Don't think GDX / NUGT / GLD move is going to hold

We've been waiting patiently for a place to open or add to NUGT / GDX long, maybe a GLD position, although that's a bit too much correlation for me.

Today's +5.5% gain in NUGT caught my attention as I haven't put out the position yet, but after looking at GDX, NUGT, DUST and GLD, I don't think today's move is going to hold, it's very much in line with the broad market and there's no confirmation in any of the above mentioned assets for today's move.

I was considering taking some off the table or maybe even a quick NUGT long, however I don't want to trade against the underlying probabilities so I think I'll just let it be for the time being, but in case anyone needs to take action, there's no confirmation in this move so I think it will fill the gap at minimum and likely return back to the range of the last 6-days.

Trade Idea: IWM Intraday FADE

I'm going with a speculative put position for IWM weeklies (next Friday the 13th) at a strike of $115, this will be about 1/3rd the size of a normal full size position.

If You Are Interested in Fading the Squeeze

I personally would probably look at puts, I don't like close expirations like tomorrow's weekly, but perhaps next week's.

The Q's and IWM are starting to give negative signals, intraday RIS is negative on all of the averages and TICK continues to fall off pretty badly. I may play a little fade trade here, I'll let you know shortly.

Fade-able Short Squeeze

This is a perfect example of a short squeeze,

 A straight line parabolic move with no pullbacks is a classic sign of a short squeeze, interestingly Treasuries are rallying at the same time.

Not that a straight line move like that needs to be confirmed as a Short Squeeze, but my Most Shorted Index (red) vs SPX (green) for today also shows it, Credit is not buying as HYG lingers.

I think this is going to be a fade-able move for those of you who like intraday fades, I know there are quite a few.

Es is already starting to put in a negative, but this is the least of the evidence.

Aside from the fact that I never trust parabolic moves as they almost always end as badly as they started. I have to wonder as well whether this is our chimney on the igloo as looking at the rounding of the SPX before this move and the .33% gain since last Friday don't really seem like a head fake move of any consequence.

 SPY is not confirming at all, this could have confirmed (2 min) nearly in real time.

DIA 1 min and..

2 min are also not confirming.

 One of the easiest indications to watch for a reversal of the move for a fade trade is the NYSE TICK index.

Note the clean channel of intraday breadth on the initial short squeeze and early warning as TICK is falling out of the channel, this would be one of the first indicators I'd be watching if you are considering fading the move.

TBT Reiteration (short) / TLT (long)

Yesterday's TBT short position Trade Idea: TBT (Short) (a way to get 2x leverage on TLT long) is looking very good for a trade, it wasn't worth it to me with just TLT, but with TBT, it makes more sense (short).

TBT short from yesterday is just going in to the green right now, we have good signals, but what I really like about the trade idea is the Channel Buster, it has a high probability of breaking above TLT's ascending channel now that there has been a break below the lower support line. The with the break below already in place and expecting a normal Channel Buster reaction (a break above the channel), we essentially have a Crazy Ivan shakeout just like we did mid-May that led to the short squeeze, it's a momentum creating play and for the first leg of the trade, it's riding the upside momentum above the channel which then sets up a short TLT trade or long TBT at that point (reversing the current position).

This is in line with longer term expectations of TLT pulling back to its base area around $102, however as you've probably heard a lot recently, the fact Treasuries (not yields) and equities have been moving together is an odd situation. The last time this happened was 2011 and led to a July break lower of nearly -20% as Treasuries ( a risk off trade) and equities ( a risk on trade) don't usually move together, however as we saw last week in 3C and courtesy of BAC confirming institutional selling last week and retail buying on the head fake move above the 3 month range (the only thing that will get retail to buy, a breakout), and the fact that the average move since last Friday has been about a half a percent (a reversal process), it's likely that there's a rotation out of equities by institutional money (and net seller can mean selling longs or being a short seller, they're all sales) and in to Treasuries.

