Market Update

I'm having a hard time keeping up today, but here's the market update.

 DIA 1 min Leading positive divergence

 DIA 5 min  Leading positive divergence

 IWM 1 min  Leading positive divergence

 IWM 5 min  Leading positive divergence

 QQQ 1 min  Leading positive divergence

 QQQ 10 min  Leading positive divergence

 SPY 1 min Leading positive divergence

SPY 10 min Leading positive divergence

ERY Trailing Stop

 This is a tight sop, you can see it's a 50 bar on a 5 min chart.

This is the widest stop I would use at this point, I don't expect this to be a long lived trade.

If you have my trend channel, let me know, there are some alternative stops with the TC.

SLV

I'm sorry, I've been trying to get this post out for an hour and a half. Here's the SLV/ZSL Update.

 Rarely do I use Worden's Money Stream because it rarely gives signals, but when I saw this, I had to show you. This is a severe negative divergence in SLV's daily chart.

 I probably wouldn't have posted it had it not been for the severe positive divergence in ZSL's daily chart (ZSL being the short on silver/SLV).

 The hourly chart of silver showed a breakdown, then a positive divergence, I showed this to you at the time it happened as t was odd, well prices moved up from that positive divergence, but now 3C is lagging price, so that's a negative leading divergence.

 ZSL had almost the opposite, it has shown accumulation and now it's leading positive.

 This is SLV's 30 min chart with a negative leading divergence.

 SLV's 15 min chart shows the same.

 ZSL's 15 min chart is in a leading positive divergence.

 SLV's 10 mn chart is in a negative divergence and leading.

 ZSL's 10 min is leading positive.

 ZSL's 5 min is also leading positive.

Here's an hourly chart of SLV in a bearish ascending wedge, most traders expect a straight drop down out of the wedge, because it is so obvious, it is likely to be gamed, so I would look for a breakout to the upside, maybe even a new local high and then a plunge in SLV, lifting ZSL. It shouldn't be long now that the wedge is so tight.

Market Update

There's little in the way of short term movements or intraday, but there are some surprising intermediate term positive divergences. I was going to mention this as an alternate version of my theory, it went something like this, drop the market today sharply and sell more puts, then move the market up Friday and cause them to expire worthless. You already saw that in the range, the puts outnumber calls (by open interest) 10:1. Either way, I think we still get the rally.

 DIA 1 min offers little short term guidance..

 The 5 min chart has an interesting leading positive divergence.

 The 30 min chart remains in a leading positive position.

 Even the daly chart has an opportunity to put n a positive divergence here.

 The IWM 1 min also offers little short term guidance, there's a possible small leading divergence, positive, right now.

 But look at that leading positive on the 5 min chart again!

 Even the 15 min chart is positive.

 QQQ 1 min has mostly been in line (green arrows) there's a slight positive divergence now.

 Again, the 5 min chart is in a leading positive divergence!

 As is the 10 min chart.

 The 30 min remains in a positive leading position.

 SPY 1 min suggests a little intraday downside.

 The 10 min chart is positive leading.

 The 30 min chart remains positive leading.

So there are some unexpected divergence today. I'll keep monitoring them, there are most surprising.

Trade Idea URRE (long)

This is one that has been under accumulation for some time. A while back, I made the fundamental case for URRE and the technicals have been moving in the right direction since. Here's what would have to happen for a long position in URRE so you may want to keep it on a watch list or set alerts.

 The daily chart has shown URRE as carving out a base for nearly six months, being one of the few commodity based equities that didn't run under QE1/2, it looks like fundamentals have created a situation in which URRE's time has come. If price can test support or even break it by a bit on a head fake move and 3C can make a higher high then the last low at the start of August, we'll probably have a high probability trade with low risk.

Likewise, if the hourly chart can test the price support or even break down below $.98 a bit and see the hourly 3C line move up, we'll have similar confirmation. So keep this one on your watchlist, it's created a big enough base to sustain quite a rally.

What to Expect...

This is a follow up post of the original, "Theory on How Op-Ex Friday Fits In To the Big Picture"

In the original post, I said,

"I just looked at the SPY Options chain, between $120-$130 there's heavy open interest in both, but about 60% more in the puts then the calls.

