MCP Chart follow up

This is the earlier MCP post today in which the charts we already looking very interesting, MCP Update and below are today's updated moves since.

*It seems MCP is already moving since I captured these charts, up over 4% so far*

 2 min which is more just for timing.

3 min leading positive improvement today, again more of a timing timeframe.

However the 5 min is where we first start to see institutional activity on an intraday basis, this is a wider view of the chart and below intraday.

 The area in white is what has been added today only on a 5 min chart which is quite significant.

And on a 15 min chart, nearly all of the leading positive divegrence is from today only which is very significant.

Trade Idea: (short term options) MCP Call

MCP has continued to improve since this morning, I'm going to go ahead and open an August (standard) $2.00 call position there.

Charts to follow.

Bounce Likely, Watchlist Components Telling the Story

Last week I put up some charts of HYG, VXX and TLT, taken together they work a a short term manipulation lever called the SPY arbitrage, it's really just fooling some algos in to thinking the market is in a risk on mode with Institutional risk assets up (HYG) and protection or flight to safety assets down (TLT/VXX). Algos, which despite being computers are programmed to follow certain correlations and buy or sell, they are not as smart as you might think.

In any case, after that post I put up this one showing charts I had uncovered in most of these that look like they want to bounce, NFLX, Z, P, TWTR, PCLN, AAPL, SCTY, TSLA

As I'm thumbing through my watchlists right now I'm writing down the assets that have the same look of a short term bounce with horrible longer term charts that I'd want to short in to, that includes all of the names above.

Then I came to HYG's chart and if there was more liquidity in the options, I'd be putting out an HYG call trade idea, however a short term call trade only, otherwise as an equity long, HYG just doesn't have the profit potential to make it worthwhile, however it is the signals that are telling me the story, take a look.

 The 4 hour chart is just as ugly as the Leading Indicator (HYG) which is massively dislocated from the SPX, a strong indication of a market blowout to the downside coming as we haven't seen a dislocation this large likely ever (since we have been using the leading indicators screen/layout).

In other words, HYG's goose is cooked, but that doesn't mean it can't bounce, it would just be sold in to which is why I have no put out many short trades as there hasn't been a decent enough bounce to make the entries worth while and I have been suspecting a bigger bounce is coming (mostly IWM, but HYG/TLT/VXX as well as the watchlist ).

 The 60 min chart shows the same theme over and over again across assets, indicators, leading indicators, credit, etc, as of July 1 as soon as Q2 Window Dressing was done, selling has been extremely heavy, you see it here too on the 60 min HYG leading negative divegrence, but short term...

 The top is easy to spot, but so is this 5 min leading positive divegrence, it can't begin to compete with the 60 min/ 4 hour leading negatives, but it can bounce and likely all of the assets in momentum names above will do the same as well as the list I'm still compiling to set price alerts for so I know when they have reached a target area I'd consider them shorts.

This is HYG's 3 min chart leading positive which tells me it's likely this move is close, this week. I'm looking at the options available to play a piggy back long aside from the IWM calls already opened, however keep in mind this is the smaller trade of the two it's really an means to an end, the end is the short in to price strength such as the names in last week's post linked above.

i'll add more, but the more I see this the more I think it is worthwhile to participate in, but I wouldn't fault anyone for sitting on the sidelines until these assets are in good shorting position, that's the primary trade.

I'll let you know what I find and what I decide to do as well as a list of assets I'm setting price alerts on for short entry reminder areas.

MCP Update

Something seems to be going on in MCP again. This is the ONLY long position I'm holding (personally) and I've considered over and over again taking it off to free up room for some trading, but I've had a feeling about it for a while, I think there is something smart money knows and I suspect it has to do with financing which is the key issue for MCP.

The last two options trades (calls) or the only two, have both been successful, the last one opened July 10th and closed July 14th for a triple digit gain, I believe around +120% after having been higher the day before which is why I like to get out before momentum starts to fail.

In any case, here are the updated charts and something seemingly brewing under the surface again.

 The 60 min chart has held up all of this time which is why I think smart money knows and has known something about MCP, the same way it happened in RIMM with the management shakeup, which they knew about months in advance.

"A" was the first call trade under $2.50 with MCP gain nearly 12% the next day and we closed the call the next day, I left the equity long position I filled out the same day in place. "B" was the 7/10 entry and "C" was when that call was closed for the triple digit gain, but the main thing is the 60 min chart having held up all of this time.

