TLT 20+ Year Bond Fund / Leading Indicator...

We look at a number of different assets because they are connected, bonds, equities, credit, yields, FX, etc.

For example, on EVERY 3C chart you can see this las t bounce's base in every asset we look at from 1/29 to 2/2, pay attention to TLT and it's 2x inverse ETF, TBT and those dates... Remember TLT is a longer term 20+ year bond fund and it moves opposite the market typically and it's yields tend to pull the market toward them as yields move opposite the bond, this is why it's one of our Leading Indicators.

*Let me say I'm still not sure of how I feel about the longer term TLT charts, they were strong through December as bonds outperformed stocks last year, but they have definitely seen their longer term signals deteriorate badly which has to do with a rate hike, but we are looking at this as a leading indicator and shorter term so we need not worry too much about it, it's just not the long that it was last year.

Note the dates 1/29-2/2, TLT was topping, negative and then rolled over as the market was basing there and then bouncing. The current leading positive divergence in TLT suggests it's ready for another turn, this time up which means long term yields should move down pressuring the broad market as well.

 This is the actual 30 year Treasury futures, also with a similar leading positive divergence as the ETF for 20+ year bonds above. I like to get multiple timeframe and multiple asset confirmation whenever possible, it's a stronger case.

TLT's 2 min trend with the distribution signal right at the market base of 1/29-2/2 and a "W" like base here, usually I'd look for a head fake/stop run just below support at the white trendline, that's where I'd consider something like TLT for a call position.

TBT-2x short 20+ year ETF), this is the inverse of TLT, TBT the 2x short, if it confirms, its signals should be positive at the late Jan. / ear.y Feb. base and negative now.

 TBT 15 min, note the base area, the exact same as the market averages and a leading negative divegrence in place now.

TBT 5 min positive at 1/29-2/2 and in line on the uptrend, negative now.

And the 2 min trend, positive at the same base area, negative at the same place now.

There's good confirmation.

I'm not a huge fan of TLT right now because of the problems with the longer term charts that weren't there when we were long TLT last year, they are now, but near term, this is acting well as a leading indicator. I suppose with some leverage it may make for a decent long (TLT) or 30 year bonds, but that's not the reason for the post.

NFLX Set-Up Follow Up

Here's the initial NFLX Trade Set-up right after they posted some bum earnings and the gap target we expected would be filled which was.

With The Q's looking like they are putting in a Chimney right now and several other assets, like AAPL also deteriorating, it's not surprising to find NFLX deteriorating on the charts as well, typically the broad market is going to be the biggest directional factor influencing any individual stock followed by their Industry group's performance next.

As for NFLX charts...

 This is NFLX's last cycle on a daily chart: Stage 1 base/accumulation, Stage 2 Mark-up/Participation, Stage 3 Top/Distribution (with a Broadening Top) and then we had the gap down, likely leaving some middle men holding inventory at higher levels and then the gap up which as was discussed in the original idea linked above, "Perception is all that matters", in other words, NFLX's not so spectacular earnings and price's reaction had almost nothing to do with actual earnings and everything to do with the perception of earnings that NFLX's price action dictated, which in my view (as the set-up was already there before earnings) likely had more to do with allowing the middle men trapped with inventory at higher levels from the gap down, to get out, this is why we were looking for at least a gap fill.

To the far right is a "P" for a parabolic move, as you probably are well aware, I never trust them in either direction, they tend to fails as spectacularly as they start (in either direction) and they are often changes of character that are red flags like a Channel Buster.

 Here's a closer look and today's daily candle is not looking great, I'd like to see that hold in to the close and volume to rise above yesterday which looks like it will no problem.

This is the 2 hour chart that shows a positive divegrence before earnings, there was a set up here to move NFLX higher and I think it was going off no matter what earnings were, but before you can even read the earnings report, price flying to the upside sets the perception of earnings, even if you had time to read the full report which was not impressive.

I said in the original Trade Set-up that I'd like to see this 2 hour chart go negative, I wasn't sure if it would, but it has.

As for the longer term 30 min trend since the gap, this is the kind of 3C chart I look for. You can squeeze information out of any chart, but it's the ones that are jumping off the page that have the greatest edge, the ones I don't ignore and it should take less than a second to see it on the chart, that's how obvious the edge should be.

On a 15 min chart since NFLX went parabolic at the yellow arrow, you can see what the 3C reaction has been, not one of support, but distribution, I don't think NFLX was in a good place to begin with as there's a large Broadening Top, but you still want the best tactical entry even if you understand the strategic probabilities are strongly skewed in favor of one direction or another.

