Chart Request- SLV

Today's SLV momentum is turning into an intraday triangle. Usually triangles are (in this case) bullish continuation patterns). There also tends to be a high degree of vaolatility and false moves around such common price patterns, especially in an ETF that has such a loyal and large following.

 For a consolidation day, it is interesting the volume is so high already, it appears it's on track to surpass Friday's which is not common for a consolidation.

 The hourly chart has moved into confirmation of the trend

 So has the 30 min chart

 as well as the 15 min chart so there's no reason at this point to suspect anything very negative with any sort of high probability.

The 5 min chart is showing a bit of a negative divergence. My initial thoughts, considering the intraday triangle, the volume and this chart as well as SLV's extended run, are that it may be prepping for a pullback or consolidation. Typically high volume days are often associated with reversal days whether it be a real reversal in trend or just a short term correction. That's my initial take, but it's too early with little evidence to declare a pullback at this point, I'm just leaning in that direction from what I see now.

LEE- A Cats & Dogs Trade (long)

LEE just breached a technical level I had an alert set for, you may want to take a look at it this morning. The breakout came on good volume.

USO to Gap Down

Last night's post speculated on the probability of a gap down in USO for reasons outlined in the article, "Action/Counteraction" so far in premarket it looks like that's what we'll see.

Here are some USO charts as a pullback was expected around March 4th or 5th, but oil being sensitive to fundamental developments kept running higher.

 3c Hourly, continues to make higher highs, this is very bullish confirmation of the longer term trend in oil/USO

 The 15 min 3C chart shows in red where a pullback was expected, in white, we see where 3C has been playing catch-up but never quite making it.

 The 5 min chart has been ( as it should be) more responsive in catching up and doesn't reflect any distribution so it seems likely that the African Delegation's Road Map to Peace was not expected to be an event that would move the oil market.

 We still have a long signal in USO and here are a couple of potential pullbacks. The 10-day in yellow seems too shallow for a second pullback, maybe the 22 day in blue.

The longterm Trend Channel Stop is even deeper and this would represent a real shakeout which I think is very possible, however, so long as the channel is not breached on the close, USO would still remain within the trend.

We'll watch for the buying opportunity, it should be a decent one.

Action/Counter Action-Oil

Last time we had a Libyan peace proposal it came from Hugo Chavez and as laughable as it all seemed, the market ate it up and oil dropped. Now we have a groups of African leaders with South Africa's Jacob Zuma having said Gadhafi has accepted the preliminary ceasefire/road map for peace proposal.

Given oil dropped on a ridiculous Chavez proposal, it would seem reasonable (and oil is in need of a breather) that this may pull oil back a bit. If this were all that was on the table, the only question would be whether this would be a consolidation or under the circumstances a more vicious pullback to shake out as many traders as possible.

However, there's never a vacuum or a singular event defining the day ever since 2011 started.

We have an intensifying brutal crackdown in Syria, conflict between Israel and militants in Gaza, the much anticipated and predicted turn of the Egyptian populace against the Egyptian military who has been running affairs since Mubarak stepped down (more on that in a minute), the Gulf States demanding that Saleh step down from power in Yemen, of course the Saudi nightmare of Bahrain continues, and interestingly the Iraqi security forces cracking down and killing Iranians who are against the current Iranian regime and live in a camp in Iraq. Iraqi security forces ran them over using Humvees, fired rifles and killed at least 25 with over 300 injured.

It would seem strange that Iran has been demanding that the Iraqi government shut down the camp, most of us remember a 10 year war between Iran and Iraq and wouldn't think at first glance that the Iraqis would respond to such a request, but this is the third time the Iraqis have attacked the camp since it was handed over to the Iraqis by the American military.

It's important to understand that the conflict between Iran and Iraq had many facets, but the most fundamental was a Sunni led Iraq fighting a Shiite led Iran, Iraq is no longer Sunni led. The Iranians have been making inroads into Iraqi politics for quite some time-remember Muqtada Al Sadr. In effect, Iran has widened it's sphere of influence to include Iraq and the two are closer then they have been in decades, you might even call them allies in a sense.

As for Egypt, Tahir Square is back in the headlines and not surprisingly (there have been many posts suggesting that this was coming). The seeming overthrow of Mubarak was not at the hands of the people, this is important to remember. For Egypt's population, the uprising is scope and size wouldn't truly be called popular and it certainly didn't displace Mubarak. What did displace Mubarak was the Military who has been running the show in Egypt since Nasser, choosing the leaders which have all come from the military. Mubarak double crossed them and tried to set up his son for succession, this irritated the military long before Tunisia started. The uprising was simply cover for the military to do what it as going to do one way or another.

