Gold Update

First, I would reference the GDX/NUGT update, GDX / NUGT Follow Up,  if you are interested in either GLD or Gold Miners because as I mentioned, the two have a very close correlation, although I did want to keep the analysis separate. In this way you are doing analysis of each asset independently and whatever similarities or confirmation you may find, it is more objective and provides multiple asset confirmation, which is combined with multiple timeframe analysis given you a sharper edge and a better view.

This is GLD in green and GDX (gold miners) in red on a 60 min chart so you can see there's a very tight correlation.

Gold miners actually use to lead gold, however when Bernanke unleashed QE, which is printing money out of thin air, inflationary expectations rose as would be normal and gold is usually bought on inflation expectations, not actual inflation which shows you the market's discounting mechanism.

However, as QE /POMO ends this month, many small things we see on a daily basis seem to be getting back to pre-F_E_D intervention levels or correlations, so while I'm not claiming GDX is leading gold right now (it does tend to have better moves), I would not be surprised to see that old correlation come back along with the $USD's historical legacy arbitrage relationship with dollar denominated assets.

Because Gold and Gold miners have such a tight correlation, when I entered the UGLD (3x long gold) position Wednesday, Trade Idea (Swing+) GLD / UGLD & GDX Update I decided for risk management purposes that I'd enter a half size position because I am eager to see if what we anticipated or forecast as far as 3C signals go, are  actually confirmed, thereby confirming our theory as to GLD long and secondly and more importantly, since I closed the NUGT long position on July 9th I've been waiting for a deep pullback, back in to the year+ long Inverse H&S base so GDX/NUGT could build a head of steam allowing them to breakout of the long term base with follow through. 

The day we exited NUGT, , even though it was a strong move of 7.64% on the day, the intraday 3C signals were obvious in that this wasn't the breakout we were looking for. In any case, because they both trade so alike, I can't see any reason to have two positions that move nearly exactly the same from a risk management perspective.

As for gold... It is the futures charts that I find interesting in that gold futures not only confirm the GLD signals, but also seem to confirm the idea of a head fake move which is the concept of the "Igloo with a chimney", the chimney being the head fake move in a topping pattern which directly precedes a reversal (in this case it would be mirror opposite).

 The long term 4 hour YG (Gold Futures) chart shows a positive divegrence that really is defined at a range and break just below the range, this is where I suspect we have a head fake move which would be significant from a timing perspective.

The 60 min gold futures shows the same thing with more detail, also note the uptick in volume as price slips below support, stops run which makes it very easy to accumulate in size and on the cheap without anyone catching on to the position you're building.

 The 15 min chart's leading divergence at the area shows there was something unique that happened in the area.

 And the short term timing 5 min chart shows the same.

In fact, it almost looks like there was a small distribution event, letting out just enough supply to drive prices below the range where a lot more stops would be hit and the shares and then some could be replaced at much cheaper prices.

GLD Charts...

 The GLD 2 hour chart shows an overall leading positive divegrence , but what is also shows is an accumulation range in which each time price starts to rise above a certain level, small negative divergences send price lower where we see large positive divergences, in other words it looks like someone has been working price to accumulate at the low end of the range and controlling price by simple adjustments of supply at crucial times, this is what market makers and specialists are paid to do when they fill orders on behalf of large institutional clients in the stocks they make a market in.

 I just showed the 30 and 60 min GLD charts in the last update from last week, linked above, but I'll show this 30 min leading positive divergence again as it has added to the leading positive position in the area of a probable head fake/stop-run move.

The 15 min chart also gives clarity to the leading positive divegrence just as stops would have been hit as well as showing a smaller negative divegrence near the upper end of the range that was likely used to push prices below support where all the stops were gathered, allowing the accumulators to buy in bulk at a discount to where prices were a few months before.

 The 5 min timeframe is sharper and shows more detail, it leads positive at the range and just under it.

And the 1 min chart shows a positive divegrence below support, leading to a pop above support/ If this is indeed a head fake move, then out entry in both assets (UGLD and NUGT) would be near flawless.

