BIDU Trade Idea Update

I don't know why I didn't do this before, but I had been reminding you after the fact that before the bounce off the 10/9 lows, I had been looking for a strong rally to the upside and this was BEFORE there was any 3C indication of it.

My reasoning was that there were "Hundreds" of shorts on my watchlists that were just so close, but they needed that extra little push and that wasn't happening without the market driving.

This is 1 of those actual posts from Sept. 25 with the exact wording at the time and this was one of many in that time period, so we were expecting this move up first based on behavior and second we started to get 3C signals confirming the behavioral theory.

The comments from Sept. 25 as this is relevant to BIDU (Bold was from the original post)...

"In fact, the best reasoning I see for a market bounce is hundreds of individual stocks themselves and the vast majority have their own signals to bounce.

HOWEVER, LETS NOT FORGET THE OTHER SIDE OF THE COIN, that's why I took the time to remind you in the post linked above, what the averages look like and they are no joke. Those aren;'t divergences off in the future, those are divergences we are in the middle of right now so now is a time to pick and chose your battles, to be patient and know when to paddle in or when to swing that bat."

These comments are from Friday Sept. 20th...

"Last night I was trying to communicate that there's almost always a goal behind a market move, like when I said, "That Bull-Flag didn't appear by chance " yesterday. I explained the reason as well, the hundreds of beautiful short set ups that are just 1-4% away from near perfect entries, but more than that, from the kind of demand (higher prices and volume) Wall St. needs to position in the size they trade, so I haven't changed my tune at all since August when the accumulation range started forming, I'm saying right now and last night the exact same thing in August that I thought would happen and thus far has."

Here's the last BIDU Update in case you want to look at more information.

 THIS 5 DAY CHART IS EXACTLY THE KIND OF MOVE ABOVE FORMER HIGHS I WAS TALKING ABOUT IN SEPTEMBER AND BIDU WASN'T EVEN ON MY LIST OF STOCKS I WAS LOOKING AT.

The ATR on the last run is significantly lower than on the previous.

A Channel Buster on a daily chart, these are the "Changes of character" we look for as they lead to changes in trend. Usually we'd see a move back inside the channel before a failure, BIDU just missed that. The yellow to the right would be the new high and yesterday which I believe was earnings looks a while lot like a churning day better known in the west as distribution days, expensive shares exchange hands from strong hands to weak hands.

 This 4 hour chart seems to show the set up for the run above resistance with accumulation , then distribution right before the Channel Buster and a leading negative since, basically it never recovered.

60 min chart, distribution at the Channel Buster, again on the breakout new high  which did have some volume, we have a leading negative signal instead of 3C at a new confirmation high,

The 30 min chart shows the same process with more detail, distribution across that entire head fake area.

The 15 min chart shows more detail as it should, distribution INTO the Channel Buster and at the area we were looking for these stocks and hundreds like it to move to.

The intraday chart shows recent and very small accumulation, it looks like just enough to help BIDU over the hurdle, the yellow would be a head fake area or failed breakout as there's distribution and today we see more on the intraday highs.

Again the same small accumulation on a 2 min chart to help BIDU above resistance and a positive this morning at the lows with negatives at the intraday highs.

The 3 min chart shows the same, it's scaled to intraday so it's more clear.

And we see the same at a 5 min chart, that's good migration for a single day. At this point I'd want some exposure to BIDU at these levels and if I can add at better levels, I'd have plenty of room.

Trade Idea: BIDU (Short)

As I'm going through the BIDU charts for the next post, it's just looking better and better.

I'm going to enter a partial 1/3rd of full size core position, phasing in with intentions to add the rest at better prices if available, this has to be part of your risk management BEFORE entering the position.

Market Update

After this I'll update BIDU which was an idea brought up several days ago.

This short term trade is very dangerous as the longer term signals, charts, leading indicators, etc are all strong enough to steam roller over these short charts, don't think they can't be steam rolled in this environment. Remember the AAPL short (full size) I had in place and I closed it to re-open it as we had some short intraday positive signals, but huge negative longer term ones. Well I got too fancy and thought I'd be ok, the Dan Loeb's top 5 came out and those short term positives were steam rolled and I gave up fantastic positioning and somewhere close to -45%.


I'm very open to any new information right now that makes short term trade more visible because it's very useful right now tactically.