If the Egyptian people think that a democratically elected leader will be chosen, say El Baraedei , they ought to think again. The military has controlled that country for decades and kicked Mubarak out for challenging their control, they aren't about to roll over and allow the people to chose the next leader and the Egyptians are starting to come to terms with this.

Still the question is will Libya over-ride everything else temporarily and see oil fall for a bit, I think it's likely. The question will be how deep the correction will be, how forcefully traders will be shaken out.

For our members trading USO, this is what you've been waiting for. We'll keep an eye on the situation and likely find an excellent entry point with low risk and very high probabilities. My longer term view on oil remains extremely bullish for the foreseeable future, however, I also think oil is approaching its last Hurrah and that is part of the reason I think we will see prices reach obscene levels this year with MENA providing the backdrop.

I'll have more analysis on USO as the situation unfolds. The one thing that could derail a pullback in oil is the Israeli conflict, oil has responded more to Israel then almost any other event in MENA.

Some Short Trade Ideas

As I said earlier, I ran a new scan and came up with a LOT of candidates. I wanted to get some out there to you before the close, that does not mean you need to rush into them. You may want to establish partial positions or take the weekend to take a closer look at them (of course you can email me as well with any questions), but here are a few that I've had a chance to take a closer look at. These all have 3C negative divergences plus the Stochastics/RSI divergence that has proven to be very useful in identifying turn around situations. The red square on the first of each daily chart is an approximate stop out level, of course they are just suggestions and should be considered as such. Make sure you are comfortable with the risk in determining your stops and position sizes. Most of all, don't over react to today's price action, there's plenty of time to establish positions still.

ERTS

 Daily

 Hourly accum./dist. cycle

JOYG

 Daily

 15 min cycle in a leading negative divergence.

KLAC

 Daily

 60 minute cycle

MU

 Daily-the white arrow is just there for example showing no neg. divergence in RSI until the most recent at a double top.

 MU 15 min cycle in a leading negative divergence.

MXIM

 Daily top formation

 15 min cycle with previous negative divergences and effects of them.

ROST-Retail I think is a strong candidate.

 Daily

 30 min acc/dist. cycle

XRAY

 Daily with a confirmed reversal

Hourly negative divergences and the Stoch/RSI indications.

Margin Calls

As the way things stand right now, the market sold off so quickly, there's bound to be those who like catching falling knives, stepping in to provide an end of day bounce. However, should this not materialize to any significant effect, chances are Monday morning margin calls will go out and continued selling would be a high probability.

 DIA bearish engulfing candle, this is why gaps up in the a.m can't always be assumed to be a good thing. there can be no bearish engulfing candle-here a signal of reversal confirmation, without a gap up in the a.m.

 DIA intraday waterfall is likely to attract the knife catchers.

 IWM with 3 lower lows.

 IWM breaking support, this is why I continually remind you not to put in stops with your brokers unless you have no other choice and keep them away from obvious stop levels like this intraday support trendline.

 QQQ bearish engulfing daily candlestick pattern.

 Q's triggering the same limit/stop orders on increased volume.

 SPY bearish engulfing candle and the 3rd lower low.

And again, stops/limits hit on the break of obvious support.

Remember to pay attention to the close as it could very well trigger a wave of Monday morning margin calls which will increase supply and downside movement.

For our USO Traders

Earlier today I thought USO would continue to discount the Israeli/Gaza situation, it has. USO has added nearly another percentage point since that earlier post today.

 On this 5-day chart of USO, you can see how important this recent breakout is, it's now entering 2+ years of blue sky territory.

Here's the 60 min chart that is now inline with price, other mid term charts are quickly moving in the same direction.

Market Bellwether AAPL breaking to new closing lows?

I've been warning about AAPL's deteriorating condition, now it's getting very serious which has consequences for the broader market.

 AAPL currently is at a level which would be a new closing low since the March bounce, this wouldn't be good for AAPL or the market as it would most likely carry AAPL to its 3rd major trend lower low and definitively break any interpretation of AAPL's top.

The 15 min 3C for AAPL showed the March rally was indeed all about manipulating returns as it couldn't even confirm similar price levels marked at the start of the red arrow. The red box shows 3C moving into a new low on a negative leading divergence, even though price is higher then the mid-March lows. This is very negative behavior.

