Market Update

Lets start here..

 DIA 15 min has a relative positive divergence and note we are near the bottom of the range, this suggests to me that the market will move higher, either later today or tomorrow and likely be in the range of the Op-Ex pin we've been looking at. This isn't a strong signal as the 30-60 min charts are still very ugly.

 DIA 1 min, here's the negative divergence right off the open around 10:15-10:30, since then the 1 min has been in confirmation with the price trend (green arrow).

The IWM looks to be one of the weakest, and is only showing a 1 min positive divergence. I suspect there will be a lateral trading range and a few more 1 min positives put n before it can move north.

 QQQ 5 min-this is another weak one, with a positive divergence only as long as the 5 min hart, but still enough to suggest some upside in to Op-ex Friday.

 The Q's 1 min confirm this finding.

 SPY 15 min positive divergences, this is one of the stronger ones at a 15 min positive.

The 5 min is also showing a relative positive divergence, again I suspect probably some choppiness into a lateral zone before it could move higher.

Remember, I'm not expecting much more then $132.50 for a close on Friday n order to pin the Calls and Puts.

Got my Eyes Back-Wll be updating like Crazy...

VXX Update

And this is why I'd be trailing that intraday stop...

The consolidation is bullish and way too obvious, the black box systems were likely to game it. Note the RSI divergence on the breakout. Now whether they pull a Crazy Ivan and shake the tree both ways or they just go for a directional move, it's difficult to say without eyes on the underlying action, thus the trailing stop.

This is a small example of a bullish continuation pattern called an ascending triangle. Technical traders are going to buy the breakout, n fact they are usually going to buy the pattern even before the breakout because it has a bullish bias. WALL STREET KNOWS THIS IS HOW TECHNICAL TRADERS WLL RESPOND, thus the black box systems which are insanely sophisticated, are gong to game the pattern.

Like most of you know, my cousin is the tech guy on a private investors own little black box system. They're only an independent trading firm trading this guy's capital, not a hedge fund or anything like that, but have spent millions installing network hubs to reduce their latency by milliseconds if not micro seconds. You can get free pattern recognition software out there so you can imagine what the HFTs on Wall Street are running and it's mostly about volume and taking advantage of the predictability of technical traders, they resort to this because for most firms, it's just too expensive to get low enough latency to front run and too many firms are specializing in it, so the pattern recognition plays have been big on Wall Street lately.

Anyway, keep an eye on VXX, it can certainly move up more from here, but the game must be played.

RIMM

I'm still blind in one eye, but I got an email about RIMM, so lets take a look.

 The first thing that stands out on this chart is RIMM's total lack of relative strength vs the market, it didn't rally at all with the market during the short squeeze. The white arrow is the signal candle, a close with a high lower then the signal candle's low will put this into a swing downtrend classification. All of the candles in the yellow box are noise, not one contributed to a higher high and not one had a high lower then the signal candle's low. Often these lateral formations are used for accumulation or distribution, as to which this one is, I need to see intraday charts and confirmation.

This is a 5 min chart and an opening like this is rarely good news. You can see support is being broken right now and it's triggered some stop-losses and probably some short sales as volume has increased. However, don't be surprised to see some gaming of the resistance level, even with the most bearish stock, Wall Street s still going to play the game and that has a lot to do with volume rebates so the more volume they can create, the more money they can make; it's just a fact that we see all too often.

Here's the daily 3C chart as of yesterday.

There's a very clear cycle with accumulation in July/Aug 2010 and distribution Jan-Feb 2011-a complete cycle from stage 1 accumulation, stage 2 mark up (which 3C confirms making higher highs with price), Stage 3 distribution at the red arrow and stage 4 decline. Right now on the daily there's a positive divergence, so until I can get eyes on the intraday charts for confirmation, I'd be a little careful. If that is real accumulation, then a break below support today would make sense.  The recent positive divergence isn't huge like the 2010 one so if it is confirmed, it would probably show a decent rally (if it is confirmed), but  don't think it will change the downtrend, it may technically speaking, but bigger picture, I'd view it as a bear market rally.

