MCP Trade Management

MCP was a fun trade last week, we waited most of the day as it bounced around $2.53-$2.57 until we got a break of $2.50 on 6/3 and then, Trade Idea: MCP Filling out Long Equity & New Calls Position.
The next day we had a 12% move in the stock, a nice move in the call options as well, but it was time to close those out for a decent double digit 1-day gain, Taking MCP Calls Off the Table .

Since then, we've just been waiting for it to finish up its reversal process from a head fake move we expected which came post earnings. So far that is looking like an Inverse H&S bottom, but the most important aspect would be the probabilities,

 Wit a 60 min chart like this that held up and even gained on the downside move, the probabilities are solidly positive which means short term charts are likely to resolve in a positive manner. The 12% gain was nothing compared to what stage 2 mark-up would look like in MCP, I'm guestimating on the conservative side, a move upwards of 600% from here.

We closed the calls tye next day because the short term charts suggested a pullback, I held the long equity position because it was filled at such an advantageous spot, there's no point in moving it. What we look for in  a pullback is accumulation...

 The 1 min chart is doing just that, from here we look for migration to longer intraday charts...

The 2 min is doing that. USually things get more serious around the 5 min chart...

And there it is.

I'm not saying this is the spot to buy if you are not in MCP and would like to be, I do think it's a very reasonable area to consider it long, but the signals could improve from here and give a slightly better entry. However, for the time being, this is what I would call a "Constructive pullback", the kind we want to buy in to.

Market Update...Getting Ugly Out There

I can't complain, this is what we forecasted Friday afternoon for this week and I'm not going to be too upset if I miss an intraday trade when my portfolio on the whole is up +3.08% vs the market's -0.81 to -1.18%

In any case, the earlier positive divegrence on the 1 min chart that was so clean and clear is now a mess, there may still be something to a bounce, but it's not anywhere near what it was earlier. You may recall in the "possible intraday trade post", Intraday Trade... I talked about the need for not only 1 min charts positive for a trade, but at least a 2 min chart positive.

The general feel I get from just about everything except the DIA (which I'm not interested in trading) is that there's negative distribution/migration.

Take a look at the charts, there may still be bounce trade that may shape up before the EOD, but as it stands, things got ugly quick.

 This is the 1 min chart, but by now, the 2 min chart should have gone positive for the SPY...

The 2 min chart is in line intraday with the decline, a far cry from positive, so at present, NO TRADE, but I'm glad I have my SQQQ, FAZ, NUGT in place.

The SPY 5 min has added to the downside leading negative today, this is an institutional timeframe, the first actually and the fact it's deteriorating is not good, especially in to downside (they don't usually sell in to downside).

The QQQ 1 min that was nice and clear as a positive has been run over and in now in line with the decline. If there's negative migration, we should see it soon.

QQQ 2 min positive, run over and heading for in line like the 1 min, thus far, NO TRADE, but again, I'm very happy to have held SQQQ.

And the 3 min chart is seeing the start of bleed through migration from the 1 and 2 min charts.

The 5 min Q's have added to the downside divergence just like the SPY. This isn't coincidence or random 3C noise.

 And the QQQ larger picture, we have the reversal process that I said we'd be expecting this week from last Friday as the upside momentum that "seemed" bullish, was the change in character that precedes changes in trends, the trend has CLEARLY changed since last week (remember there are 3 trends, up, down and lateral).

IWM 1 min is in line, but this isn't where the trading divergence was for a bounce.

It started on the 2 min, but as you can see, RUN OVER.

The more impressive was a 5 min positive, but again, RUN OVER, NO TRADE HERE.

THE DIA is the only one looking somewhat decent, 1 min'

 2 min

and 3 min, but I'm not very interested in it and the divergences here vs all of the ones above, just don't put a bounce trade on the right side of probabilities.

If you have entered shorts in to this head fake move, enjoy the day, I am.