On another note, don't forget to take a look at yesterday's long trade idea, TZA.

FORGOT THE IWM

Since I captured the screen shots, the IWM has broken down even worse so the %'s are worse then they will appear in this post.

 Important support levels on a daily chart, the $84.23 has already been taken out in the last few minutes, now at $84.14

 Here ar the important support levels, the last one ($84.23) has already been broken

 3C IWM 30 minute in a leading negative divergence, not when it started, April 1st.

 The Stoch/RSI signal I've been using more frequently has a pretty bad RSI divergence (compare price levels with the marked period in RSI and Stochastics is turning down.

Here's the 60 min crossover screen which has generated a sell signal, the daily will take a day or two to catch up. Also the red dotted line is a VWAP (volume weighted average price); it has acted as support during the rally, it's now broken so there are some people caught at a loss here.

Before the move down in the last few minutes, the 6 day period ending Q1 saw a huge gain of 3.26% (remember that the Fed has seemingly concentrated it's firepower to levitate the broad Russell 2000 index). The April performance (again calculated before the last few minutes in which the IWM broke important support came in at -.40% making it the second worst performing average for April. I just quickly recalculated it, the IWM is now at an April loss of -.60.

Broad Market Update

You may recall that prior to Q1 ending March 31st, I had made mention several times that the returns must be kept as high as possible for Q2 prospectuses and to avoid redemptions, even if it is done in an artificial manner. Since Q1 has ended, we have seen momentum fall off a cliff and internals deteriorate.

Manipulation of the market, especially at qtr/year end is not uncommon, but it can't last too long, eventually the realities of the market trump any short term attempts to keep prices artificially high.

The last 6 days of Q1 returned an average of +% with the Dow only a fraction lower at +1.28% (this is also a good representation of how the market's move together). The last 6 days (including today thus far) since the start of Q2 on April 1st have broken down like this: The S&P +.01%, the Dow +.21% and the NASDAQ 100 -.56%. This set of returns is also notable, not only for the complete lack of momentum, but also for the divergence between the averages, this is usually a short term effect, but one seen at transitionary periods.

 DIA's April performance +.21% an -83% decline from the previous 6 day period.

 Today's DIA intraday support

 The Stoch/RSI setup I mentioned a few nights ago that has given pretty reliable and consistent results, which also shows an RSI divergence that is worse then the 2007 top. For calling reversals, Stochastics (for me) is just about useless without adding the RSI component, then it becomes much more effective, rarely giving a signal, but the success rate for the signals is much higher and tend to mark major tops, not just swing corrections.

 The QQQ performance since April 1 @ -.56% compared to +1.29 in the previous 6 day period at the end of Q1.

 Today's QQQ intraday support, which is at an important level on a daily chart.

 This is the same level of support for the Q's we are seeing intraday, just on a daily chart. You can see it's been an important level on a closing basis.

 The 60 min. Bollinger Bands for the QQQ shows momentum has died and volatility is starting to narrow which is typically an indication of a highly directional move.

The SPY's April performance at +.01% for the 6 day period vs 1.29% for the previous Q1 6 day period.

 Today's SPY intraday support, also an important level on the daily chart, note the uptick in red volume on the slightest breach.

 The same SPY support level on a daily chart has shown 4 closes just barely holding the level and 1 with a hammer which found support exactly at the trendline, today we are vert close to that support after an initial gap higher that could not hold.

 Here's today's TICK chart with 3 areas in red breaking the -1000 level. This shows the TICK for al NYSE stocks each minute, it's derived by taking advancing ticks and subtracting declining ticks, a reading below -1000 is extreme and until recently has been quite rare. In orange we have a sub -1250 tick which is at the bottom of the useful scale, meaning it's an extreme rarely seen.

 Looking at the Tick chart since 3/31, you can see an increasing bulk of ticks below the "0" line and the deterioration of the Tick Index since Q1 closed.

On a daily Tick chart since 4/1, look at the closing tick and the nature of the candlestick bodies as the week has progressed. Starting out at +1000 with the following 2 days showing TICKS ending the day higher then they started (but still declining) to TICK readings that end the day lower then where they started and also declining. Today's data hasn't shown up yet until the close.

I think that should give you a pretty good feel for the end of quarter window dressing/push for returns and the subsequent new quarter's deteriorating price and internal structure.