LVS

LVS earnings are out after the close today, so here's a look at the charts.

 60 min chart, a short accumulation period, followed by mark up and negative divergences.

On the 15 min chart, there's that pop above resistance that failed nto a negative divergence.

My opinion is LVS won't react well to earnings.

Financials

 FAZ, leveraged 3X short on financials, note the date of this 60 min positive divergence-the 28th

 On the 30 min chart, again positive at the 28th

 The 10 min chart, the 28th

 XLF long financials, negative at the 28th

5 min chart negative as well.

The 28th keeps popping up. I have to consider the possibility of what's going on in silver as more then just a shakeout. What if leverage is being unwound? Why the 12% margin hike yesterday in silver when it was already hit hard overnight?

A Nasty Hit in Crude

USO

Even more on the Fed

Read this article that was sent to me when you have a minute

Remember yesterday I noted weakness in the home builders, it continues today, the article will explain the effect on housing.

XHB-Home Builders ETF, that' a pretty nasty drop in a broad ETF.

More on the Fed's Policy

If any of what is being rumored about the Fed's policy stance turnaround is true, and I can see that it could be considering the language about QE3, then an interest rate hike and some of the other measures being talked about would have an effect on the $USD, a bullish one.

Considering the FOMC meeting was so recent and this rumor is so far removed from the language of that meeting, they must have some data that is very scary. The Fed doesn't want to be "perceived" as wishy-washy, I can't say for sure whether they really care about being wishy-washy, but they don't want that perception.

So lets look at the dollar which I've been taking for granted lately.

 What we want to look for are things out of character. On this daily chart, the recent volume since the 28th of April has certainly been out of character  as it's 2-3x the average volume. We often see big volume at reversal points in a downtrend.

 The longer charts aren't showing much yet, but the 15 min chart is showing a positive divergence that started on the 28th, the same time volume increased.

 We see the same on the 10 min chart.

And more of the same on the 5 min chart.

This would be a major disruption in market psychology and may be a partial explanation of why we are seeing such broad weakness in energy, precious metals and commodities in general.

I've looked at several hundred charts today and I can't recall an energy stock that wasn't being beat down. This is a broad index of energy stocks and to be down 3% today, plus yesterday's weakness I mentioned, is out of character.

 The CRB commodity index has seen two of the nastiest back to back days in awhile.

GCC is another commodity index under pressure.

We know what silver looks like.

The net effect on the market would probably send a lot of traders and funds scrambling to unwind the leverage they've been using at multi-year highs. The market itself is not fond of interest rate hikes and truth be told, we all know that the Fed has been behind the market's rally through QE/POMO. If that is all coming to a crashing halt, then.... you do the math.

Small and Large Caps

Both seem to be getting hit today. I'd like to look again in a bit to see if high yield stocks are seeing any inflows, but for now, take a look at BGZ and TZA, both inverse ETFs, on small cap and large cap stocks.

Both ETFs look like they've undergone a decent size accumulation cycle, mark up would come next and that's when they'd really move. If you want exposure to either group that is broad, these are good choices, but ETFs should never be the extent of your exposure, they're a good way to get broad exposure quickly. If you enter these trades, keep in mind the market is likely to move up and play some tricks along the way, so set your stops with some room, position size so that these or any trades don't put your portfolio at significant risk. You can check out the risk management link at the top right of the site, but my general rule, depending on how many open positions you carry, is that a failed trade shouldn't do more then 2% damage to your overall portfolio value. There are caveats to that, you can se in the risk management link, but to assume that the market will head straight down from here or that these will had straight up is setting yourself up for disappointment and failed trades. Even in the ugliest of bear markets, we typically see nearly as many up days as down days, the down days are just more extreme. So take a "big picture" view and set your risk management accordingly.

Otherwise, both of these seem like they are set for a cycle moving up. Be prepared for the pullbacks though.

Here comes an intraday reversal in the maret

Think about shorts you might like to get your toes wet in, use strength to do that.

 QQQ 1 min positive

SPY 1 min positive

These have been trending down for a bit, it's natural to see a countertrend move. Also be aware that the market will usually look to sow some seeds of doubt concerning a move down and many traders are anxious to buy that line so if we see a decent move up today, tomorrow, or the next day, don't jump to conclusions. Wall Street wants to keep you guessing.

Just Got This Email

"Leesman from CNBC is indicating that the FED is talking more aggressively about raising the fed rate, stopping the reinvesting of maturing debt and that these talks are becoming much more serious in nature."


So what does that tell us? If true it would explain the market action, remember that I said it takes some time for the market to internalize FOMC policy and then to set up their chessboard. I don't think anyone bought the transitory inflation bit Bernanke was selling and if this is true, the Fed is concerned about it and Bernanke straight out lied about it.


Any way, rumors are dangerous so lets stick to what we can observe for now and just keep this in its proper perspective.

SLV request

 Traders fal for it again, "Place that stop" and the intraday support is taken out by one cent, a flood of sell-side orders comes through.

 Nothing falls straight down, so there will be various areas in which we'll see intraday and maybe daily bounces. Right now at the 22 day average, this is a reasonable area to expect the momentum on the downside to slow and maybe even reverse for a bit.

 Here's the earlier pos. divergence I mentioned as an intraday move, and the end of that. Now we have a small positive divergence, maybe a run back up to that trendline I just showed you and maybe a break above to sucker in more sheep. I try not to get too absorbed in these short term fluctuations, the bigger picture is what is important.

 Here on the 5 min there's also a small positive divergence.

 The 30 min chart is showing the trend in line so this is the more important chart to me.

 Here's the tighter trend channel, in the white box, that is the amount of rally it held, it's now broken, although this is meant to be used on the close, so it seems we have a change in character now for the recent rally, which leads us to the bigger picture.

This has held almost all of the silver rally, you can see in red where the target zone is, if that target zone is broken and stays broken, then something has gone very wrong in silver or at least in SLV. For now, this is the target I anticipate, how long it takes to get there will depend on how much money Wall Street can make playing games with support and resistance as shown in the first chart of this post.

I'd expect some counter trend moves, certainly intraday, perhaps daily as well. I wouldn't be too distracted by them unless the internal action gives good reason to be. Translation, don't get lost in the lines when looking at this too closely.

EDZ

EDZ is a leveraged short on emerging markets, it's one of the ideas I felt would be a theme for 2011 so I've been keeping tabs on it for early signs. This trade is much like the FXP trade posted earlier today.

 Like FXP, we have a small double bottom, unlike FXP, it was tested with a false breakdown yesterday, I'm a little surprised FXP didn't do the same. As you can see volume is up nicely today on the break higher.

 On the daily chart, like FXP, we have the positive divergence at the double bottom in MoneyStream and my STOCH/RSI combo is giving a bullish signal.

 Here's 3C hourly within the double bottom (not a true double bottom as those are much larger), we have accumulation at both bottoms and some distribution crating the second bottom, but the relative position were the distribution occurred was very high, so it wasn't very bearish.

 The 30 min chart confirms the same as above.

 Here the 5 min chart shows yesterday's false break and the successful signal 3C gave on that false break.

 This is today's move thus far, which is confirmed.

The one difficulty in the short term is several resistance zones very close together, a break above $19 will be very bullish. For now, there's several ways to handle the trade, you can start accumulating now or wait for resistance to be over taken and several combinations of each strategy. If you are interested in the trade and want to fit a strategy for your trading style, feel free to email me. I do like what I see developing here in EDZ.