GDX/NUGT Follow Up

Here are the charts and the reason I decided to just stick it out beyond the AAPL lesson which was a painful one, to be making the case for so many months for a massive decline as AAPL hits new highs, to be in place with a short and to lose that short to try to get a 3% better entry!!! This is when no one could say anything bad about AAPL lest you be treated like a leper.

 First off my minimum targets for GDX are $34-$39, in all honesty, I expect a lot more from them , as in primary bull market, but I'm just using the price pattern implied target.

 I'm not entirely sure which base pattern to go with, an inverse H&S base?

Or a Cup and Handle base?

This is what the 3-day 3C chart looks like, note the Complex Head and Shoulders Top to the left (complex because there are 2 left and right shoulders). There's clear distribution. The numbers are the 3 places I'll short a H&S, the top of the head, top of the right shoulder/s and after the initial break below the neckline (which is where technical traders short these), there's almost always a move to shakeout the new shorts that predictably chase price as it breaks below the neckline, they place stops above it and tend to be shaken out of an otherwise good trade, so that's the area I WON'T short it and the shakeout is the last place I will.

The base is a good 8 months of accumulation, this is why I think a sub $40 target is probably VERY conservative.

 This would be the 4 hour chart if we look at this as an inverse H&S bottom...

There's strong accumulation at the area of the cup and it increases at the handle as it should.

Here we have a bearish descending triangle, we expected a head fake move below this since traders already expect it to break below the bearish consolidation, however the one thing I should have included on this chart is volume, it shot was up as support of the descending triangle was broken, but that supply was accumulated as you can see with this 2 hour chart. In yellow we have a "U" shaped reversal process, we picked up some shares in this area and waited for some charts to look a bit better in the mid-term 10-15 min area.

Here's the 60 min chart showing accumulation of the head fake/shakeout move which could have been some stops, I think there were probably a lot of shorts in the area as well which probably accounts for some of the recent momentum as their stop level would have been taken out this week.

The 5 min chart is in line, if I back out the longer view, it's actually leading positive in a big way.

The point here though is, "if" this chart were negative, I'd probably take the gains and wait for a pullback, it is not which tells me the pullback probably won't be that large so it's not worth the risk of missing the trade, especially if there's more of a short squeeze.

 Here the 3 min chart shows the accumulation for tis move and it falling short of confirmation, this is about as bad as the pullback gets, plus some gaps and a move that's a bit parabolic, but understandably so, you'll see below.

Back to the daily, any shorts entering on the break below the triangle where volume increased would have put stops right above that same trendline which would have been hit this week, thus short covering and a parabolic move as short covering tends to look like that.

So I'm going to hang in there, I planned this as a longer term trade.

If you are interested, I'd set alerts for a pullback and recognize that GDX and NUGT are still very low in the base and in excellent buying position, I'd rather do it though on a pullback rather than chasing.

NUGT Trade Management

I think there's a VERY high probability that GDX / NUGT pullback from here, gold as well as they have a tight correlation which I saw Tuesday and entered a GLD put position, Trade Idea- FADE: GLD (Puts)

Looking at GDX/NUGT, I think there will be a short term pullback. I have a small double digit gain in the equity long NUGT, which I was considering closing out and then re-opening at a lower level, I do want to put out an add-to post as well at the right spot and this probable pullback will likely be where we get that chance as I love this as a longer term position (LONG).

In any case, I wanted to let you know, I will be putting out charts, but I didn't want to waste time.

I have been struggling with the decision, but I keep thinking about that AAPL short that I had been waiting months for, had taken all kinds of flack for daring to suggest AAPL would ever go down and had a short set up, then decided to cover it in favor of a little bounce where I'd open the short at better prices, then AAPL dropped like a rock, ultimately -45%. For me the lesson was, "plan your trade, trade your plan" and this was meant to be a longer term play so I'm not going to mess with it. If you feel the same, you might consider a little offsetting hedge like the GLD put I mentioned above.

Charts are coming

Intraday Trade...

If we get a pullback in the averages and the 1 min chart holds up and we have at least 2 min charts positive (a 1 min only is a 50/50 chance between a move and a consolidation, add the 2 min chart and the probabilities go way up for an intraday move) , I'm going to have next Friday or maybe even tomorrow's in the money calls tickers ready to essentially play a day trade with weekly options.

