AAPL is a little more interesting, that is coming next.
7 years ago
Thursday, March 1, 2012
Market Update
I'm not voiding a market update and have not forgotten about it, it is just there are no strong intraday (note the use of the word "intraday" ) signals that are useful either way right now.
DIA 1 min saw a negative divergence on the opening highs, since then it has been pretty much in line with trade.
The 2 min chart showed the same opening negative divergence, it is in a leading negative position, but hasn't made any interesting moves like a new low on the day.
QQQ 1 min saw the same negative opening divergence and is trading with a negative bias in not confirming price action.
The 2 min chart is in line.
SPY 1 min is in line with trade.
The 2 min is in a leading negative position, but again, no interesting moves suggesting an edge to a trade at the moment.
AAPL is a little more interesting, that is coming next.
AAPL is a little more interesting, that is coming next.
USO
In yesterday's early morning USO update, I showed some short term charts that suggested a bounce in USO.
Let's take a look at the current charts.
USO 60 min chart-in white is the channel buster and subsequent decline, in yellow is the heavy volume (important point-must be within an established decline) and some long lower wick candlesticks suggesting a reversal to the upside-this gives no target, just a reversal. In green, the most common place for a bounce to move to, the lower end of the channel or "kissing the channel good bye".
The 1 day chart also confirmed the strong probability of a reversal (again, no target implications, just a reversal) with a hammer reversal candle and heavy volume.
USO 5 min 3C shows the channel buster negative divergence in white and then trend confirmation in green, then a small positive divergence in white.
Thus far the 1 min chart today has not confirmed USO's slight move higher.
The 2 min chart has not confirmed either and is leading negative. We will have to see if this weakness continues and bleeds in to the 5 min chart which is currently in line with the trend or confirmation.
Other then short term trades (which can certainly be profitable), the larger question is whether the trading range in USO in white that started a downtrend and then saw a breakout from that down trend, is still in effect. Or put another way, is the move outside the downtrend at the green arrow a shakeout of the downtrend or a new emerging trend?
We look to the 15 min chart for clues, the downtrend was confirmed at the green arrow and the breakout from it is currently in a relative negative divergence suggesting probabilities are that it was a shakeout move, however, I would like to see a stronger signal and movement to the 30 and 60 min charts before venturing a guess as to what this latest move is really all about.
Let's take a look at the current charts.
Quick Check on URRE
So far, so good.
Unbelievable Sign of the Times
I just read that Greek bonds, which only 5 short months ago recorded a new record high yield of 100%, are now at 920%, very close to a 1000% yield!
The S&P's rating action (from CC to Selective Default) and the subsequent ECB decision not to accept Greek bonds as collateral in light of the S&P rating's action has reduced these bonds to virtual scrap paper. The yield rises as the bond price falls, so to get where it is at, there has been immense dumping of these bonds.
Furthermore, as I understand it, the retroactive collective action clauses Greece passed (which almost certainly led to the S&P downgrade) are not a true 75% of all bond holders to pass the PSI, they need only 50% of bondholders to respond and of that, 75% to respond favorably.
In addition, yesterday I addressed the problem of the bailout as the money allocated to recapitalize the Greek banking system is now most likely severely insufficient since Greek banks holding mostly Greek debt were not able to use that as collateral in this week's LTRO and to make matters worse, there's been a huge bank run by the citizen's of Greece which has prompted the Finance Minister to plead with the ordinary people to put their money back in the banks.
Furthermore...
I don't understand how austerity measures which will cause even worse unemployment will help Greece grow its economy when the very measures are tearing it apart. However, we need not wait for the effect of austerity to do its damage, details are emerging today of the collapse or further collapse in the Greek economy.
From Reuters:
Greek manufacturing shrank at its fastest rate in at least thirteen years in February as production and new orders declined at record rates, driving the sector deeper into recession and forcing firms to shed more jobs, a survey showed on Thursday.
The Markit Manufacturing Purchasing Managers' Index (PMI) for Greece fell to a survey low of 37.7 points in February from 41.0 in January, staying below the 50 mark that divides growth in activity from contraction for each of the past 30 months.
And these are only a few excerpts, you should read the entire article. These are the hard facts that were released in the top secret "Greek Sustainability Report" that was leaked showing that even with the next bailout (if they get it), Greece will be nowhere near sustainability as envisioned in the bailout and bailout terms. As usual, EU plans make conditions worse not better, but as most recognize, the bailout isn't for Greece, it is for all of Greece's creditors.