However so far from what I see in the Index futures there's nothing there to say the chop or MEAT GRINDER theory isn't probable, but forecasting twitches and jiggles in the market is really something of an art that I'd rather not engage in, I want to know as much as I can and then look for the screaming signal that says, "Don't ignore me".

As for the averages, again, there's nothing there that tells me the chop theory isn't probable.

Here's the current charts and as we've seen recently there is a lot of dispersion between them, usually if you know what one is doing you can pretty much guess what all are doing, those days have past. *Later, after market I will give you as much information as I can and my best interpretation of that information and some things I think you need to know.

 My personal Russell 3000 Most shorted Index is underperforming the R3K today, no squeeze, shorts are down.

New divergences from yesterday would follow the normal path, 1, 2, 3, 5, and here 10 min. The positive did start yesterday as I saw yesterday afternoon and this is inline, maybe a bit better, the new divergences for today again start at 1 min and then out...

2 min positives yesterday and in to today's lows, price up on that small accumulation and early signs of some distribution.

***THERE'S NO WAY THAT I CAN SAY THIS BEHAVIOR IS NOT CONNECTED WITH THE TYPICAL FRIDAY OP-EX PIN, it very well could be.

 3 min also from negative and then late yesterday/today positive, price up and apparent distribution in to those higher prices, this I am guessing would be the first swing in chop, but as I said, I'll update that theory on any new information.

QQQ 3 min shows what we need in 1 chart

IWM 10 min, note the size of the accumulation is very small vs what's around it, if you wonder why I say "I think this is noise", this is why.

 IWM 2 min negative in to the afternoon, still intraday signals though

And the 3 min migration following that.

BIDU is up next...

Gold. GDX, NUGT Long Set ups and trading positions

The last time I had done fairly intensive analysis of the 3 assets which have a fairly high correlation right now my conclusion was that I'd hold NUGT (the same with a GDX or gold/GLD long) as a core/trend position.

However that wouldn't stop me from making counter trend and short term trades from a couple to days to swing.

I also felt that the long term underlying trend in gold suggests that the downtrend was coming to an end and we'd see at least a sub-intermediate to intermediate uptrend and if gold pulled back enough to widen the footprint of the base, then I'd upgrade that to an Intermediate to a new primary uptrend in gold.

Understand the most common reason for buying gold (and right now we are seeing very strong suggestive activity of such, more so than price represents) is inflation EXPECTATIONS, so if you are trying to figure out what the F_E_D will do, when, etc. that's an important pice of information. QE drove gold higher for a long time, that was based on inflation expectations with a weaker $USD as the F_E_D's printing press ran 24/7. There can be other reasons however than simply QE, as a matter of fact I do believe this would be the first and only time gold was bought because of QE based inflationary pressures which did mount and were very obvious in commodities and companies' margins between input costs and sales.

Not too much has changed in the assessment for both, but there is a decent chance for some misleading activity and a decent chance for some trades if you are pretty aggressive.

 GLD 2-day 3C chart
A) Accumulation at 2009 lows
B) An inline or 3C/Price trend confirmation
C) Where we first suspected a top due to intraday charts
D) At this point we already expected an intermediate to primary downtrend on heavy distribution
E) The current accumulation in GLD.

On a shorter timeframe of 30 min you see the strong accumulation phase and a couple of areas of gap fills we expected, 1 is filled, the larger one is the one I suspect we are heading to. There is a chance GLD widens it's base with a deeper pullback to the second white area forming a "W" or double bottom, often there's a slightly lower low, but that's something we'll deal with as it comes.

If GLD does make this pullback, I'd upgrade the future uptrend 1 notch to Intermediate to a full primary bull market. Not all pullbacks and declines in price are as bearish as they appear.

 This is the daily chart of Gold Futures, this is a significant positive divegrence confirming the GLD charts.

Again, I think you can imagine how easy it would be for a downturn to create a larger base in gold futures from here.

Gold futures 30 min showing in line price/trend confirmation at green and distribution on a smaller scale in red, but more than enough for a pullback.

Gold 5 min futures, this is positive and it looks like gold could chop around as I suspect the market is likely to do, I'd expect a wide chop to attract longs/shorts, but chop nonetheless so far with what we have.