Intraday 1 min, much like GDX and NUGT, there some afternoon weakness which I speculated would bring price down a bit and just widen out the base area (move laterally) which would be healthy for an upcoming breakout attempt.

Bottom line, I still like both and will point out any new entries that look especially interesting, otherwise I wouldn't mind owning either at these levels .

Index Futures Update

My apologies, it took some effort to get my futures charts up and running, which I actually wanted t use for the Gold /GLD/UGLD update (and will), but I thought the ES (SPX E-Mini) Futures update would be useful in understanding multiple timeframe analysis and multiple timeframe based trends.

Lets start from the view point of our tradable nearest term trend, that would be a bounce on top of what we saw last week, which has fallen apart since Friday for the most part.

 This 60 min chart of ES shows a negative divegrence at the head fake , failed breakout attempt after a large August cycle stage 3 top. The failed breakout led to stage 4 decline and as you can see, the lows we bought last week. This divergence suggests there's still gas in the tank for a move higher, although I still suspect we see lower prices first to strengthen the base, really the same thing I've been forecasting since last week.

If we go to the stronger, longer 4 hour chart, this is a different trend and story.

 Here we can see the distribution leading to the July decline and how much worse the distribution was through the August cycle to the right, so the larger picture beyond the bounce referenced on the chart above this one, is very bearish. The most probable timeline would be the current base gets a bit stronger, bounces and then falls to a new low as seen above.

 The ES 15 min chart shows the positive divegrence at the lows we bought last week as well as the negative divergence from Friday and the reason we sold those longs and entered 3x leveraged shorts for a pullback. This 15 min chart suggests a very strong probability that the anticipated pullback will materialize. 

This is the 5 min chart, it is also the minimum timeframe which must have a divegrence for me to trade and the current negative divergence for a pullback is very visible, this would eventually bleed over to the 15 min chart so if there's improvement in to lower prices, we should see it migrate to the 15 min chart, but for now, it is still suggesting more downside.

Intraday 3C has been confirming price with only a couple of small intraday divergences, one in the morning on the gap up in the cash market sending prices lower, an afternoon positive and slight bounce that is now going negative.

Really this is just about what we've been looking for, I just thought it might be easier to understand in multiple timeframe analysis

GDX / NUGT Follow Up

Although Gold has a close correlation with GDX (Gold miners), I'm going to keep GDX and Gold updates separate, but you may want to consider both as far as the bigger picture.

Friday we entered a "Swing-plus" position in NUGT long (3x long gold miners), Trade Idea: (Swing Plus) GDX/NUGT and the charts, GDX / NUGT . I'm also going to leave the longer term GDX/NUGT charts to Friday's update linked above.

We have been expecting a GDX/NUGT pullback since July, the idea was that this would be a constructive pullback that will build strength to try to break out of the year plus base which it just barely broke above on weak 3C charts so we exited NUGT long the very same day it broke out of the base on 7/9, a day with a +7.64% gain (our total gain on the two exits +40 and +50%) and it turns out we were as close as you get to the perfect exit as NUGT didn't do anything for months as we expected a pullback which finally came in September.

I still suspect this is a strong and strengthening pullback that will make a significant move higher, I also believe we got in near Head fake lows. The case for a head fake move is better made in GLD, but their correlations are so close I think it's reasonable here as well and volume tends to agree.

 As mentioned, the longer term charts are linked in Friday's post above, they haven't changed and look good.

This 15 min chart is a pretty serious timeframe and tight around the yellow box is what I suspect is a stop-run/head fake move. The divegrence in the area would make sense if that were the case as well.

The more detailed 5 min GDX shows the same accumulation of a move below support/stop-run which is an excellent timing signal for an upside reversal.

 Note NUGT (3x long GDX) has a 5 min chart that looks exactly the same at the same potential head fake move.

Intraday however, after excellent 3C price/trend confirmation, we have a small negative divegrence. I suspect even though it is likely a head fake move, it is not yet wide enough (same concept as the market) for a base that can sustain a strong move, thus some light distribution and a pullback in to accumulation would make sense.