The S&P's rating action (from CC to Selective Default) and the subsequent ECB decision not to accept Greek bonds as collateral in light of the S&P rating's action has reduced these bonds to virtual scrap paper. The yield rises as the bond price falls, so to get where it is at, there has been immense dumping of these bonds.
Furthermore, as I understand it, the retroactive collective action clauses Greece passed (which almost certainly led to the S&P downgrade) are not a true 75% of all bond holders to pass the PSI, they need only 50% of bondholders to respond and of that, 75% to respond favorably.
In addition, yesterday I addressed the problem of the bailout as the money allocated to recapitalize the Greek banking system is now most likely severely insufficient since Greek banks holding mostly Greek debt were not able to use that as collateral in this week's LTRO and to make matters worse, there's been a huge bank run by the citizen's of Greece which has prompted the Finance Minister to plead with the ordinary people to put their money back in the banks.
Furthermore...
I don't understand how austerity measures which will cause even worse unemployment will help Greece grow its economy when the very measures are tearing it apart. However, we need not wait for the effect of austerity to do its damage, details are emerging today of the collapse or further collapse in the Greek economy.
From Reuters:
Greek manufacturing shrank at its fastest rate in at least thirteen years in February as production and new orders declined at record rates, driving the sector deeper into recession and forcing firms to shed more jobs, a survey showed on Thursday.
The Markit Manufacturing Purchasing Managers' Index (PMI) for Greece fell to a survey low of 37.7 points in February from 41.0 in January, staying below the 50 mark that divides growth in activity from contraction for each of the past 30 months.
Production and new order volumes fell at the sharpest pace in the near 13 year history of the survey as austerity sapped demand. New export orders fell for a sixth straight month and at the steepest rate since May 2010.
Greece's 215 billion euro economy shrank by an estimated 6.8 percent in 2011, its fourth straight year of recession. It is seen contracting this year as well.
Greece's unemployment rate hit 20.9 percent in November, the latest available data, highlighting the pain of higher taxes and cuts in public sector pay and pensions which suppress economic activity.And these are only a few excerpts, you should read the entire article. These are the hard facts that were released in the top secret "Greek Sustainability Report" that was leaked showing that even with the next bailout (if they get it), Greece will be nowhere near sustainability as envisioned in the bailout and bailout terms. As usual, EU plans make conditions worse not better, but as most recognize, the bailout isn't for Greece, it is for all of Greece's creditors.
Looking for the next GLD Trade
Yesterday I closed the Puts I opened last week in GLD on what I suspected was a head fake move, it payed off big time.
Here is the trade just before closing yesterday around 3 p.m. in the WOWS Options Model Portfolio
March $173 Puts bought for $2.04 and sold for $5.30 for a 211% gain which was closer to 215% by the time it was closed. This trade took about 4 days.
Yesterday I received a lot of emails from people looking to buy puts in GLD, I encouraged everyone to wait for a bounce as a bounce was most likely. There is a possible Long trade on the bounce, but it is more risky.
This candlestick configuration suggests a reversal to the upside, however there are several patterns that would signal a bearish continuation pattern that I will list at the end of the post. A test of the $170 area is a likely outcome and maybe then some.
Here's the short term 3C chart from yesterday suggesting a bounce and thus my reason for taking profits yesterday and suggesting members wait before entering a short or buying puts.
The 5 min chart also shows a relative positive divergence.
And another relative positive divergence on the 15 min chart.
Given today's opening, I think the most likely candlestick pattern would be some variation of "Falling 3 Methods"
Note however that there can be more then 3 rising candles in this formation. We'll keep an eye on 3C as we move forward for timing hints.
Here is the trade just before closing yesterday around 3 p.m. in the WOWS Options Model Portfolio
March $173 Puts bought for $2.04 and sold for $5.30 for a 211% gain which was closer to 215% by the time it was closed. This trade took about 4 days.
Yesterday I received a lot of emails from people looking to buy puts in GLD, I encouraged everyone to wait for a bounce as a bounce was most likely. There is a possible Long trade on the bounce, but it is more risky.
Given today's opening, I think the most likely candlestick pattern would be some variation of "Falling 3 Methods"
Note however that there can be more then 3 rising candles in this formation. We'll keep an eye on 3C as we move forward for timing hints.
ISM Manufacturing Misses, Send Market Lower
The initial reaction to the ISM miss looked like this just 2 minutes ago...
Here's the data...