I'm letting you know ahead of time because if it happens and looks like a decent set up, it will happen quickly and I'll want you to have this information already to know what I'm thinking about doing. Good signals are good signals, even if it is only a 1 and/or 2 min, with some leverage, they are worth something.

Quick Market Update

It's still early so a lot can happen, but what should happen next is a bounce intraday. All of the averages have nice, clean, clear 1 min positive divergences like this one.

SPY 1 min

Futures Update

It's a bit hard to look at intraday timeframes as everything moves so fast by the time I capture, upload and write the post, but this is generally in line with what I saw in the averages, the 1/2 min charts were largely in line so no divergence, thus this morning's Initial Claims sent futures lower with the USD/JPY / $USD weakness. There was a 3 min positive on most charts, that looks like what we may be seeing develop on some of the 1 min charts. You'll notice though after that it gets uglier and uglier from 5 mins out to 60 mins, actually 4 hours. Also you can see the positive divegrence in Treasuries (Futures).

Example charts

 ES 1 min , there's also a almost complete (the 3C pivot hasn't locked in yet) 1 min SPY positive divergence.

NQ 1 min with the weaker divergence form, a relative positive, the Q's have a similar relative positive, again the weaker form

TF 1 min, the IWM has no 1 min positive so the very small, very weak one here is in line with the IWM for the moment. There are some positives on slightly longer charts as already mentioned, around 3 min mark.

USD/JPY negative right in to the Initial Claims (8:30 a.m. EDT) release, sending USD/JPY just below the BOj's line in the sand at $102, it's likely they'd lift all offers to defend $102. It does apear there's a 1 min positive here.

And the $USDX also has a 1 min positive. I don't know if this is anything more than defending $102 and not letting it slip, it seems to be that, this is what I expected yesterday and thus far through the overnight session $102 seems to have been defended.

As mentioned, you get in to the institutional timeframes and things go downhill like this ES 5 min

Or the NQ 5 min (NASDAQ Futures)

TF has a relative positive 5 min, there's something similar on the IWM, I'm not sure it will hold though, however it wouldn't be uncommon as there's a 3+ day downtrend in the Russell 2000 futures/ IWM so a relief bounce wouldn't be uncommon.

Note that this is all this week, Friday at near the close we were looking for upward momentum to die and the resolution of the head fake move to begin, I'd say this is a pretty good start as this is all since Monday.

 The further we go out, the worse it gets, that's where the probabilities are and they effect the probabilities for resolution of shorter term charts, take this ES (SPX E-mini Futures) 15 min leading negative

Or NQ 15 min (NASDAQ 100 Futures) in a flat range leading negative.

And further out, even worse, TF / Russell 2000 futures leading negative.

 60 min NQ (NDX) leading negative, note the flat 4-day range and RSI declining as well, this is the one chart I mentioned yesterday that would be ripe for a head fake the longer that range persists.

As for the "Flight To SAFETY" Trade, Treasuries, it looks like it will be back on which should benefit out TBT short (essentially long TLT 2x).

 5 year futures are leading positive (30 min), these are the yields I use for Leading Indicators that work so well, so a rising 5 year bond would send yields lower which tend to pull the market toward them.

The 10 year is the most mediocre, but it's positive out here on this 30 min.

And related to TLT, the 30 year bond is leading positive with a flat reversal process in place. If you like the idea of the TLT long trade, I actually used TBT (the inverse of TLT with 2x leverage) and shorted it, essentially giving me a 2x leveraged TLT, which you can get in ETFs, but the volume is so dismal I wouldn't mess with it.

This Week's Scan Completed

I just finished my scan of the Russell 2000 as I did last week, Results of Last Night's DeMArk (inspired) Custom Indicator Scan

Like last week, the Sell Candidates/Signals Far outnumbered the buy candidates. Last week is was by a margin of 10:1, this week by a margin of 76:1, this brings the two watchlists to a ratio of 16:1 when adding both scans to my watchlist and gives me 498 sell candidates and 31 buy candidates, in other words I have a lot of work to do.