It's just a bonus to see the stages playing out as they should and have these charts confirming.

 Part of multiple timeframe analysis is having signals line up in multiple timeframes, what I call, "A full house", often these shorter charts that aren't particularly strong, are the most important at the end as they are the best indication of tactical timing.

Intraday NFLX doesn't have much support here either which is what I want to see in to a parabolic move.

The probability that QQQ is making a "chimney" on the Igloo/chimney" top formation is a bonus and the fact NFLX's relative performance on the day is off, is another bonus.

I'm going to bring the NFLX equity short tracking position from half to full size, which I view as a longer term trend trade.

NFLX About There

For those who have been interested in the NFLX (bum) earnings based trade set-up from late January, waiting for NFLX to come to us, along with the broad market most importantly, I think we are just about there and I'll be increasing the size of the 1/2 size NFLX tracking position (equity short).

I'll have charts out in just a few minutes, but it's looking a lot more like what I was hoping to see.

AAPL Management

I'm going to bring the formerly spec. AAPL Put position in the tracking portfolio up from speculative to full size in March 20th / $130 puts Trade Idea: Short Term Options) AAPL Puts from earlier in the month.

Here's why.

I think the Q's are making an igloo w/ chimney top here...

 This is the rounding portion of the Q's cycle of the 2/2 lows, the yellow would represent the "Chimney" in the commonly seen Igloo/Chimney top as posted earlier (both in bottoms and tops).

The Q's also have no support, even on a short term 1 min intraday chart, the easiest chart to confirm which it is not.

The same is happening in AAPL as well, but it's price performance is not even getting off its belly.

 Here's the bigger picture in the same chart, the rounding reversal process.


And a slightly longer , bigger picture...

And the intermediate term chart's bigger picture.

AAPL is far from my favorite short, but for a leveraged position with liquidity, I do like this set-up, especially if the Q's fail from here in the next day or so (tomorrow is op-ex). This is exactly the kind of discount (of pouts) and timing indications I prefer for option positions.

UNG Nat Gas Update

The EIA Nat gas report was out today and despite an unseasonably warm start to the cold Fall/winter season, things are definitely picking up to unseasonably colder, Natural Gas supplies though, as revealed today in EAI's natural gas report only saw a draw of -111mm bcf vs last week's fall of -160, even with the draw, supply is above the 5 year average.

I think as posted on the 10th and yesterday that there was a head fake stop hunt in UNG below $14 and we are technically at a bullish ascending triangle which would suggest an upside breakout, the longer term charts are there as support, but looking at some of the shorter term NG futures charts, UNG like USO, also looks like a stop run first is a higher probability, as well as a better entry, less risk and stronger timing, although from a broader perspective, I have no problem holding UNG here.

 Daily UNG 3C chart with the stop run (yellow) and a positive divergence at the head fake/stop run

It's for this reason and charts like this that I don't mind holding UNG long here, but I suspect for new or add to positions there's probably a slightly better entry.

 While not textbook, on this 60 min chart the form of an ascending (bullish) triangle can be trraced out, the naural stop run would be below lower support, also at the psychological whole number of $14.

Today's churning bars with long upper wicks (60 kin) on heavier than normal volume suggest near term churning and a likely pullback, $14 or below would be ideal for letting the trade come to you with a better price point and lower risk.

 Long term charts look great for UNG like this 60 min which is why I wouldn't mind holding UNG long here and now.

The intermediate 10 min chart is the same.

At the 5 min chart we get our first taste of a negative divergence recently that looks like a pullback below the $14 level.

Futures charts don't have the same history on TOS, so their timeframes don't mean the same as the ones above, but in looking at them, it seems a pullback below $14 is probably likely and the sweet spot for new UNG long or add to positions.

 The 30  min natural gas futures chart suggests a pullback as do the 15, 10 min and others.

 This 7 min chart is near term so it would seem like if it were going to happen it wouldn't take long to start.

Again the longer term UNG charts are heavily biased to the upside, but that doesn't mean a near term pullback is out of the question, in fact they are usually hand in hand.

So I'm setting alerts for UNG< $14, that's where I think it has the highest probability set-up and the trade comes to you on your terms and has to prove itself first before any entries.

USO Update

In the USO potential trade set up for a second leg higher, the last two posts probably set it up best, the first from Tuesday, USO Update and the second from yesterday, USO Follow Up.

One of the areas that was a potential stop-run set off a lot of alerts for my system this morning, that would be...