*I mention this because ultimately it's noise, but it could either scare you out of a position, give you false confidence over a position or prove to be useful for tactical and short term trades.

 This is the $USDX 1 min chart w/ a negative divegrence, a pullback here would likely send risk assets (gold, stocks, oil) higher.

This is a 5 min chart which is more reliable, the same signal, this would be the first swing.

Ultimately though the $USDX  4 hour chart has a strong positive and that's a negative for risk assets so short term looks choppy and risk assets up and probably down in a wide range, but the more important trend looks like it agrees with most every other chart, risk assets down on a stronger $USD.

GDX-Gold Miners

 This is a 5-day chart, my view based on market behavior and signals in place is this large H&S type top is REAL and will eventually see the downside it's measuring implications predict,  THAT WOULD ULTIMATELY PUT GDX IN THE AREA OF MID-TEENS OVER A LONG PERIOD.

A) the Top,
B)The break where shorts jump in
C)  A consolidation that is actually a base
D) A breakout higher
E) A large head fake move that clears all the shorts and sets up the real leg down.

 GDX daily positive at the base described at "C".

The accumulation and first leg, but also a smaller negative suggesting the pullback we've been expecting.

NUGT 3x long GDX/Gold miners as confirmation

The same longer term base/accumulation

(4 hr. chart.)

 The current negative/pullback signal on a 15 min, but compare the accumulation period to the distribution and it too spells pullback that should be accumulated as it moves lower and make for an excellent , low risk, high probability long position that comes to you.

Very short term, 2 min intraday negative yesterday and going positive today as part of the chop (which I may change with new signals, but I'd still classify whatever we call it as trend noise),

This is not only good confirmation of gold and GDX, but all in all, good confirmation of near term market trade as well.

TICK

I meant to get this chart in too, it matches up almost perfectly with the 3C signals yesterday in the afternoon and today, many of you probably remember the 30 min trend version of this, it's ugly, but this is 1 min intraday we are looking at.

This is my custom indicator using TICK and SPY to create a histogram, you see the negative yesterday and late afternoon turning positive as well as today, remember this is short term .

This is the longer term for the last cycle or current.

First up as it should be with a new uptrend and then it starts fading

Important Market Update

I've been looking at the market all morning (the day after) and while I didn't listen to CNBC yesterday much longer than I had to, I've seen (I think we all have seen) QE expectations earlier this week go from "No taper until 2014/2015" to, "The F_E_D can never taper" and even "They'll announce an expansion of $15 bn in additional Treasury buying a month".

What a difference a day makes, today the "consensus" seems to be a taper in December.  My point is simply like the tongue in cheek prediction I made that the F_O_M_C would increase asset buying, but they'd do it last week", which makes no sense and it was not suppose to, it's a statement of how useless these predictions are.

Our best source of market information is market action itself.

I think before you make tactical plans you need to have some idea of what the broader market is likely to do, right now we are sliding down a slope so it gets a lot trickier. Retail is getting bullish again, but what do you expect, they've been brain-washed to BTD and I'm actually glad to hear it.

We all know the market can change dramatically in a few hours, even underlying trade can warn us of a change in a few hours so this is something that needs to be watched, but I saw something yesterday and I'm seeing some today, although dispersed as the averages are breaking correlation more and more.

The reason this is important is because about 2/3rd of a stock's movement is dictated by the market's movement and the second most powerful force is the Industry group which is totally at odds with the way most people pick trades, they pick the stock first and then hope the market cooperates.

MY GUT FEELING FOR THE IMMEDIATE FUTURE IS A CHOP-FEST, A GRINDING MACHINE. This is normally not the kind of market you want to trade, it's a portfolio killer.

So far I don't expect it to last long, maybe through op-ex tomorrow. 

Here are a few Leading Indicators and other things that tell me this seems to be the most probable direction (remember we have 3, up, down and sideways- no one likes to think about sideways, but it's real and it's dangerous).


*With Leading Indicators, the comparison symbol is always the SP-500 unless otherwise noted (green).

There are a few longer range charts in here, I prefer saving these for the daily wrap, but you know most of them, this is really just to demonstrate the atmosphere even with short term moves doing something different.

 Commodities intraday, not looking great, not leading positive, but this may change as currencies change trends.

