Trade Idea-SPECULATIVE GLD Long

I do think GLD is going to bounce, so this would be a shorter term trade idea. I'm going to enter the trade in to the tracking portfolio as GLD June 19th $115 calls a little under normal size to account for the speculative nature. Charts are on the way.

Taking GLD June 19th $117 Put Off the Table

I'm going to go ahead and book the gains in this position in the tracking portfolio on some signals that look like the GLD bounce I expected with USO. If I'm wrong about it, well I've booked a +15% gain, if I'm correct, then there's a new entry and a larger percentage gain available. I see it as a win / win at this point...

Intraday Market Update:SPY

In addition to the QQQ negative intraday signals posted earlier, the SPY has joined the QQQ charts. The IWM has been the under-performer while the Industrials and transports are about as far from Dow Theory confirmation as is possible...

 SPY 1 min

 SPY 2 min

SPY 3 min and with that, intraday migration to perfection. The 5 min chart is starting to feel the leakage as well...

SPY 5 min intraday is slipping in a flat range which is where we most often see accumulation/distribution

$USO / $USD Update

Since there is a strong correlation between $USO and $USDX I'm looking at both as well as Crude futures. Again, the parabolic move in USO today is not something I trust even whether up or down, but they can last longer than a day and there's nothing to say that the corrective move in the $USD is done either so I'm trying to keep an eye on all of those and determine what the best strategy is and the best timing.

To give you an idea of what things look like...

USO 1 min mostly in line since the bounce signal, there's a very slight intraday negative that has formed over the past 30 mins. or so.

 USO 3 min is still largely in line from this week's bounce signal (white) which was independent of the $USD pullback signals even though they have a near perfect inverse correlation. This is the degree of confirmation I look for before I call something a "High probability trade".

$USO 5 min bounce signal. I would think that a reversal/short signal would also hit at least the 5 min chart as well.

 This is the 15 min chart's leading negative signal which occurred right at the break above the base's upper trendily, it is still the highest probability near term outcome, a move lower inside the base and some serious work to be done before a decent upside breakout will hold.

As for Crude futures...

 intraday the 1 min chart is seeing stronger 3C deterioration.

 Crude futures 3 min with some deterioration to the 3C chart today, but still a larger accumulation area. The downside signal intraday doesn't seem to be proportional to the positive signals just yet which makes me think a second day of upside can't be ruled out.

 The Cl/crude futures 5 min chart isn't far from "in line" status. Again, I'd anticipate a clear negative signal here before crude was ready for an entry (short/puts).

 And Crude futures 7 min chart is in line.

 As for the $USDX, continued downside would likely send crude higher. Once the corrective move in the $USD ends, crude should be ready for an entry.

Intraday 1 min it looks like we are just seeing typical bouncing around intraday that is part of the trend, but on a chart too short to see it.

The 3 min $USDX chart shows the reversal process I have been talking about for a $USD downside corrective move that was part of the backbone of the $USO bounce and second chance entry. It doesn't look like the $USD is quite ready to make a turn back to its counter true d bounce.

 This ONE $USDX 5 min chart grabbed my attention as it has gone from the downside corrective signal to a leading positive divergence. This "could" be the sign that the $USD is near to a continuation of its counter trend bounce, I just don't want to make a call on all of these charts based on 1 chart.

And while the $USDX 7 min chart reflects both the end tail of the positive divergence for the counter trend bounce as well as the downside corrective move, it is not as ugly as it appears.

Looking at the same chart intraday there appears to be a positive divergence starting which may be leaking/migrating over from the 5 min chart.

In any case, I think USO will give us a clear and unambiguous signal when its time. I know the feeling of impatience and wanting to jump on this parabolic move, but as I said, there's typically some sort of reversal process and although the gains for today may be exhausted, a second day higher can't be ruled out yet based on these charts.

Trade Idea: SPECULATIVE QQQ Puts

Based on the Quick Market Update with the QQQ intraday negative divergence, I like a quick, but speculative trade to the downside, perhaps a fade, perhaps a bit more.

However, even though I'd be treating this as a short term position unless additional information came to light, I'd want at least 2 weeks of expiration for elbow room. Every time I've violated this concept that has worked very well for me by going with something much closer in expiration, I've regretted it.

So I'm going to open a speculative QQQ, June 5th $111 put position and at smaller/speculative size.

Quick Market Update

It looks like the QQQ is about to come down intraday much like IWM has diverged from the other averages.

