intraday, because these trade opposite the market, these are confirming signals of the SPY/IWM's positives.

TLT as mentioned has been acting like a risk on asset rather than a Flight to Safety asset lately, so the 1 min positive I'd also add as confirmation to the SPY, I'm still looking for a long entry on a pullback in TLT to $100-$102 or less.

 I said the SPY 1 min was nearly perfectly in line (Price trend/eC confirmation), and now a small leading positive.

And the same for the IWM.

These aren't strong signals, just intraday, so I wouldn't trade off them, but I would pay attention for information about the market's position here after Friday's strangeness.

Precious metals/miners update coming up.

Position Update: SPXU & SRTY (long)

Both SPXU and SRTY (3x leveraged short the SPX-500 and 3x leveraged short the Russell 2000) were entered last week as trading positions, meaning not a full size core position, but they do have 3x leverage. SRTY was entered 10/14 in very small size and added to on Friday (10/18), the draw down there is only -0.63% so nearly flat. SPXU was entered 10/16 and the draw down is -4% which is not bad in my view for a 3X leveraged asset.

I would seriously be considering adding to them, but my initial risk management plan doesn't allow for any larger of a position. I'll put out a post if we are at a screaming spot where I'd add or start a new position (if I didn't already have an active one), but this will be only if there are just unreal signals as I've already entered on what I think are good looking signals.

Here's what they are looking like now, the only thing that is missing in my view is the reversal "PROCESS", yes we can have a "V" reversal or a reversal "EVENT", but they aren't common, they aren't my favorite as they typically don't supply much support, but there's a chart I showed last night that may make this a moot point and I'll show it again in this post.

First SPXU...

 This is an intermediate term, pretty strong chart (we use to use these signals on 10-15 min timeframes for swing trades until the market became very extreme after 2012). This leading positive divegrence through the entire decline may look out of place, but remember this chart as the chart from last night will have some interesting confirming signals.

The still strong, but shorter 5 min SPXU chart is leading positive as well, you'll notice it too is through virtually the entire move down. I want to remind you how many charts I've chown you in which price moves (in this case) up on a reversal and passes the first point in which a new divergence began, that would be virtually the Oct. 9th top. 

Also note the recent, very sharp leading move up in 3C from late last week and today.

This is the intraday 1 min chart, I'd probably puyt out an additional post if this 1 min chart started to lead positive and look like the chart above where I was talking about the leading positive from late last week.

The rounding process is in place here and there's a potential head fake/stop-run, but it really doesn't look big enough to me, I'll be setting alerts for a larger stop run and that would also be a high probability entry point once 3C confirms a head fake move.

As for SRTY, the 15 min chart went negative to the left and price fell, we had a brief consolidation and small bounce and we have an almost identical leading positive divegrence through the entire decline.

The confirming charts are above in SPXU that is doing the same thing and below in the IWM.

 This is intraday 1 min action, a couple of negatives steering price lower and a leading positive, I'd like to see this 3C chart also go vertical for a new entry or add-to position. Add-to is NOT the same as dollar cost averaging, an add-to position has to be part of your risk management plan BEFORE you ever enter the first share of the position.

 Now recall the SPXU and SRTY 15 min charts and their leading positive divergences through the decline, this is the IWM so it should look almost exactly opposite. I pointed this out last night in saying for the reason I suspect the market moved to the upside, this is the kind of distribution signal I'd expect so I wasn't surprised, virtually the entire move off the 10/9 lows has a leading negative divegrence or the exact opposite of SPXU and SRTY 15 min charts, that's pretty good confirmation in my opinion.

Arbitrage Assets: VXX, HYG, TLT

Nearly all of these we saw strange behavior in Friday, very strange with the exception of TLT  (20+ year treasury).

VXX and VIX futures look to be in the reversal process which is characterized by the rounding bottom, but also 80% of the time we see a head fake move, this one a stop run and it occurred off the open in VXX. HYG still doesn't look good from Friday and TLT (I was hoping it would come down) now looks like it may, those are the 3 arbitrage assets and with VXX and Up and HYG down, that'a negative pressure on the market, TLT down however is not. However TLT's normal correlation hasn't been dominant recently, in fact it's almost been shadowing the SPX, just a little bit late, like a shadow.

It's still very early in a.m. trade to take anything too seriously, but I am wondering if VIX futures are getting ready to make a turn up, I still have open VXX calls.

 The VIX 15 min Futures positive 3C divergence and rounding bottom, at the yellow trendline would be where this morning's head fake move would have taken place, it did hit orders, but it's not as large as they often are, however if it hit enough orders and there aren't many stacked below, it's not relevant.

A 5 min chart of VIX Futures just to see the trendline and this morning''s possible head fake move.