Here's what I mean...

The base area is not proportionate to the preceding downtrend on a 60 min chart (the pullback), so I wouldn't be surprised to see some lateral price movement in the area, even though it looks good from the 3C charts, the base is what's missing. I intend to hold NUGT long and if I see another opportunity for a low risk/hiigh probability entry, I'll post it.

Remember to keep the GLD update in mind when considering GDX/NUGT and vice versa when considering gold.

Leading Indicators & Market Update

So far our short term 3C signals and Leading Indicators have been right on allowing for some decent small trades in both directions that probably wouldn't be worth taking if they were only in one direction, for instance, in addition to the 5.66% total portfolio gain (personal portfolio) for last week, since adding NUGT Friday and switching back from URTY and TQQQ to SRTY and SQQQ, the additional TOTAL portfolio gains for today alone are +3.18%, that's a larger gain than 80% of hedge funds make on the year. For me it's not boredom because overtrading is very dangerous, it's good signals that have good confirmation and the ability to create additional gains that keep compounding.

Our intermediate or sub-intermaditae analysis has also been right on, lets call that the August cycle and both 3C and Leading Indicators (as well as breadth) have been very accurate there as well.

The SPY August cycle with accumulation 8/1-8/8 led to the deeply oversold breadth bounce we expected, but also expected to see distribution and a failure of the bounce, even the head fake move just before the stage 4 decline, these are not only the 3C charts, but the Leading indicators as well as other analysis all coming together and of course you know what our long term primary trend expectations look like (hint, not good for the market).

In any case, looking at the market's divergences and Leading Indicators Friday, I expected something like the chart below.

This is last week's lows in which we moved out of market shorts like SRTY and SQQQ and went long for a short term trade in the 3x leveraged long, TQQQ and URTY at base #1, these were 50% normal full size positions because the base was too "V" shaped and not able to support a broad move. As I said last week when switching positions, "IF" the base broadens out and creates a more stable, predictable and reliable platform, I'd go in with full size 3x long positions rather than the 50% full size. 

The move below support in yellow, representing price, is a head fake move which we see typically about 80% of the time at visible support/resistance levels, these are excellent reversal timing indications.

The pullback signals from Friday created another sharp "V" shaped reversal, we can look at this one of two ways, a small counter trend bounce that failed and the market sees lower lows for the move off July highs, for example...

For the IWM's August Cycle, the anticipated base from July 28th's deeply oversold breadth condition formed between 8/1 and 8/8, a fairly sizable Stage 1 base,  followed by Stage 2 Mark-Up, which was followed by a Stage 3 top (more evident in the SPX), followed by Stage 4 decline, a textbook cycle. 

The current bounce from last week and now pullback is in the orange box. This could very easily be viewed as a simple counter trend bounce within the Stage 4 decline phase... 

Or it can be viewed as I suspect, a short term base/bounce, probably still a countertrend move within the downtrend, but larger as shown on the second chart of this post, above.

Some of these charts, because they are such fast timeframes, likely have already changed considering the time it takes to capture, upload, write and publish the post, but you should still get the idea.

As for the 3C charts, they are doing what we expected Friday afternoon and price is doing as expected as well. *Actually at this very moment we are seeing some intraday strength causing a bit of a consolidation intraday.

 The SPY 1 min chart may be consolidating a little intraday, but overall the 3C signal is still leading negative, suggesting price move lower. The base's accumulation can be seen to the left at the white arrow.

 The 3 min chart is in overall good shape for a continued bounce which is why I said that if I didn't switch back to shorts on Friday, I wouldn't be too concerned as I suspect higher prices will prevail in the short term.

The QQQ 1 min intraday is nearly PERFECTLY in line with 3C and remains so even right now.

The QQQ 5 min is leading negative, leading price and suggesting a lower low be made. This could give us a base in the area of last week's lows and a larger overall base that can support a larger move. Without that larger base, I doubt I'd get too involved in any long positions of any size as they just wouldn't have the strength to be reliable.

And the IWM 1 min leading negative.