 The break below the bullish ascending triangle,  this is just another example of how Technical Analysis principles, with a bullish consolidation price pattern, are used against technical traders because of their rigid adherence to technical concepts, it makes them predictable.

The stronger and probably more likely move is below the wider rectangle, this would also be a stronger and more profitable set up for a new leg higher.

Volume is up today so that means , "Pay attention", however it does not mean that the daily candle we have right now is what we'll have by the close which is what really matters.

Here's where the volume has come from so far intraday, not a lot of it has come from stop runs, only on this morning's gap down, that's where the set up is, hitting a big group of stops and accumulating on the cheap sort of like that mistranslated Japanese game's taunt, "All of your bases are belong to us ha ha ha ha!", in the market it's more like, "All of your shares are now belong to us ha ha ha !"

As for the other indications...

 Intraday there's support both in USO and Brent futures (/CL), however this is a 2 min chart, there's literally no base other than this morning's intraday lows and thus far price has filled a gap, not uncommon.

 It's when we get to the 10 or 15 min charts that we see not only the base/accumulation for a USO move higher, but also the pullback/negative signal to the right which does not look resolved and this is a much higher level of underlying money flow.

I know equity traders don't like to be compared to gamblers, but there's a similarity, however it's not as bad as it sounds. The typical Las Vegas vacationer is gambling 9 times out of 10, a professional card player knows what the odds are of a certain hand coming up, they know what cards have already been dealt and therefore they are making an educated guess based on probabilities, don't fool yourself, the best we can do in the market is make the BEST educated guess as to probabilities which is why trading is otherwise known as speculating, the only sure thing is surely illegal.

Based on the chart above, I think you "could" enter USO here, if you had the tolerance for drawdown below the $18 level and the ability to hold, the probabilities would be you'd be rewarded, you'd also most likely be jumping in early and not at the best price or lowest risk.

The flip side of that coin is you miss the boat entirely if you're not right and decide to wait it out a bit longer. However from a probabilities standpoint and from a risk:reward standpoint, I think $18 has to be broken and in that area you'll find the highest probability/lowest risk position. So you can either take a pair of Jacks here or wait for a full house below $18 and have the ability to know whether or not it is a full house (confirmation of the 3C signals on timeframes like the one above).

From a probabilities perspective...

The 2 hour chart which went negative and is now positive suggests a high probability move higher, but as to where the best entry is and the most timely, I think the probabilities are highest below $18 based on what I see right now.

This is where fear and greed come in to the decision making process, the Fear and/or greed of missing the trade vs the higher probability/lower risk position under $18, I'd rather go with a probable full house than a pair of Jacks, I think that Full House is likely below $18.

Market Update

I almost have to laugh at the brazenness of the Greek government, but it's actually nice to see David stand up to Goliath.

After the Euro-group/Germany rejected the Greek proposal for a 6 month bridge loan earlier today, the Greeks came back with an ultimatum of their own, "Either accept or reject our proposal", the thing is, just hours ago it was rejected, that's what's kind of entertaining about this new Greek government, what's even funnier is to watch the market respond to the news which I don't think will be well received by the Germans, especially considering that folding here could embolden countless other far left anti-establishment groups across the EU, something I think many people don't give enough credit in the decision making process, the EU can't afford to look like they are being pushed around by the "Beggar".

In any case, here's the morning update/charts, as ridiculous as the Greek ultimatum is, although done for a specific theatrical and negotiating purpose (We won't give any ground, but if we do, you better take it because that's all you're going to get), just as ridiculous is the market's pop on the news. As Goldman has said in analysis, they are now in the very red danger zone (every player in this drama).

 The SPY intraday chart shows no support for the move off the Greek Ultimatum to the EU.

This is the rounding top/reversal process area for the SPY, one of the common price patterns for such a reversal is what we call the "Igloo with a chimney", which is a rounding top and to the right of the chart, a small failed breakout from the rounding top forming a chimney looking pattern as drawn in above, this chimney is the best timing indicator for a reversal in the reversal process, it's where I'd enter put positions, not just shorts. 

Sometimes we don't get them, but they are just as common at bottoms (mirror opposite) as they are at tops, for instance,

 Here are a couple of rounding bottom/tops in the SPX's 2015 range, the first two were just rounding, no chimney, the 3rd, the base to the current cycle, has the chimney or what is otherwise a stop-run head fake move and it happens just before the reversal process turns to a reversal.

It's a fairly common pattern, but whether we get it or to what extent is really up in the air. IF we do get it, that's the kind of move and discount on puts as well as timing, I like to use for option entries (puts) just because of the discount from the move and because of its timing qualities which are important to me in option positions.