My premise has been that Treasuries will maintain their legacy correlation as a Safe haven asset, but I have had some questions about the correlation which will only be answered if TLT makes a move back toward $102 (down).

In any case, I still like the TBT short here as 30 year Treasury futures as well as TLT and TBT all confirm the same.

30 year Treasury Futures...

 This is a 30 min chart of 30 year T Futures, note the positive divergence just as TLT (20+ year Treasury bond fund) broke below a multi-month, very clean channel, a Channel Buster.

The 30 year Treasury futures on a 60 min chart are positive as well (accumulation).

We just saw the initial channel break, typically this creates strong upside momentum that breaks above the top channel, from there (like a head fake move), it creates strong downward pressure which might be the move back toward $102 (TLT) that I've been expecting, but we'll have to wait and let the market tell us what the probabilities are.

Even on a very short timeframe and small reversal process, we have a head fake move or stop run, I showed the volume pick up yesterday on a chart as the channel was broken, that helps to create the upside momentum as long as we can confirm it was a head fake move and the positive divergence suggesting that supply was accumulated, is what we look for to prove a head fake move.

Intraday there's a small relative negative divergence (weakest form of divergence), this may cause some intraday consolidation, perhaps a pull back if the 2 min chart were to go negative as well, but... thus far...

 The 2 min is leading positive, making the timing of the trade look excellent and lowering the risk profile significantly.

Charts like 5 min are relative positive then leading positive, this divergence has seen more leading upside today already.

As for the longer term TLT action and my expectation of a move lower, the 15 min chart now has a negative divegrence, this is why I suspect we get this channel buster move and then make a strong run down, perhaps to the $102 level.

TBT which is the actual trade, short as that's the only way to get 2x leverage on TLT as TBT is a 2x leveraged inverse ETF of TLT.

 This also has a channel (descending) with the same confirming positive divergence at its lows where TLT was negative at its highs at the same time. The current divergence is leading negative for TBT which also confirms not only TLT, but the 30-year Treasury futures as well.

This is also exactly what we want to see for a TBT short position.

The 5 min chart confirms the exact same as well as a negative divegrence at the last reaction high to the far left that I didn't draw in.

The only place I can't get confirmation in TBT is on the 15 min + charts that suggest on TLT charts that TLT pulls back, but being this is a 2x leveraged ETF, those signals are usually closer to the event and often stronger and leading the non-leveraged assets as they near the event.

OIn any case, for now, TBT short still looks like a nice entry, but I don't think it will last long. A stop can be place just above reaction highs (I prefer a little wider, mental stops and on a closing basis. Of course watch where you put it, stay away from whole numbers, moving averages or strong support/resistance levels.

Opening Indications

So far the trend this morning is similar to what it has been all week, 1 min charts acting as steering divergences which tend to be largely in line, with longer charts continue to deteriorate which is right about in line with last Friday forecast for this week in continuing what was an immature reversal process which can be seen in the price action's rounding with very little in gains, the SPY has gained 0.33% since Friday's close and looks like this...

 SPY daily chart, today's candle thus far is taking on the shape of a hanging man, one of the things I'd like to see in a reversal candle is increased volume.

The intraday 1 min chart continues to act as a steering mechanism, going negative as price moves too far away from the median and going positive as price drops too far from the median.

This has allowed stocks like NFLX to do what we expected for this week as the charts look good for a short entry, it was the reversal process that was missing, that's why last Friday's forecast for this week said,

"Essentially, if you take the NFLX Trade Idea Follow Up from earlier today and apply the same expectations and the same logic, you have the market forecast in to next week, which doesn't end well for the market. However, you do have time to position, I would not try to chase the market, just be patient and let it come to you."

Referencing NFLX, I had previously (just an hour before) said, 

"As far as adding the other half, I'm going to wait, I'm thinking 1-2 days and I'll show you why....The 15 min chart is leading negative, i'd like to see a new leading low, but more importantly I think the reversal process needs at least another day or 2, the left shoulder's took about 4-days.

Today's charts...

 As has been the trend, this morning's longer charts beyond the 1 min intraday steering divergences continue to deteriorate.