Here's an example of the signals for the scan (chosen randomly as it was near the top of the alphabetically sorted list) ...

AVNR buy/sell or sell short signals (green and orange respectively). You can see the signals which are a custom indicator I created based on the DeMark principles, are quite accurate.

A.M. Update

Last Friday afternoon we expected the start of the unwind of the move above the 3 month range, a move we expected to be a head fake move. Yesterday the Dow-30 saw it's largest loss in 3 weeks while also putting in a bearish reversal confirmation candle, although I'd prefer to see more volume. I also believe that there's a proportionality which I explained early yesterday in two charts, here's the post...Opening Indications 

With the exception of 1 of the major averages, the rest have largely seen reversal-like candles all week, in other words, the increased rate of change to the upside we saw last week when we called that a "Seemingly Bullish change in character, that often leads to a change in trend" actually did lead to a change in trend, thus far it has been lateral with a bias to the downside, which goes back to yesterday morning's post regarding the reversal process's proportionality, Opening Indications.

 Being the Dow saw the largest loss in 3 weeks, what that means to us is that the Dow saw the largest loss and largest change in character since the anticipated head fake move above the range and various resistance levels began (yellow arrow). Note the Dow's daily candlesticks for this week, a bearish Star, bearish Hanging Man and a large bearish down candle closing near the lows of the day with very little lower wick.

I heard all kinds of reasons for the market being down yesterday as I had to make a long drive last night and just happen to be listening to several news stations, everything from China's failed bond auction in the overnight session Tuesday a.m. to Iraq, to the Budget Deficit, HOWEVER, AFTER 2+ WEEKS OF SHORT SQUEEZE, HOW COULD WE FORECAST LATE FRIDAY THE START OF THE UNWIND OF THIS MOVE?

Granted, few other people have this chart, the QQQ seeing almost immediate distribution as soon as resistance is broken, the same place retail demand picks up and gets bullish after 3 months of chopping sideways, it's pretty clear as was expected that Institutional money used that demand (as is the case with most upside head fake moves) to distribute in to, in to both higher prices and the volume that comes along with that demand. After a chart like that, you have a pretty good idea of where the probabilities are going to take you, but we already knew that before this started around the first and second week of May. The probabilities being solidly in place...

Remember, if you haven't seen the chart already, the 3C daily of the Dow 1929 pre-crash and the Dow now shows a much worse chart now than 1929, this is why I believe we have a historic opportunity in front of us and one that no one alive has ever seen. The market is actually ripe for it being this entire rally since 2009 lows is the equivalent of a gingerbread house built on the sweet sugar of the F_E_D, not on the rock of solid economic recovery and via a mechanism that was used before the 1929 crash, QE! At least in the 1920's QE produced a nearly decade long recovery, this is a jobless recovery if it can even be called a recovery.

Speaking of the F_E_D...next Wednesday at 2 p.m. the F_O_M_C makes their policy announcement. If you have been listening to the multiple F_E_D speeches of late, they have a single theme, "Concern for the market,concern for the lack of volatility" or you might saw complacency with the VIX just having touched a 7+ year low. The F_E_D can't come right out and say, "Stop buying stocks, the market is at a worrisome area", but they can hint at it and they have been. However it "seems" the market is ignoring them, so the F_E_D unofficial leak, mouthpiece, Hilsenrath from the WSJ made the point a little more bluntly than the F_E_D can in the WSJ. I'm not convinced that the market isn't listening by the looks of charts like the QQQ above, but I'm convinced retail isn't listening which is perfect because they always are left holding the bag at the top.

I wouldn't be surprised if the F_E_D pulled a hawk out of their hat Wednesday. Rumors are already circulating that they will increase the taper from $10 billion to $15 billion, it may be something other than that which they say or it may be something they don't say. Smart money redlines the policy announcement and will react to even the change of a placement of a "comma" as it can change the meaning or outlook.