Released On 3/1/2012 10:00:00 AM For Feb, 2012
ISM not only missed consensus of 54.6, but declined from the previous print at 54.1 coming in at 52.4
As you can see below, 3C never confirmed the opening trade.
Confirmation of opening trade would have seen 3C in the area of the orange box.
Here's the data...
Released On 3/1/2012 10:00:00 AM For Feb, 2012
| Prior | Consensus | Consensus Range | Actual | |
| ISM Mfg Index - Level | 54.1 | 54.6 | 54.0 to 55.5 | 52.4 |
ISM not only missed consensus of 54.6, but declined from the previous print at 54.1 coming in at 52.4
As you can see below, 3C never confirmed the opening trade.
Confirmation of opening trade would have seen 3C in the area of the orange box.
CHT Trade Candidate Follow Up...
On Feb. 24th I posted CHT as a trade candidate and while CHT was already down big, I urged you to put it on a watchlist for a bounce to the $31.50 area. Well CHT has bounced and is nearing the area mentioned in the post, this is why we use watchlists- to keep tabs on potential trades and we use alerts to let us know when a potential trade is nearing our target so we can pay close attention and look for a tactical entry.
Here's CHT...
CHT longer term top and the date of the trade idea. The large volume on an established decline suggested a bounce was coming. The pattern implied target is $18.
A closer look at the bounce toward $31.50
Here the Trend Channel on a 5-day setting has a stop in the $33 area so a bounce to $32 or $32.50 would be even better from a risk management point of view.
The long term daily 3C shows CHT in a strong daily leading divergence, the trade has been all about a tactical entry.
Here's the 5 min 3C that shows the accumulation by the middle men for the bounce. Keep CHT on your radar today as SJM was yesterday.
Here's CHT...
An Interesting LTRO Factoid
Jens Weidmann, head of the German Bundesbank attacked Mario Draghi regarding "increasing risk stemming from certain ECB policies", further adding that Germany, the biggest Euro-zone creditor sees risks and the potential of the ECB damaging their reputation stemming from the ECB's willingness to loosen collateral restrictions; Weidmann called on Drahi to make a quick return to stricter collateral rules.
I find this news interesting considering some of the LTRO details have emerged and half of the 800 banks in the Euro-zone receiving LTRO loans were GERMAN! Which is surprising in its own right.
Clearly Weidmann's criticism of ECB collateral was not an issue when collateral rules were relaxed way back when for the second LTRO, it only seemed to become an issue when the level of participation of German banks became clear.
I find this news interesting considering some of the LTRO details have emerged and half of the 800 banks in the Euro-zone receiving LTRO loans were GERMAN! Which is surprising in its own right.
Clearly Weidmann's criticism of ECB collateral was not an issue when collateral rules were relaxed way back when for the second LTRO, it only seemed to become an issue when the level of participation of German banks became clear.
Wednesday, February 29, 2012
All in the P/V
I could tell you that volume today was higher than average (NYSE 1110 mln, vs. 794 mln avg; Nasdaq 2060 mln, vs. 1703 mln avg) or decliners outpaced advancers (NYSE 1018/1993 Nasdaq 644/1923).
However, just looking at the charts tells you something has changed.
The Price / Volume relationships really tell the story, all dominant and all the second most bearish reading, Price Down/Volume Up.
Dow-30
NASDAQ 100
Only 21% of the total advanced today!
R2K
Sp-500
By the way, over the last 3 days, the Dow crossed above and below $13k 52 times! I would be remiss to not tell you that the Dow lost $13k today.
Inside Information -Treasuries...
Last night in the "Daily Wrap" I showed a few charts of TLT and said,
"Here on the 15 min chart you can see accumulation sending TLT higher and a negative divergence that fits with the candlestick reversal above, so I'm looking for a pullback in treasuries, unless some event causes a flight to safety."
And that's exactly what happened today. I'm convinced that smart money was at work behind this negative divergence, but the reason remains unclear. This Wall Street Journal article covers some of the possible angles, plus the NY F_E_D conducted a reverse repo today, withdrawing liquidity from the market.
Whatever the cause, 3C caught it.
"Here on the 15 min chart you can see accumulation sending TLT higher and a negative divergence that fits with the candlestick reversal above, so I'm looking for a pullback in treasuries, unless some event causes a flight to safety."
And that's exactly what happened today. I'm convinced that smart money was at work behind this negative divergence, but the reason remains unclear. This Wall Street Journal article covers some of the possible angles, plus the NY F_E_D conducted a reverse repo today, withdrawing liquidity from the market.
Whatever the cause, 3C caught it.