In any case, as soon as 3C is back up, I'll confirm whether or not that real accumulation.

VXX Follow Up

Yesterday I posted the VXX long trade idea based on some positive 3C divergences later after examining the chart more closely, I said I thought this was more then just an intraday trade. Then last night I said this about VXX,

"I think VXX pulls back earlier tomorrow, but I think it will present an opportunity, options would probably be my choice on VXX, although I haven't looked at the chain."


Here's VXX today...

 Today's daily chart

Today's 1 min hart, we saw the early pullback below yesterday's close and up and away from there.


Right now it looks like it's going to consolidate a bit as RSI has gone negative.

I don't think it looks like much more then a consolidation, but until I can check the underlying trade, I would trail a stop behind this intraday. I do think there will be more opportunities in VXX in case you get stopped out as the longer term 3C charts linked in the posts above, look healthy.

Today's Flash Crash-ASIA

I'll check this one out as soon as 3C is back up, but I'm sure I'll find the same thing I always find, a negative divergence late yesterday.

The moral of the story continues to be, Keep stops in your head, not with your broker, t's only a matter of time before the next flash crash hits the averages and don't panic, they always recover, even though you'd have to have superman like reflexes to sell on a flash rash, that is unless you have a stop in with your broker.

Lets take bets on whether the SEC will investigate! I'm saying, uhhhmmm.... NO!

I'll bring you the 3C charts on this one as usual ASAP, but as I said on the earlier FC this week, these algos keep pulling them off, even though they know most trades will be nixed, but there's still some profit motive at work here and the sooner we figure it out, the better.

Here's ASIA on the open.

Click on the chart for a larger view.

Intraday market bounce?

I still don't have my preferred tool of choice, but looking at the SPY, it looks possible we just saw a shakeout.

A good RSI positive divergence on a 1 min chart.

Here support is broken, volume picks up, there's your shake out. Watch for a bounce from here if the SPY crosses back above the trendline (now resistance), it'll produce a mini-short squeeze.

The market didn't like this one...

After the Fed minutes came out, the QE-crack addicted bulls were as Mike Tyson says with such lovely lisp, "eksthatic" which of course would be "ecstatic".

So Bernanke saying the following regarding QE3 took the wind out of their collective sails...

 Bernanke Says Fed Not Prepared to Take Action at This Point, but, Bernanke Says Recovery 'Still Rather Fragile'.


That's okay, I'm sure Wall Street can still ramp the ES to get the pin they want by Friday.

DUST Update

This is another I look forward to seeng the underlying 3C action (very frustrating for me right now and I'm sure you). In any case, yesterday I showed you the improvement in DUST, even though it's not a long signal in the trading system, I know several of you had a cost basis and risk management that allowed you to hold it. So far so good. Here's yesterday's 3C update of DUST.

And here's DUST today...

Moving up off a gap lower in to the green.

The moral of the 3C analysis is when you have all timeframes lining up like they did yesterday, it's a pretty good bet that there's been accumulation. Next up, we need to quantify it to get an idea of where this is going. The fact I'm a bit blind right now doesn't matter too much in this case, we need several hours of data to see what the longer timeframes are dong, whether they are confirming , leading or out of confirmation.

I'll get the updated charts up ASAP.

USO Update

Still blind, but things are happening thus far as expected. Yesterday I posted this about USO, be sure to check out the charts.


In Short, I'm still intermediate term bullish on USO, but yesterday it was bumping up against resistance and showing 3 negative divergences as you can see n the post above. Today t's backed off that resistance level.

Remember, resistance is only an exact level for technical traders. Much of what you see on a price chart s created by the two main drivers of price, those would be Fear and Greed. As I've mentioned before, a price chart is an emotional map when read correctly, therefore exact resistance/support levels are really only useful to Wall Street in shaking out technical traders who get a little too technical about these levels. The truth is support and resistance are areas and if you think about the emotional process of how each are created, you'll understand why they are areas and not exact levels.

In any case, my original thinking was for a pullback to the $37.75-$38 area. I'll be very interested to see what 3C looks like as soon as real time is restored.