 QQQ 1 min intraday leading negative

QQQ 2 min intraday leading negative.

I'd say at minimum it comes down pretty sharply intraday very soon.

Crude/USO Follow Up

The bounce we have been looking for in Crude on a $USD correction lower is here and it's quite parabolic. It's actually a bit hard not to take action immediately with the USO put position we were hoping to enter on such a move.

However I always want as much confirmation as I can get and I don't know that 1-day of Crude bouncing is all that we should expect until I have good confirmation from the charts showing strong distribution in to the bounce. There are some interesting correlations and some that are simply over-run at the moment.

 USO making a reversal process the last 2-days much like the $USD with a small Harami reversal as of yesterday (inside day) on this daily chart and today's move so far at +3.39% on no news beyond yesterday's inventories.

 Note the inverse correlation between Crude (candlesticks) and the $USDX (purple) on a daily chart.

Here's the same on a 5 min chart, crude is outperforming the correlation as is plain to see today.

On the other hand ES/SPX futures seem to have no correlation of any meaning on this 4 hour chart vs crude.

However on a 1 min chart, the correlation isn't great as of yesterday, but when looking at today...

ES 1 min vs Crude, running hand in hand, although the relative performance is much different.

It's interesting to note that small caps/Russell 2000/IWM are looking MUCH Different.

In any case I'll be looking for signs in the $USD that it is slowing its downside corruption and that $USO is seeing distribution in size, then I'd feel much more comfortable with an entry once we have objective evidence in hand rather than best guesses.

Transports Trade Set-Up

This is not the actual trade, it's the set-up to let the trade come to you at better prices, less risk and from what I see, pretty nice timing for a much larger move than we have already seen in transports weakness.

As far as playing the long side of the set up, the probabilities are there, the high probability/low risk is not. Letting the trade come to you and sticking with the highest probability outcome charts is the way I'd approach this, but to each their own.

Yesterday transports hit a 6+ month new closing low and managed to take out a bunch of stops which is why it should bounce now. Again, I feel it's a much safer, wiser trade to let transports come to you as a short set up than to try to play the bounce, but theoretically both could be done, the bounce trade is just much more risky with a much lower profit potential.

The lack of Dow Theory Confirmation between the Dow Industrials and Dow Transports is staggering.

Anyone who thinks at this point in the game that "This time it's different" and the market is going to keep doing what it's been doing because the F_E_D has their backs, is sorely mistaken. This has been an average length bull market (nothing special about that), it has received unprecedented assistance in the way of massive money creation, but the chart above is hard to argue with. Charles Dow would be calling his broker and going full short right now. If the goods America produces via the Industrials are doing so well, then why aren't the transports that ship them? That's essentially the logic behind confirmation or Dow Theory between the Industrials and Transports.

As to the charts and trade set-up...

 The preceding up trend (green to the left) which can't be seen on this chart was very clean and strong, but then gave the typical red flag earning signs in what looked like an apparent bullish move off the October lows, this was the peeling away from the long term average. Shortly after, Transports are in a large lateral top.

 The support candles that created the first support trendily can be seen at the white arrows, each one had higher volume than the preceding day (something we look for that makes a reversal candle 3-4 times more effective or reliable).  The yellow arrows are the first head fake move/stop run below the first support trendily and a bounce forming a new support line a little lower and that saw another stop run and its low became new support slightly lower. Yesterday in a 6+ month new low, a huge number of stops were hit/new shorts entered, in other words, massive supply at cheap levels which is the point of a head fake move as the new shorts can be squeezed and for a quick trade all of the shares can be accumulated without anyone wondering, "Who is on the other side of the trade absorbing all of these shares and why?"

Note the huge volume at yesterday's break below the latest support level.

 Here's a closer look as a bearish descending triangle broke down yesterday, these use to just keep going on the downside, but now Wall St. knows how technical traders will react, what they believe and they turn the trade against them if only for a brief time, using the concepts of technical analysis against traders. Again note the large volume on the break below support at the small white trend line.

You also have a pretty good idea where the upside target is by looking at the downtrend trend line of the descending triangle, but LLOOK FOR A POP ABOVE THAT TRENDLINE, IF WE DO GET IT, THAT IS LIKELY THE LAST BOUNCE IN THE AREA TRANSPORTS SEE. Rather they should see a rapid decline as a Crazy Ivan shakeout will be in place, already having shaken out new shorts yesterday below support on large volume, any new longs entering on a break above the trendline near the apex of the triangle will be caught in a bull trap as prices move lower and their eventual stop-losses will send transports even lower with more supply on the market.