 The last week or so had a very defined support range so that being run is no big surprise, the positive divegrence in to it isn't that surprising either, however I don't take trades based on a 1 min chart alone, here's where it gets interesting.

 The 3 min chart's positive at the July 10th call entry and a leading positive in to the recent run below support, interesting, but still not enough.

This 5 min chart's leading positive in the flat range after the stop/support run is getting very interesting.

It has even moved to the 15 min chart which we didn't even see at the July 10th call position so I'm going to keep an eye on this, I suspect if there's a positive moving out to 15 min., then there's likely a stronger divegrence to come, but I'd certainly keep this one on the radar as things are more interesting now than they have been in a while and in a very short period of time.

Market Re-Cap and Update

Starting fresh on a Monday sometimes it's easy to forget what the trends in underlying 3C trade were last week so I want to give you a quick recap and update for this morning's opening indications which have been in line per 3C as well as TICK data, not too insane on the TICK downside, but a solid -1000 and trend down.

I'll use the SPY as the main example and fill in the rest of the averages.

 This is the SPY 5 min chart. I am now viewing the divergence at point "A" which saw heavy, immediate distribution as soon as it gapped up as a separate event from divegrence "B".

In fact I wouldn't even give divegrence "B" very much credibility if it weren't for the IWM which really had not gapped up from divergence "A" but seems to be building a larger A+B, otherwise if it weren't for the IWM, I'd not be considering a bounce to the extent that I am now which isn't to say a whole lot of good about the market, it's really one average that is an outlier and has seen the most damage, therefore is the most oversold/ However, that being said, where we are in the market, things like oversold/overbought don't matter, what matters is Wall Street's perception and even set up cycles they have invested in they will abandon immediately if they feel they are in imminent danger, that's what happened with the AAPL short we had at the AAPL highs and a bounce cycle that was set up, it was abandoned on the news the Third Point had sold its AAPL position which started the -45% , 8 month AAPL decline. This is why the extent of my long exposure has been hedging with IWM calls which I know the maximum loss and am willing to accept while leaving the larger shorts like SRTY, SQQQ and FAZ in place.

 SPY negative divergence Friday afternoon which is why I expected a gap down today as I said, "3C tends to pick up right where it left off , even over a 3-day weekend".

This is the 1 min intraday chart showing Friday's negative divegrence, although price action "seemed" strong Friday, it couldn't hold for more than a day, that's 3C's edge,  the ability to contradict price.


Right now intraday trade has a VERY slight positive, almost in line, this is not the kind of accumulation on  a move lower I was speaking of last week.

 SPY 10 min from the first accumulation point, you can see it was heavily distributed in to on any price strength above the cycle set up at the July 10th lows.

This is hardly the extent of the damage, this is the same chart with a little more context...

 10 min SPY and this really is no where near doing the situation justice, it is much worse than even what is portrayed here, but just as 3C contradicted price action Friday, the longer term or bigger picture has 3C contradicting a much larger area than what we see above, this just seems to me to be a pivotal point in market direction.

 QQQ 5 min with the 2 separate cycle "set-up" accumulation areas. The distribution after A is what tells me to view these as two separate events, only the IWM looks like 1 event.

Furthermore the accumulation at "B" is already nearly spent as distribution Friday was heavy in to the bounce.

QQQ 2 min Friday afternoon and the reason I expected the market to open weak Monday

 Intraday the 1 min QQQ is almost perfectly in line,  again this is not the accumulation in to lower prices that would tell us something about the market preparing for a larger bounce, it still may come, but it's not there as of yet, so far just 3C confirming the damage this morning.

 This small 2 min intraday divergence wouldn't be anything more than intraday movement, it's not the accumulation i to lower prices that tells us a bounce is high probability, it may develop further, but so far there's nothing too surprising in the market this morning and the overall weak tone persists.

 The IWM, even if it does get off a bounce of some consequence is in big trouble as we see again the power of 3C contradiction of price in to the highs,  which you should note takes place just after Q2 window dressing ends, a trend seen everywhere in breadth indicators, leading indicators, credit, etc.

 This is the ONLY reason I suspect the market has any ability to bounce, the IWM 5 min positive, remember the IWM never did bounce with the rest of the market after positive divegrence "A".

Whether this hold or not is what I'm trying to determine and lower prices are a way to help determine that, so far there has been nothing supporting a bounce as we have not seen accumulation in to lower prices yet.