Here's the same chart with a trend view.

SPY 2 min trend. Of course we saw the divergences fro last week (negative/distribution) which have carried over to this week and as BAC so generously provided, the detailed transactions last week showing Institutional money selling everything across the board except the defensive utilities sector and that was still very small accumulation, and who were they selling to? The same reason the SPX had to break above the range, RETAIL. Here's that post...3C Distribution Confirmed by BofAML

MCP Position Follow Up

After a nice start on a head fake move below $2.50, hitting stops and creating a bear trap, yesterday's action in MCP (closing with an 11.6% gain) has seen a -3.23% drop this morning.

While I still love the long equity position entered at the same time as the MCP on Tuesday of this week, Trade Idea: MCP Filling out Long Equity & New Calls Position, I was concerned about the calls and took gains looking for a new place to enter, the reason...

 This chart was the reason, the MCP reversal process was more of a "V" shaped event.

This is the signal on a 2 min chart from yesterday which reflects very short term, near term move expectations and we've seen that thus far this morning.

At the very next timeframe of 3 minutes, there was no migration of the 2 min negative divegrence so there wasn't that much damage, but enough to suggest some downside today.

As far as the longer term charts which are the reason I like MCP, there's no damage whatsoever.

If a new call option position opens up, I'll put it out there. As for the equity long position, I have no problems with it, the wider view of charts can be seen from yesterday's follow up post, MCP Follow Up

ES now retraced all initial knee jerk gains

While I'm playing catch-up on what Draghi is saying vs. market consensus (size mostly and duration of programs), ES (SPX E-mini futures) have retraced all of the ECB policy gains. As I said, "Be prepared for volatility".

After a SUPER flat night in Index futures and the knee-jerk initial pop on the "fully priced in" ECB policy announcement, while it seems Draghi has given the market some of what it wants, ES has retraced all of the knee jerk gains and is bouncing around a bit.

Market Not Loving Draghi

One of the knee jerk moves in the market was a drop in gold, GLD is now up after the Draghi press conference started by +0.65% coming from a negative start premarket.

Bonds have also reversed or are starting to and Index futures are fading.

The Euro is retracing some of the initial knee jerk drop and as a result the $USD is retracing it's knee jerk gains, which is causing exceptional volatility in USD/JPY which is now retracing its gains.

So far it looks like Draghi is failing where the only place he could fail was, at the press conference.

ECB Meets Market Expectations...So Far

After a long night of the Index futures as flat as I have ever seen them before the European Central Bank's policy revue, the market finally saw "some of the volatility " expected as the typical Central Bank knee jerk reaction took hold.

The ECB cut the Refi-Rate by 10 basis points to +0.15%, they cut the Marginal Lending Facility (Emergency lending) by 35 basis points to +.40% and in a move widely anticipated (consensus of 10 to 15 bps), the ECB took the Deposit Rate Facility down by 10 bps to NEGATIVE 10bps (-.10%) which means you must now pay your bank in Europe for the privilege of parking money there.

European money markets are expected to be hit hard as money flows out with the negative deposit rate.


The knee jerk reaction sent the Euro lower, the USD higher, the USD/JPY higher and Index futures higher with USD/JPY...

USD/JPY in candlesticks, ES purple line. Note how flat ES was overnight and followed USD/JPY on the knee jerk higher.

The policy change was exactly as expected and as many have come out this morning and said, "Fully priced in", it's the "further monetary policy measures" to be communicated at a press conference today at 9:30 a.m. that is what the market is really looking for, be prepared for volatility if the ECB disappoints.

The above actions have been fully expected for well over a week now, it has been the press conference where Draghi will communicate other measures that the market is nervous about and where the ECB may disappoint.

Here's what the market is looking for...

After those rate cut decisions, the market is anticipating further measures like stopping its sterilization program which will inject liquidity. Investors are also expecting it to announce asset purchases. Another LTRO may be on the table or at least has been expected, be prepared for early volatility.