 The Q's this morning, also not seeing any support.

And what "may" be considered a Chimney" on a rounding top, it's a bit small, but the question is whether it's effective, usually volume will tell us that. I don't see a very effective volume spike, meaning traders fell for it as of yet.

Here's a better example of a larger one off the August cycle in to the October lows, the head fake/rounding top, igloo/chimney was in September.

That one we knew was coming and made for an excellent short entry or puts.

Here's IWM this morning, very little to no support.

And since the cycle from 2/2 started, here's the IWM's reversal process.

Quick Market Update

The market bounce this morning on the Greek counter-ultimatum is silly, I'll show you the charts on a post I'm working on now, but this move isn't going to hold intraday, just look at TICK.

I'll have the charts out in just a few minutes.

GLD Next Set-Up

We had been looking for a pullback in Gold/GLD which has taken place or is still underway, but I believe it's getting close enough now that it's time to start looking at the next set-up as the trade comes to us rather than chasing it. For any gold shorts out there, you likely have more time, but probably not too much more upside in the short or better put, the upside that remains, may not be worth the volatility, I'll include a Trend Channel stop.

 This is the longer term daily chart of GLD, although it's a bearish looking descending triangle, the price pattern is too large to be a real descending triangle consolidation/continuation pattern, I think it's more likely this is a longer term base that has been forming, but we'll leave plenty of room for the market to tell us when we get there. Inflation expectations are going to have to see a drastic change in expectations if gold is to lift off.

 Here's the pullback we were calling for. Just for perspective, look how many days within the downtrend that it seemed GLD was doing nothing (2 trading weeks). Sometimes we expect things to happen much quicker than they do, especially if you watch the market all day every day, but if I remove that yellow box you'd likely only see a downtrend.

 Here's the 3C pullback signal we got in January and the pullback, but you've probably noticed a positive divergence "building", it's not complete, but it is suggesting that GLD is going to look for a bottom and start a reversal process sooner than later, thus my reason for tightening stops for GLD/gold shorts on the pullback.

In buying a pullback we always look for a "Constructive" pullback, that means it can be there for numerous reasons like strengthening an already large/strong base, but we HAVE TO SEE ACCUMULATION OF LOWER PRICES, that's the real judge of whether the pullback is constructive and worth looking at for a purchase at lower prices and lower risk.

The intraday charts are showing accumulation taking place and accruing on the longer term charts like the 10-15 min charts.

 However there's no reversal process (rounding or "W" bottom) in place and the 5 min chart is not positive, these should materialize before we enter a long position and shorts will probably want to be out of the position by then if for no other reason than it's dead money.

If you look at the second chart (daily) you'll see we are approaching a support area, there may be a head fake/stop run below that, we'll have a better idea as we get closer, if there is, I may prefer a call position as the calls can be had on the cheap.

For current GLD shorts, this is a bit of a wide Trend Channel stop, but it's on a daily/closing basis and it will lock in additional gains before price can cross it which now stands at $118.90 and locking in about an additional $.50 a day (likely $118.40 tomorrow).

So we'll look for the reversal process, but GLD has already shown accumulation so I suspect this one will come to us at better prices and much lower risk, you might want to set some price alerts near long term support.

A.M. Update

Markets in China, Hong Kong, Twain and South Korea remain closed for the Lunar New Year.

Futures slid most of the night until the Emergency Euro-Group meeting to consider a Greek proposal for a loan extension or bridge loan, her's what happened next...

Shortly after the European open the algos lifted prices on the resolution of the Greek dilemma, and that sharp peak and reversal you see is the Euro-Group, specifically the paymaster, Germany, saying "Nien!" to the Greek proposal.

The exact reason why the Greek loan extension/bridge loan was rejected, it's the same reason I've had since day one of thinking this was going to end ugly:

GREEK PLAN SEEKS BRIDGE FUNDING W/O FULFILLING PROGRAM: JAEGER

Of all of the bullet headlines, the one above is the most important as it illustrates the gulf between Greece and Europe and the fundamental issue at hand that has prevented even negotiations on a proposal, the two sides have goals that are completely at odds with one and another, the Greeks seeking to exit the bailout and find an alternative solution and the Germans who have the most vested, seeking to keep the loan on the books at all costs, even if they have to extend terms and even if the Greeks exit the Euro, that has been the problem since day 1 and why this will not be easy to resolve, the market just doesn't seem to get that sticky point as you can see.

In another bullet point headline, 

`WE HAVE REASONS WHY CAN'T SAY YES TO GREEK PROPOSALS'

They have been the same reasons throughout.