On the chart above (2nd from the top), I drew in some "rough" expectations of market action and what to expect. At the point this chart was captured, there were NO positive divergences and we expect to see them in to a pullback, but usually only around the area where the base will be created so I wouldn't expect to see positive divergences starting quite yet because we aren't close enough to last week's lows, they want to buy low and sell high just like us even in a short term bounce and sell short high and cover low.

What I found interesting even before some of the intraday consolidation stuff started, was Leading Indicators suggesting our expectations are right on track.

Remember these are leading indicators so the first sign of a divergence is not a signal, but the start of a signal.

 HYG - High Yield Corp. Credit, which is used for short term market manipulation is an excellent leading indicator, it led the entire August cycle and here you can see it leads the base see in SPX (green) by several days.

Intraday it has been almost perfectly in line with the SPX, but is still in a short term leading position and longer term negative position suggesting a short term bounce followed by lower lows.

HY Credit which is not as manipulated is making higher highs while the SPX was soft, this is a positive leading signal for the market as we expected to see.

Pro sentiment is not moving up, but it is holding and not moving down today.

 Our second version is actually moving up as a leading indicator.

While TLT diverges from SPX, I suspect there's short term rotation out of TLT (being sold at higher prices) and in to the market (being bought in to lower prices), again I see this as short term.

Yields tend to lead and as you can see from Friday they were leading the market lower which is why this morning's gap up failed (among other indications).

NOW look at our leading indicator, SPX/RUT Ratio, it was pulling for a lower low which the SPX made, now it is starting to lead positively and thus far the market has reacted with some backing and filling, I suspect this continues to lead positively, even if the market makes some lower lows and this indicator will once again have called market movement correctly.

And the TICK trend moving down intraday in breadth since Friday.

My suspicion is the market could be ready for a bounce in to Wednesday's earning's season with A reporting WEdnesday, however that doesn't give much time to form the base I envisioned and drew in above. In this case I'll likely be very careful, if there's not a strong base to sustain a decent swing move, I may just sit this one out until it's time to short in to price gains, the market and market breadth is too unstable to trust it without a strong base so that's what we are going to be looking for.

However as you can see, Leading Indicators are now confirming what we suspected Friday, price weakness would be accumulated to form a stronger base. We just need to see the quality of that accumulation/base.

SRTY / SQQQ /Market Update

Looking at the market, so far our forecast for this week from Friday is right on, including our new NUGT position from Friday October 3rd, Trade Idea: (Swing Plus) GDX/NUGT and switching back and forth between 3X short the IWM and QQQ to 3X long and back to 3X short.

On a daily chart of the IWM, "A" is where we were long SQQQ (3x short QQQ) and SRTY (3x short Russell 2000).  Last Wednesday October 1st at "b" we closed SRTY and SQQQ and opened URTY and TQQQ (3x long QQQ and Russell 2000 respectively) from this post, Position Management & Trade IDea : QQQ/IWM  and Friday at "C" we switched back upon 3C negative divergences and sold URTY/TQQQ and repurchased SRTY and SQQQ putting us back short the QQQ and IWM in this post, Changing positions.

While I don't usually share my personal portfolio other than to say any position I personally enter is always posted here for you first, however I like all positions I post and it's just a matter of what positions make the most sense for each individual's trading style, risk tolerance, portfolio size, etc. I never wanted to create a "follow me" website, the trade ideas are ways to express concepts and information so you can apply them any way you see fit to any asset and any trading style. However, beyond the tracking portfolios ranking which I use to track every idea put out, the only real trading effectiveness of a single portfolio really is my own which is why I shared with you that the portfolio as a whole was up +5.66% for last week alone, quite a bit more added to that today from Friday's position switch.

When I first closed my core short positions in SQQQ and SRTY, I opened a somewhat speculative size, 50% of normal full size, TQQQ and URTY (3x long QQQ and IWM) and said, "If the base gets bigger and I feel it's more sturdy to hold a larger move, I'll bring those positions up to full size".