So this is just a theory, but if Wall Street creates a SHARP sell-off between now and Friday, they wipe out most of the call contracts, the holders of Put options may be more likely to exercise their Puts then sell them if they see such a sharp sell-off. The long term 3 has been bullish, so if next week Wall Street runs the market up then the exercised Puts will be in a short squeeze and they effectively knock them out too on a Sharp rally."

Does this chart look like a natural progression or does it look like there's been some planning and intervention?

A smooth rounding top is cut off in to a SHARP SELL-OFF, so the first condition of the theory above , "if Wall Street creates a SHARP sell-off between now and Friday, " has been met as the theory was posted yesterday. 

Yesterday I was looking where there was heavy open interest, in calls and puts and a lot of that was in the $130+ area. I compares the $120-$130 calls vs. Puts and found 60% more open interest in the Puts. As of now, all of those calls with heavy open interest are wiped out and worthless, and this is what I was expecting and why I said we needed a SHARP sell-off between now and Friday. 

Now looking at the calls and puts within the area I think the S&P is most likely to hit...

Around $1100 on the S&P-500, although knowing how double bottoms work and throwing in the head fake concept, I would expect a marginally lower low so perhaps a bit below $1100 SPX.

In the range of $115 SPY to $110, currently the open interest for puts is 10x more then calls. The key to this theory is that the sharp sell-off will make the put holder's exercise their puts and take possession, with such a sharp sell-off, they'll be expecting the next leg down. 

if this is what happens and the 3C charts and even the Dollar/Euro charts suggest it is likely...

(the red arrow represents today to Friday, the green arrow represent next week as early as Monday and throughout the week)

then Wall Street will have caused the calls to expire worthless and will short squeeze the shorts next week. At this point I think we've had our final rally and the second shoe drops.

DZZ to be the next ERY?

Many members recently entered the ERY trade and it wasn't the easiest trade to hold, although as I mentioned a week or two back, your stops should be as wide as you an afford to make them with this kind of market volatility and your risk management should be your first priority. With wider stops, the risk management becomes a lot easier.

In any case, ERY gave all the signals and today it did what the underlying action has been threatening.

IF my Op-Ex theory plays out, then DZZ could be next week's big mover.

Here are the charts....

 GLD posts a new high this a.m., but 3C refuses to confirm it, it seems likely this is not accumulation, but merely a retail flight to safety bid.

 The 2 min chart shows something worse, distribution in to the new highs.

 The key timeframe, 15 min 3C also shows a distribution mode in play
(selling in to higher prices)

 And the daily is suggesting trouble, this may be the kind of trouble that produces a once in a year buying opportunity on a pullback to the 150-day m.a.

 Here's DZZ, 2x leveraged Short on Gold. The hourly chart has been positive for some time.

 The 30 min chart has also been positive for a length of time.

The 10 min hart is also starting to get that sharp look to it. I'll keep following GLD/DZZ, I think it may be to early now to have a large position, but I think we are getting close. Silver is coming up...

Dollar / Euro Post

If you didn't already, I would suggest reading last night's "Chart Request: Euro vs. U.S. Dollar", it also expands on my thoughts about the near future and Op-Ex Friday. IT also showed this move in the dollar and Euro today.

There's not a lot of change in the charts since last night, but here are the updated charts for today.

 Here's the .91% move up in the dollar today alone on a daily chart.

 The 15 min chart shows a sharp positive divergence, but not a long one, which fits well with my theory of what will happen n the market after Op-Ex Friday, the first part of my theory played out perfectly this morning.

 Here's the 5 min chart with accumulation yesterday on a gap down head fake, right now the 5 min 3C chart is confirming the price trend.

 Here's an intraday chart of the Euro/FXE's fall this a.m., down over 1% a few minutes ago.

 FXE 15 min, again a sharp divergence, but not a long one, again it fits well with my thoughts on where the market is going.

And the 10 min chart, note the head fake gap up yesterday with a negative divergence. Remember what I always say about head fake moves, false breakouts, etc.

For those who missed it or just want to refresh your memory, here's the post in which I lay out what I expect the market to due from the information and charts available.

Theory on How Op-Ex Friday Fits In To the Big Picture