This is the leading quality of commodities on a larger scale, it's the entire 10/9 cycle with commodities leading the SPX at the lows and leading at the highs. I only include this to give you a feel for the atmosphere so I'm not just leaving you with short term "choppy" (and choppy is my best guess right now based on what I see).

 HYG Credit has been pounded and it's a great leading indication for the market's important trend, however very short term...

Again these 3C charts if taken for the timeframes and the underlying trade those timeframes represent, should also tell you something.

 Intraday distribution in HYG before it falls and the slight 2 min positive divegrence that started yesterday and continues today, this would represent very short term support for the market, even if that were only sideways.

For a while it's been this HYG 60 min chart that has been perplexing as it was ready to support the market long before 10/9 and had been used in every rally before from August, finally it moves from 3C confirmation to 60 min leading negative. Many times it looked like it would do this with 15 and 30 min charts leading negative, but pulled out, now it's locked in.

Again this is to give you some sense of the structures that have been holding the market together that are collapsing.

VXX-short term VIX futures don't have the bid in them today you'd expect, but the fact they didn't make a lower low for a week also tells you something as the bid was there, I suspect there's probably some short term manipulation for the market's sake and to buy protection on the cheap.

 This is the trend in sentiment and it's not retail sentiment, it's important and it leads the market.

Again to show the broader atmosphere, this is the same indicator, I don't think it has ever been so dislocated from the market, but it goes to show where professional money has been going. It's almost a spitting image of what 3C has been telling us about the same subject.

 Yields are up today, that's short term supportive of the market, they are a fantastic leading indicator and act like a magnet for price of the market.

A longer view...

 Leading the market in August, Sept. and October whether up or down, but the current leading negative is the worst, again much like any of the leading indicators.

 This is the 60 min Yen chart, if it moves up with the 3C divergence the carry pairs move down and the market loses that support which it did yesterday and even the day before it started.

However short term I think the Yen pulls back, that allows the carry pairs to offer some short term support.

This is the EUR/JPY, you can see how the carry pair collapsed and where the market is now, however this short term 3C positive matches the Yen's short term charts so I do think the carry pairs or at least one or two will offer support.

AS OF NOW, I DON'T SEE ANYTHING IN 3C THAT SUGGESTS A COUNTER TREND BOUNCE UP AS AVERAGES LIKE THE R2K HAVE CLEARLY ROLLED, BUT I DO SEE ENOUGH TO CAUSE A DANGEROUS CHOP, WE MAY BE ABLE TO USE IT FOR SOME TACTICAL ENTRIES, BUT OVERALL I'D BE CAREFUL THE NEXT DAY OR SO UNTIL WE SEE SOME CLEARING, ESPECIALLY WITH OPTIONS.

AAPL Set Up / Follow Up

One of the things that differentiates a pro trader from a retail trader is tenacity, I won't quote him right now, but Jesse Livermore (as in of the book by his name, "World's Greatest Trader") alluded to this in one of the best pieces of big picture advice I've heard. He also went broke like Donald Trump several times, Tenacity.

A pro will take several shots at the same trade until they get the positioning they want whereas amateurs or lets say "non-pros", will take 1 sot at a trade, usually take too big of a loss and walk away from the trade idea and subconsciously they'll even avoid the stock again in the future or they'll be fixated on it like they'll get revenge. I'm not knocking it, I'm just saying it's human nature. A pro can take several shots at the same position because they keep their losses small.

I've found more often than not you can be right about a stock or a market and the difference between making money and losing it is all on the tactical side, the entry and exit.

So yesterday I closed the SECOND AAPL Dec. $535 put in as many days, the P/L for this one (the last was slightly above break-even) was...

2 contracts at a cost of $27.20 each (remember I said I wanted to leave room to add just in case) and the exit was $27.95 for a slight gain of +2.75%, but I didn't close it for that reason.

I didn't go for a regular equity short because I still have some concern with the longer end of the charts, 30/60 min which had been perfectly in line, the 30 min and even 60 went negative at the recent high as you can see above on this 30 min, this makes me more comfortable with an AAPL short, but I'm not yet comfortable with an equity short, but a shorter duration leveraged trade, Puts, yes and that's the entry I'm looking for possibly today (for a 3rd time).

 AAPL accumulation and distribution- 30 min

The 15 min chart shows what looks like a reasonable reversal process, but this is only part of the uptrend, it's fine for a quick options trade, for an equity short, as I said, I'm not sold yet.