As far as yesterday, there was a dual Dominant Price/Volume relationship, Close Down / Volume Up and Close Down / Volume Down. This has no next day implication for the close unlike a single dominant relationship as these two actually contradict each other for next day close probabilities, but remember the reversal process I drew out yesterday morning, again right here....Opening Indications

Several Leading Indicators have small positive intraday divergences, these are typically a small blip in a much larger bearish leading indicator, but it is one reason I decided to close IWM puts and look for a better entry and move them out to July.

SPY closed largely inline on intraday charts except the 3 min which it left a relative positive divergence (weaker form of divergence) at the lows from around 2:30 yesterday, there's nothing on the 5 min chart so it's not anything I'm too concerned about, but would (if it fired), look pretty much exactly as I drew the proportionality of the reversal yesterday morning, linked 3x above. At 5 min and beyond, we are deeply leading negative. I suppose this falls in to the category of, "While we know the probabilities and which way to be aligned, WALL STREET WON'T MAKE THIS A CLEAN, CLEAR REVERSAL, they'll continue to condition retail to buy the dip and seemingly reward them for it right until the moment the market crashes through the multi-month range support. This also "could" give certain assets like PCLN, the time they need to finish their set ups as they will fall staggered on different days.

The QQQ and IWM intraday (charts) are very similar to the SPY, the DIA is still working on the divergence it started yesterday after falling in line with short term leading negative divergences on 1-2 min charts.

Falling in line with the above, the Index futures are nearly perfectly in line this morning on the 1 min charts, they are close to in line on the 5 min charts with a negative bias, however the 15, 30 and 60 min charts have a sharper leading negative divegrence so again this fits right in line with yesterday's drawing of the reversal process as found in yesterday morning's post, Opening Indications.

The USD/JPY, as expected, seems to be getting help from the BOJ as they don't want to see the Yen rise much and will likely draw the line (as noted yesterday morning) right around $102, where the pair has been lingering all night and this morning.

A couple of assets that do look ready for a move are Treasuries, the 5 year Treasury futures especially which means yields would fall and pressure the market negatively, the 10 year also has positive divergences, not as defined as the 5 year and 30 year and the 20+ year Treasury ETF, TLT also has positive divergences which should help out the short TBT position. This will be interesting to see what the correlation is and if it continues to be a flight to safety as the VIX Futures are now showing clearly with positives out to 60 min charts.

Japan's Central Bank begins its 2-day policy meeting today, with tomorrow's announcement, as Abenomics has been a dismal failure, there has been talk of an early retreat from their monstrous QE program, not the stuff the market is looking for which is "MORE QE", not less from Japan and certainly not a sharper taper from the F_E_D. 

After a quick sweep through Breadth Indicators, the weak NASDAQ Composite's Advance/Decline line is falling off and out of sync with the Composite, this is the same thing that happened right toward the top of 2007. The Absolute Breadth Index is also making a worse reading, which is already worse right now than the 2007 top and the 2000 Dot.com bubble bust. The McClellan Summation Index's divergence is also at the worst reading I can see going back to 1988. While not a breadth indicator, Investor's Intelligence released their updated survey last week with the lowest bearishness among investors EVER, past lows lined up with the 200 top and the 2007 top. I'd like to look at intraday breadth on charts in the 60 min timeframe which I have a template for, if things quiet down enough today, I'll do that, otherwise I'll do it after market.

Right now the USD/JPY just took a sharp dive and took index futures with it as jobless claims printed at 317k, a miss of 309k consensus. However the 4-week moving average is down at a new recovery low, that puts us a bit closer to an interest rate hike. Continuing Claims 4-week moving average also printed a new recovery low.

 USD/JPY dropped below $102 before stabilizing, thank you BOJ...

And Index futures drooped on volume.

I'll likely spend a good portion of the day thumbing through several watchlists and re-scanning for the newest signals, as I said last week when I ran the scan, I had 10 times more sell candidates than buy candidates and of the buy candidates, a fair portion were inverse ETFs, which is essentially the same as being a sell signal.