IWM intraday 1 min, again this isn't much more than intraday steering divergences and not strong at all.

 This morning's TICK trend at -1000

And my custom SPY/TICK indicator in line with price action.

Thus far it doesn't look like there's anything interesting in underlying trade, it looks like the market is just confirming the weakness in price. We will see some intraday bounces I'm sure, it's way too early to expect nothing but a straight line trend.

I probably don't have to say it, but for the first time in 5+ years the market is operating as a discounting mechanism as it should as the F_E_D pulls away so any escalation in world events is likely to have some impact which is one of many reasons why I'm keeping core short positions in place.

A.M. Update

Good morning,

I'm not going to go through all of the news, just some expectations from last week and what they'll mean to us early this week. 

In Friday's Market Update / NEXT WEEK I see enough positive divergences for a bounce but said first I expect for Monday,

1.  "The IWM 2 min chart would be where we'd pick up next week as that's what we see most often with 3C, thus a pullback early next week which would create a wider base than today's "V" shaped base,  the key will be accumulation in to a pullback."

Thus far that pullback is exactly what we have.

SPY pre-market.

What I'll be looking for is whether there is any accumulation in to any moves lower, if there is, we likely bounce with the same warnings from Friday's post linked above, if we do not see accumulation in to the pull back, the market should be ready to make a lower low, either way a lower low is coming whether we bounce or not.

More after the open.

Daily Wrap

This week had a lot of big changes, many unexpected, some expected such as last Friday's call for a bounce this week, we saw a bounce in 3 of 4 averages, but a very weak bounce. I'm not sure what was more important, the F_E_D making it clear that they are going to be making moves a lot sooner and a lot bigger than expected or the fact the market has actually started discounting which it hasn't done in at least 5 + years unless it was F_E_D related as shown in last night's QE chart.

We expected a pullback in GLD and GDX, they have a lot more to go in my view, but were down just over 2% and -1.54% on the week.

Breadth was destroyed this week (and the last few weeks), as I have said, in some 15 years or so of watching these indicators, I've only seen them move like this twice, the first time was the 2007 market top.

Here are some examples...

 In green "Percentage of NYSE Stocks trading 2 Standard Deviations ABOVE Their 40-day Moving Average",  not only has this dropped significantly while the market is near tear to date highs, the percentage of stocks trading 2 SD's above their 40-day are nearly at new lows for the year!

Stocks trading 1 standard deviation ABOVE their 40-day moving average are at new lows for the year.

And ALL NYSE stocks trading above their 40-day moving average are almost half of what they were a month ago.

The SKEW Index is Still in the same elevated red zone, I saw today some other financial media outlets are taking notice of the massive dislocation between credit markets and stock markets, a major red flag and volatility, A change in character, is finally picking up which is common just before a change from 1 stage like the stage 3 top we are in with most assets and stage 4 decline or bear market. There are numerous other leading indicators also flashing the same red light.

As far as a bounce as I have been talking about since yesterday on a short term volume capitulation event and a IWM chart that has stayed positive all week as well as the positive divegrence in the index futures after the close last night, it's not anything unusual in the IWM's case, it's also not guaranteed, with the increase in volatility (after 60+ consecutive days of the SPX not making a move up or down of 1%), the last two days have seen moves in excess of 1% up and down, just look at the VIX yesterday. With an increase in volatility, you get increased unpredictability, look at the market discounting yesterday's tragic events, it didn't move at all on the sequential collapse of governments during the Arab Spring, it didn't move when we were saber rattling with Syria and Russia, it hasn't cared at all about Ukraine or Iraq, suddenly it's discounting a tragic plane crash.

These breadth charts have so much damage, no bounce, no matter how strong is going to repair them and if you think about what they really mean, they mean more and more stocks are trading lower and lower.

I think we do get a bounce in at least the IWM, we'll know more Monday as I expect a pullback as 3C tends to pick up where it left off, that will tell us a lot about whether the IWM still has it in it.

However, I'd be sure you are pretty much prepared. This is the kind of market in which the hedge fund herd breaks up and it becomes every man for himself and there's only 1 small door as we saw with AAPL's nearly 50% decline in 8 months.

All things considered, breadth, credit, SKEW, the IWM, 3C charts, weak bounces, F_E_D panic, I'd say we have already topped for all intents and purposes. I don't think chasing a 2 or 3% gain at this point makes much sense considering what typically happens next, a large gap down on some unsuspecting, seemingly normal day that takes out months of gains on the open. This is why I'm not moving any core shorts and only hedging here and there where it makes sense.