This is what makes me think AAPL has a shot at higher prices and why I didn't want to sit in a put during that, there were smaller signals yesterday, but ultimately its a 5 min chart, it's below resistance, it's a head fake move, volume is there, it did what it should have done so they can take this higher (form where it is now, I'm not making predictions about how high, I'll let AAPL/3C tell me that).

So that's what I'm looking for in AAPL. I'll let you know of course as always before any entry or exit, but I am really NOT sold on an equity short and really I'm looking only at the trend above this chart so duration is not especially long, thus the need for leverage.

Market Update- Looking for that "In"

Yesterday toward the late afternoon some positives for a bounce like move were building and that's mostly what I'm looking for today to set some new positions. Most all of the trading shorts set up in the last week are at a profit now, not huge, but we're just getting going.

The thing I'm worried about is any small divergences that appear can easily be run over by momentum, the reversal process is mature as you can see in the IWM, actually over-ripe in the IWM.

 That is MORE than enough of a process and I think the only reason it was so long was waiting on the F_O_M_C.

Momentum is not on the side of a bounce, my Russell 3000 Most Shorted Index (red) vs the R3K is showing a lot of downside momentum.

The NYSE intraday TICK is at extreme s of -1750!!! We haven't seen that in a LOOONG time.

What I do see that "may" allow for a toe hold, so we can set shorts in to a bounce is the Yen, it is losing upside momentum and reversing which gives the carry trades a chance, I don't know if they can compete with the momentum, but I suspect this is pack-like early fear finally building in as the longs are so margined out.

I'd watch the NYSE TICK and look for a positive trend change, I'll be watching 3C and otherwise just managing shorts that were already established (both trading and core), but there are a few I'd like to take a swing at.

AAPL is one, XOM was a core short that I closed and went long for a counter trend bounce, at some point that's going to be a short again. There are others, but first we need a little improvement in atmosphere (to enter new positions), otherwise I'm quite happy about the core and trading shorts.

Keep an eye on that TICK, it's amazingly extreme.

A.M. Observations

I've been looking at some of the data/charts overnight and checking, re-checking just to make sure I'm not overblowing some bias I may be unaware of as we all have them from time to time, but it benefits me nothing to be right about a bearish case over a bullish case, it only benefits me to be on the right side of the case for you. If that means I have to eat humble pie and admit mistakes, I'm okay with that, I'm human, I make them and probably have a fair share, but the bottom line is the weakness I see is unparalleled and its a difficult discussion to write about succinctly as years and years of bias about how Wall St. works have skewed our thoughts, so it's not just presenting evidence, but in many cases it's starting from ground zero in explaining how Wall St. works (underlying trade) and why in some ways, this time is different, but not in a good way.

I think you all have seen the dismal volume since 2009, you know the record margin, you may be aware of who provides liquidity and that they are not bound by law to do so like a market maker or specialist and they can pull the plug in an instant and seemingly have recently. I'll try to get more in to this as I have more time and try to think of ways to make it as succinct as possible.

Futures for all the overnight action are virtually unchanged if not literally from the 4 p.m. print yesterday.

China is conducting open market operations and putting reverse repos in to the system, but with a twist, a fixed rate higher than usual which gives the impression they are managing a tightening patch, it's not over as we might have assumed when they started reverse repos again this Tuesday.

Japan's Abenomics are creating inflation that he wanted, but like the US, in Food and Energy, the two places it really hurts every day citizens while wages in Japan have fell for a 16th straight month.

In Europe German Retail Sales posted a huge miss.

In the US, Initial Claims misses.

Right now though, the most important thing for us near term is planning and execution of positions while maintaining a finger on the pulse of the macro market, I don't think it will change as I haven't seen much like this except in a few Industry groups like Oil under G.W.B. and there's a reason for that which I'll get in to, but right now, I'm more interested in making this information useful.

Gold has been pulling back overnight which is exactly what we had expected with it being a buy at some point as we get positive signals. Crude is a bit jerky even as the USD is rising, also another recent expectation. All of the carry pairs are useless today for ramping the market and I think that overnight strength in the Yen is the obvious reason why so they may try an arbitrage end around, but I suspect protection will be bid making that hard today. We'll see how long the Yen can stay up.

So lets see what's on the menu...