 This is the 60 min chart, I marked the divergence areas, but the overall 3C trend has been deeply negative.

There is no positive divergence at yesterday's head fake.

 Even a 10 min chart is trending negative with no positive divergence at the stop run yesterday which is why I would not want to risk playing this one for the long bounce, there's not much support at all. This is the kind of trade (bounce) that can go very wrong very fast with a few words from a F_E_D speaker or some other unforeseen event unlike the sturdier divergences like the $USDX that fired and have done what we expected despite F_E_D news and other events, the divergences are strong enough to hold the trade together.

This 3 min chart of transports is about as good as it gets for a positive divergence at the lows and stop run of yesterday. I'd never enter a trade that's longer than intraday on nothing more than a 3 min chart with all of those other charts so overwhelmingly negative as they represent the highest probability resolution. Like I said when I decided to keep the gold/oil shorts in place, "When in doubt, trade with the highest probability signals".

If you are interested in the trade, I'd set price alerts around the upper trend line of the descending triangle and just above where it should be in several days or so. We'll take a look at the charts if and when it makes it there for the precise entry.

Transports Look to Bounce/ USO is in the Area

These have been horrible performers and compared to the Dow Industrials, they couldn't be giving a worse signal of non-confirmation.

Even though these are already among our core shorts, I would love to be able to get another entry for those interested. I'm not so sure if I would play a bounce in transports as they have been so weak, but I certainly would short one. I'll have charts out in a few minutes looking at both possibilities.

As for oil, we are in the area, but I wouldn't act to rashly, we'll have good signals when it's time to enter a position, they essentially just gapped on the weaker $USD overnight as the move we are looking for (corrective / down) in the $USD is underway.

We'll have to see if gold will give a similar opportunity.

A.M. Update

The weakness in Index futures seen yesterday after the market close held fairly steady through the overnight session with some slight gains leaving ES looking like this, this morning...

 ES 1 min Index futures have remained fairly constant at yesterday's post cash market lows.

The $USDX has started to come down overnight, although easier to see the reversal process that I have been talking about on slightly longer charts...

This 7 min $USDX chart shows the divergence that led to the analysis of the correction and you see the rounding of the reversal process and the start of a corrective move down.

This in tuen has sent oil higher this morning, we'll see soon if gold follows suit and opens up the 2 trades for a second chance entry.

Meanwhile the EUR/USD has put in its rounding reversal process and looks near ready for a small bounce as anticipated on this 5 min chart.

I'm still looking for the reversal process in the averages to mature as you can see it here on the SPY 10 min "Gas in the tank" chart as the divergence becomes worse and the reversal process is revealed in lateral/rounding.

Additionally overnight China, Germany and the Euro-zone missed on PMI data with Germany and the Eurozone missing the worst.

Also there's a growing chorus as predicted long ago and again last night for rate hikes sooner as the economy CAN'T be right (src.) only computer models can as the BEA gets ready to seasonally adjust the first quarter a second time, an adjustment of the adjustment and overnight to show the F_E_D is behind this, none other than Goldman Sachs re-ran their FRB/US Computer Model and saw, "Little slack" in the economy, a keyword for Yellen.

Initial Claims were slightly higher than consensus, but the 4 week moving average is at cycle lows and just shy of record lows from 1972 while continuing claims also at cycle lows are at new lows not seen since 2000. However the Chicago F_E_D National Activity Index printed a 4th month of contraction at -0.15.

Hopefully we'll get some nice trade set-ups and a lot more movement than yesterday, at least I anticipate that.

We do have an F_O_M_C voting member , Fischer, speaking today so look for some potential volatility on his comments (dovish).

Otherwise, I'll be keeping an eye on the $USDX , oil and gold as well as TLT for very near term trade set ups and the continues deterioration of the 10 min charts as this week has seen the reversal process play out as pointed out last night with this chart...

"This is all of the major averages including Transports (in salmon) for this entire week. Our "Week Ahead" forecast said, 

"I don't think the bounce is quite complete or its reversal process is not quite complete which means that my first assumption would be that the market would be rangebound and choppy in the area finishing the reversal process..."

Again, these are the major averages for this entire week, would you say that they look "rangebound/choppy", which is a typical hallmark of a reversal process (until the very end when a last small head fake usually appears) ?"