Market Update Addendum

What I should have added was this, I think the market has begun the distribution cycle from the shares picked up at the white arrows or positive divergences/accumulation last week. That means that institutions are likely selling into higher prices now, which depending on how much they accumulated and today's volume, will determine when they've unloaded all of the inventory. Then they may and probably will go short so I'm a little edgy that we will see a black swan event and the market will just drop, that's why I've suggested using the strength to get your toes wet in shorts you like any way in the area. However, under normal circumstances, that distribution/shorting cycle can last a few more days.

This is a big shift in the market and it's becoming obvious to many people and when it's obvious, the market throws a monkey-wrench in the plans meaning something like a new high false breakout, but on the other hand we could see an overseas event that causes a black swan breakdown.

I've always taught my students to leave the first 10% of a new move to someone else, the risk is not commensurate with the gain, I'd rather take the less volatile 80% out of the middle. So just take that all into consideration. We are living in one of the most historic market periods ever, it will be written about a century from now just as 1929 was. So pat yourself on the back that you are still standing and understand that we are entering uncharted waters. We'll have to learn as we go along and adjust very quickly.

Market Update

We really want to be on top of the market as it is at a possible turning point, we haven't seen action like this in months thus it is out of character and anytime that happens, you pay attention as it is often a shift in sentiment and sentiment is what moves markets, not ISM. These are 1 and 5 min3C updates for the DIA, IWM, QQQQ and SPY

 DIA 1 min

 DIA 5 min

 IWM 1 min

 confirmation on the IWM 5 min

 QQQQ 1 min nasty leading negative divergence-the semis may be a good group to look at.

 QQQQ 5 min-the accumulation seems like a day or two more of bounce is possible, but black swans change all of that as smart money is now in the difficult position of NOT having inside information on the middle east conflict.

 SPY 1 min-leading negative divergence

 SPY 5 min-relative negative divergence

Here's the SPY in a linear regression channel, you see this is unusual behavior. Often , actually almost always after a trading channel busts or breaks down, there's an attempt to test the trouble zone/resistance, that may be what is happening now. A failure could send the market hurdling down, but for now, this looks about right and none too positive for the market.

USO Update

This is still a bit early for a good read, but we'll take a look anyway as I suspect that oil traders understand prices must rise as the Saudi substitute is a poor one, it's not heavy sour we are seeing shortages in, it's light sweet.

 I'm venturing a guess here, but this price formation, which technically (bigger picture ) is still solid, looks as if it may be trying to form a consolidation/continuation triangle or correcting through time.

 The hourly 3C, TSV and MoneyStream ar all in line with a bullish move and 3C is actually starting a leading positive divergence.

 The 5 min chart shows the pullback from last week, the white box is the (stronger then confirmation) 3C move last Friday I mentioned and now in green we have confirmation of price, however, it is close to a relative positive divergence and certainly leans more positive then negative.

The 1 min chart is showing us again that better then confirmation, maybe even a slight leading positive divergence in this morning's pullback.

My job is to show you what the market is doing, I don't like to try to venture guesses about why, but I will this time. I think it's possible that crude traders know that prices have to rise with the mideast conflict and what I said earlier about the Saudi crude as a "crude" replacement. They may be taking this opportunity as the market(retail) feels there's no problem as the Saudis will absorb demand. Retail may not be sophisticated enough to understand the problem and locals may be using that to their advantage to stock up on the cheap. THAT IS OPINION, but from what I see, it's the only thing that makes sense to me.

The latest Silver Salvo

Rack one up for the shiny silver bugs....

 SLV at a new recovery high

1 in 3C hasn't confirmed, but 5 min is in line. We'll see if it holds. I the meantime, I'm going to look at JPM.

By the way, that's what short covering looks like-no pullbacks, except it usually lasts a lot longer. We still need to see a close at the new high to confirm. Remember, I'm not taking a side on this trade yet, just watching for the opportunity for a high probability set up in either direction.

Another Trade Alert-GASS Long

This is from the same list as the first alert also I made a mistake in saying FXEN gained 125%, that was another trade last week, but it did do about 20% in a day. Now GASS just triggered a long, take a look.

Chicago PMI in at 71.2 a Beat from expectations of 67.5

Anything over 50 represents expansion and under 50 contraction. This is the latest in a long series of good numbers out of the Chicago PMI (green shoots? Where are the jobs?).  This number is exceptionally suspicious as it puts manufacturing at the best levels seen in 23 years!

Inside the report.... The new order index is the highest seen in nearly 28 years! However for all the new orders, the employment index component DROPPED from 64.1 to 59.8-is the math adding up here?

Still the comment section features continued complaints about rising prices or input costs. We all know Chicago is the apex of truthful politics, but we have to wonder about their PMI report. With numbers like this, we should be seeing a revival in our economy led by Chicago alone.

A good trader always has a healthy dose of skepticism, a great trader is downright paranoid.

Drillers and Explorers

That's what I get form the long term implications of mideast instability, I've set many alerts in the past few minutes, but one I wanted to bring you now is AREX (long). Take a look at the charts..

 This is teetering on a breakout, at $33.15 I'd consider it a breakout.

 The 15 min chart showed a nice positive divergence before this move up, so it looks solid longer/intermediate term.

The 1 min shows a false move, but I think it could just be a shakeout, so watch AREX for a move above $33.15, you can check back with me if you like for the short term 3C charts, I have it on an alert as well so I'll bring it to you should it break out, some of you may chose to take a shot at it now and that's why I bring it to you now.

EGY

This s from the same list FXEN triggered from last week, we bought at 10% up on the day, but saw 125% return by the next day. They can't all be like that, but with risk management there's no reason not to gave this a shot, especially as it was caught much earlier. Stops can be under $8, I'd prefer $7.90 and you may get a pullback in the a.m. here.

EGY Trade Triggered (Long)

From this article


Check it out, not too late at all.

An Article from the WSJ

Note: if you ever want to read a WSJ article and can only get the teaser without signing up, just Google the headline in Google news and you'll get the full article for free. 

And here's another reason I like the ETF, FXP short on the China 25 Index:

Beijing to Slow Growth