Have a great weekend, I'll likely have more on the bank/F_E_D collateral problem and the repo markets.

SRTY Positon Management

SRTY is at a decent gain (3x short IWM/Russell 2000) ) and I've been toying with the idea of closing SRTY briefly for a long URTY position to trade an IWM bounce, however looking at the charts and reminding myself why SRTY was entered (not as a trading position, but as a macro position), I have to keep pulling myself back from that idea even though it seems like a pretty cut and dry trade, so did AAPL. Instead I have decided to use IWM calls instead.

The SRTY charts are incredibly strong...

 Surprisingly there's no negative divegrence on the 3 min chart, I would have expected something here.

This is the 5 min chart and base area, even though the IWM does have a 5 min divegrence..

SRTY is in line surprisingly again. This is why I like to ise multiple assets as they will often give you additional information about the same underlying. It seems demand in SRTY has been high.

 There's a small relative negative on the 10 min chart.

However the 15 min chart is not only holding up, but in the strongest divergence of the year, leading positive.

As is the hourly chart.

This is the IWM 60 min which is what the SRTY position is really for, longer term macro trend.

And the IWM daily chart.

With the way the market acted this week, very weak on the bounce, a very weak bounce and discounting events that it hasn't since 2009, I wouldn't want to have been patient this long to miss that one morning in which the market gaps down and takes months of gains out on a single gap as most of us have seen at some point.

Z Position Management

I'm taking gains in Z short off the table, it's one I want to add to, but I figure I might as well add the entire position on a bounce and keep the current gains.

Market Update / NEXT WEEK

As I have thought all week, I think the IWM has to bounce before anything else on the downside happens. The IWM is down -6.28% for the month and almost a straight line decline, a bounce here would not be anything out of the norm.

The SPT Arbitrage indicators seem to be on board, a lot of 33C charts including a lot of momentum stocks and crowd favorite as I just posted seem to be on board and the market is simply oversold with yesterday's volume event/short term capitulation. someone on the Wall St. side had to absorb a lot of supply at horrible prices and they'll want to get out of that inventory. Almost all of this was obvious yesterday and in last night's post. The increasing volatility is typical of a market getting ready to move from one stage to the next, consider the upside rate of change in an uptrend just before it turns to a stage 3 top.

The one thing that I think you have to be very careful with if you decide to trade anything on a long bounce is the fact the market is for the first time since 2009 (other than a few brief months when there was no QE or TWIST in effect), actually discounting news , fundamental and economic events, it's the fundamental/news events that are the most dangerous as Wall st. often has no way of gathering an inside track in advance such as the downing of yesterday's passenger plane,  this is another very significant change in character.

 The IWM 2 min chart would be where we'd pick up next week as that's what we see most often with 3C, thus a pullback early next week which would create a wider base than today's "V" shaped base,  the key will be accumulation in to a pullback.

Look how long the IWM has been in a downtrend, since the end of Q2 window dressing, if that's not ironic, certainly not a coincidence which gives you information about the market's health on its own.

As soon as no one is able to see anymore, they are selling. Which is what we've seen all this week in to the weak bounce culminating in yesterday's sell-off.

The IWM 5 min also pointing to a pullback,  I have considered that this is doing damage to the base that has been in place and perhaps we don't get the bounce scenario laid out above, but I think there are too many other watchlist stocks to make that theory plausible.

 QQQ 3 min leading negative so again 3C tends to pick up where it left off, even over 3-day weekends so Monday should see the pullback and that's really the first and most important data point for the rest of the bounce theory.

I don't have very good charts in SPY and QQQ so just like IWM showed weak relative performance as they bounced (as weak as it was), we may see the opposite with IWM bouncing and SPY/QQQ acting very weak.

And SPY intraday/

I'll get some breadth charts up as that gives a very different perspective, but again, a bounce here is very normal...

 The right shoulder of the IWM since July 1st with over a 6% loss and a loss of all YTD gains. This is the pullback/base I have in mind to the right and yellow arrows as price action.

It wouldn't be any different than the decline from the right side of the head. Sometimes we watch the market too closely, that trend is obviously a downtrend, but the 2 bounces at the yellow arrows are both 5-day / week long bounces which don't look like much on a daily chart as they should be viewed, but intraday it seems like the end of the world.