Normally I always want my SQQQ and SRTY short exposure even in small counter trend bounces, but these signals have been too good to pass up the chance to rollover some gains and compound.

From what I see now, Friday's call for early this week (today), looks pretty good.

 QQQ 1 min negative from Friday afternoon which is why I closed the 3x long QQQ and IWM and re-opened the "Default" position, long SRTY and SQQQ (3x short IWM and QQQ). I hope this isn't too confusing.

This morning's gap up I figured would fail,  this is the concept of 3C picking up where it left off, as I said last week and every week for the Week Ahead updates, "Whatever the closing signals on intraday timeframes, the following trading day, even over a 3-day weekend, almost always honors those signals"  which is what we are seeing right now with all 4 major averages now in the red .
 I switched back to the short side Friday by buying SQQQ (3x short QQQ) and on its 1 min chart from Friday you can see a positive divegrence suggesting higher prices coming which confirmed the QQQ negative divergences that formed at the same time.

 The IWM on Friday gave a negative signal just like QQQ, thereby confirming in multiple assets that we were looking at early weakness this week

And the 3x short IWM ETF, SRTY, was giving a confirming positive divergence Friday.

 As you saw already, SPY's 1 min negative from Friday afternoon and we have been seeing the pros come out late in the afternoon as they usually do, but on an increasing basis lately.

 Although we have a negative on the SPY 3 min from Friday, the larger probability is still the larger white positive divegrence suggesting that these recent negative signals are a pullback only before higher prices which might make sense as earning's season kicks off with AA on Wednesday.

 The SPY 5 min shows the head fake/failed breakout highs to the left we had been looking for and the current 5 min larger divergence. Remember I said this "V" shaped base was not strong enough for me to commit to full size long positions, it would have to come down and create a stronger base before I'd consider a bigger long position so this pullback is the opportunity to do just that.

Remember these are all short term trade indications.

 The NYSE TICK intraday has been pretty flat, in fact it's just recently broken below this channel.

Now my custom SPX/RUT Ratio Indicator that has been 100% correct since we have been using it.

This shows where the indicator was giving positive and negative signals and the SPX on top following. The two yellow arrows are my VIX inversion indicator and I pointed out that near term fear fell Friday just like the last yellow arrow and you see what happened to price.

On an intraday basis, the indicator has been perfect thus far leading the SPX lower, however the SPX has not made a new low at the time of capture of the chart and the indicator has, as of this moment, the SPX has now made that new lower low intraday as the indicator was suggesting.

What we need to do from here is simply verify that the 5 min positive divegrence still has gas in the tank to take the market higher. I expect the averages to pullback to somewhere around last week's lows and ,maybe even a stop run below that level. As that happens, we want to watch for signs of accumulation which would suggest a larger base is being constructed and the 5 min chart is still the short term dominant signal, if that happens I'll switch back to TQQQ and URTY long at full size position, if it doesn't happen, I'll keep the current SRTY and SQQQ short positions in place.

As far as entering new shorts, I'd rather wait to see if we get a base, if so, then we want to enter those new shorts in to price strength and 3C weakness so that would likely be later in the week.

We also have MCP up 8+% today and our new NUGT long from Friday 4+% today so I'll be watching those two.

First things first though and that's determining whether the market is going to put in a larger base as I have suspected since first entering the 3x long positions last Wednesday.

Early Indications

Since Friday's Week Ahead forecast which is for early weakness this week, today specifically, it looks like we are still on track, but the 3C charts do look like there's more gas in the tank after that which aligns right with AA's earnings Wednesday as they kick off earnings.

Here's what the opening 3C charts look like, same as Friday, suggesting a pullback and then probably some more upside. So far NUGT and MCP are doing well this morning too.

 DIA 1 min still negative and looks like it will come down

IWM still looks like a pullback is coming

IWM 2 min shows the same

QQQ shows the same, but...

At 3 mins it looks like there's more gas in the tank.

SPY 1 min suggesting a pullback shortly.

And the 5 min shows both the smaller pullback being likely as well as more gas in the tank to continue a bit higher, probably in to earnings.