 This is VXX (short term VIX futures) and you can see the 3C positive intraday divegrence as well as volume on what looks like a stop run on the open.

Here's a closer look at the same, the yellow arrow is this morning's open, note the volume.

HYG really turned ugly Friday, this intraday 1 min chart shows it continuing today.

More importantly the HYG 5 min chart went from accumulation around late September in to early October at the lows and has seen recent distribution, this has been used as an asset to support and push the market up as algos read it as institutional risk on and buy.

 These are the accumulation/distribution signals in TLT (20+ year treasury) and it's not looking good recently with a leading negative divegrence.

The actual 30 year Treasury futures (5 min) also don't look so good with a recent leading negative 3C divegrence and a relative negative at last week's highs.

There are some 1 min intraday charts that look like TLT could bounce a bit from this area intraday, but that's about it for now.

The TLT 1 min intraday, not a strong signal because of the short timeframe, but good for intraday movement, so this is the bounce or perhaps consolidation intraday on the TLT chart, remembering that a.m. trade is not the best time for good data, especially on a Monday, but everything here looks reasonable thus far.

 The NYSE TICK has been negative most of the morning so far, my custom TICK indicator shows the short term SPX trend coming unglued from TICK data (see the Histogram).

SPY intraday 1 min is in line as trade has been all night since the open yesterday in futures, but...

You don't have to go far to see damage, this is the 2 min chart leading negative

And of course the 5 min chart.

For now, I'll wait to see if TLT will bounce the market as the SPY intraday is still in line, still holding VXX calls and will continue to.

Morning Futures

Good morning,

Well there's not much to say about overnight futures, ES (SPX Futures) are still hovering around 1 to 1.5 points above Friday's 4 p.m. print which is unchanged for all intents and this has been going on virtually all night with the exception of a little run to +3 or 4 points.

The 5 min. 3C chart looks exactly the same, it just keeps moving down on the same trajectory.

Treasury futures for the 10 and 30 year have been uneventful. Gold has been uneventful, silver futures have shown a little more life on the upside and Crude has lost some ground.

The $USD, as we thought, is making a slow and steady march higher, that may be one of the more interesting assets and that has transferred to the USD/JPY and the other carry crosses have been upwardly mobile overnight, of course Japan had that horrible trade deficit data last night.

I'm actually kind of surprised the market is this flat considering the panic buying from last week and considering all of those ugly signals Friday, I would expect however that they were just getting started and it was an op-ex day, so we'll see what they do today. 

There's no great signals of what's to come other than the negative 5, 15, 60 min charts we already know about.

We'll wait for the initial opening panic and let a.m. trade calm down and see what's there.

Midnight Futures

Well it really isn't the US Index futures that show some excitement, ES is about 1 point above Friday's 4 p.m. close so pretty flat, the 5 min charts continue to drop negative, but we're just getting started.

The excitement was Japans trade balance miss, the 30th month in a row and the biggest ever which has sent the JPY down and guess who up? The $USD as we were expecting...

Since this is the 15 min positive of the $USD. the move is hard to see being there are so few new candles, but it's up.

As for Carry pairs, the AUD and EUR vs the JPY are up a bit, but very choppy.

The Nikkei however is up as bad news is good news in the land of the rising QE. However I'm not all that impressed wit the move as of yet, the 5 min is still negative, but again the night is young.

Nikkei 225 futures 5 min

I'm interested whether the rising  USD and falling JPY act as a positive carry or the historical legacy arbitrage for the $USD such as we saw last week says, "strong dollar=weak market.

The pair look like this.

USD/JPY 5 min chart, the positive divegrence here is mainly due to the positive $USD 15 min chart, still the pair looks ready for a turn higher, the question is does it act as a carry pair and supportive (I suspect so) or does the same Legacy Arbitrage of the $USD from last week continue, if so the stronger $USD brings commodities, oil, precious metals and stocks down.

Oil is totally flat and not giving any hint. Gold has a 5 min negative, but that's the same thing seen Friday and the reason I suspected gold and miners fill the gap, I think they are a buy or add to at that pullback. So far Silver futures are in line with 3C and not much help, silver does look pretty good tonight so far.

To show you how dull it is for US Index futures thus far...

ES is now up 3/4's of 1 point since Friday's close, virtually flat.

That 5 min negative is still there, but it's way too early to expect to see any significant changes on a 5 min chart with Index Futures open for about 5 hours.

So we'll check again in the a.m.

I would seriously take a close look at gold and GDX, set some alerts for a pullback/gap fill and I think you might get a nice swing trade on the long side in to the pullback, maybe a 2x leveraged gold ETF and NUGT for GDX?

See you in a few hours, MAKE IT A GREAT WEEK, it's yours!