GALE/QCOR Pair Trade

Last Wednesday I updated the GALE/QCOR pair trade idea from Feb. 2 GALE (long) was at $1.57 and I suspected it had more room on the upside. Take a look at GALE today.

So we have another 21% gain in GALE since last Wednesday and about a 164% gain in GALE since the idea on 2/2.

QCOR is the short in the pair trade, it's still working its way down a trendline...

Here's the premise of the QCOR short...

A break of support and then a target around the long term trendline near $20, GALE is the long hege for this trade, but at this point is certainly working well.

 I'd be tempted to take some profits here, this is a tight intraday stop.

 This is a bit loser if you want to give it more room or take partial profits and leave some to run.

 This daily has held the entire uptrend, a move below this and the GALE portion of the trade is over, but the QCOR should be working well by then as they are both biotechs.

You could take some profits and look to reposition on a pullback to the blue 22 day moving average on the X-over screen, which remains long.

Financials

 XLF looks like it's working on some kind of top, it's difficult to say what at this point, maybe a triangle, a descending triangle, a H&S, etc. We'll have to see how it reacts at the current trendlines.

 Why do I think this is a top and not a consolidation? Volume is one of the first things I look at when trying to confirm a top. from May-July of 2009 there was a small pattern that looked like a H&S top, if traders understood volume and the characteristics of a top better, they would have realized it was simply a random price pattern. In the same area as the top I drew above, I have constructed a simple cumulative volume indicator, volume should rise on rallies and fall on declines, here we see volume fall off on yesterday's rally and it increase on the decline. Thus far today, volume has fallen off on a little bounce, this is common in a top; the cumulative volume indicator just makes it easier to see.

 Here's the 30 min chart, notice it is leading negative and making a lower low today, yet price didn't make a lower low (compare between the current reading and the small red trendline).

 Here's the 15 min chart divergent at yesterday's top and leading negative all of today, remember that the shorter charts like this 15 mi flow in to the longer like the 30 min above.

 The 5 min chart is leading negative as well, that is not a positive divergence in the red square at the higher low, it is simply in line as price did the same thing.

 The 2 min chart at yesterday's highs  and today is leading negative

A close up of the 1 min shows an early positive divergence on the gap down lows and another recently, so we may get a chance to see how XLF reacts at the top trend line I drew on the first chart above.

I'll update again as it develops.

GLD Update

This is a shorter term update, there's still the issue of a possible gold top, whether it be a primary top or a lesser intermediate top, that will be addressed in a more intensive post later.

 For now, the red arrow to the left was the head fake move in GLD which produced a 215% gain in a couple of days, on this 30 min chart, GLD is starting to move closer to an "in line position", which is better then where it has been since that head fake move.

 Here's the 15 min chart on a GLD bounce attempt after the larger head fake move. There's not much positive on this chart.

 However on the shorter term charts (remember, divergences have to start somewhere and they are usually on the short term and migrate to longer term charts as they become more powerful or if they become more powerful). What we have here is a positive divergence on the 14th sending GLD higher and a leading positive position for 3C since, even on today's drop in GLD, the 5 min chart is still even more positive, suggesting the dip is being accumulated.

 Here's a 1 min chart with the details of the dip, you can see the positive divergence from the 14th on the left and except for 1 negative divergence which sent GLD lower, GLD has been in line or trend confirmation here. Today you can even see a leading positive divergence on today's gap down, again I suspect there's some accumulation of the weakness.

The 150 day moving average has been the most relevant average for GLD, from what I see now, I wouldn't be surprised to see a short term move above the 150 day average, again this is the shakeout theory at work as the 150 was recently broken again. Thus far it looks like a short term long trade, but again, we still have the bigger issue of the probable GLD top to deal with. In the mean time, you might want to take a look at GLD for a quick trade, our last one was a 215% move using some calls and lasted about 3 days.

ORCL Follow Up

ORCL is in a similar situation to WMT as a short trade idea...

 Here's ORCL's Top and a bear flag that failed to reach the upper trend line. ORCL is different then WMT as ORCL is near the bottom of the bear flag rather then the top.

 Here's ORCL breaking below the bottom, if you follow the Edwards and McGee Technical Analysis dogma, then ORCL was a short yesterday and would have been covered yesterday as well, the market understand technical analysis all too well and uses it against technical traders every day like what you see here. ORCL is still an excellent short in my opinion, at least for an initial move to the large descending triangle's lower trendline, (it will probably see volatility there and then make for an even better short). So ORCL is lingering at last support, so again, at important technical levels, the breaks are never as clean in the real world as they are in the T.A. books and seminars.

 The 2 day Trend Channel does a good job in holding ORCL's moves, however, if they run a shakeout and this is just experience and gut, I have no evidence, then near the Trend Channel stop out (on a closing basis), there is a very juicy looking level of resistance, a break through that (at the yellow trendline) would almost certainly shakeout shorts. This is why I prefer wide stops on initial positions, it would be a shame to get booted from a good short on a shakeout move. Just be aware of the area and remember psychology, the market is about fear and greed, the more powerful a shakeout or head fake move, the more it moves emotions which for too many traders dictate decisions.

 The 60 min ORCL chart is ugly, this should easily move to the lower Triangle trendline and after some volatility, much lower.

The daily chart is showing the same negative divergences as well, except this time ORCL wasn't strong enough to make it to the top trend line of the top pattern.

WMT Follow Up

This is a follow up for stops, but it could also be used to initiate new positions or add to existing ones.

 Here's WMT hanging on around that upper trend line of the bear flag, I don't have any evidence that WMT will attempt a shakeout except experience, nothing is as easy as they make it out to be in Technical Analysis anymore. At the red arrow we saw a move inside the flag that turned in to a quick shakeout. My experience has been, whenever an important level is broken (technical analysis dogma teaches you to short it and it should immediately fall), there's a lot of volatility and shakeouts around that level, so as I said, I don't see evidence of a shakeout coming, I would just expect one based on how the market trades.

 I suspect the daily Trend Channel would hold a shakeout on a closing basis, but there's the off chance a shakeout makes a new local high before heading back down. I would probably stick with the Trend Channel on a closing basis and if there's a move above it on a closing basis, I'd look at the move more carefully and judge from there. The nice thing about the WMT short here is the risk is fairly low as a natural stop is in the area just above the recent highs.

The longer term charts which are the most influential for the trend (ignoring noise like shaek-outs and such) looks very bad for WMT.

Sectors, FX, etc...

 Commodities are in line with the SPX (SPX in green on these charts) on an intraday basis.

 Longer term, commodities have been lagging since before the 6th of March and lagging in this current leg.

 The EUR/USD seems to have very little influence today, normally it is pretty closely correlated to the market, the red line is yesterday's close at 4 p.m., you can see a little bounce in the Euro, theoretically this should help the market a bit to bounce intraday, maybe try to fill some gaps.

 The carry trade pair of AUD/USD has sold off since the close and this is what the market seems to be following more closely as the carry trade is unwound, that isn't good for stocks or any risk asset for that matter.

 Intraday this is the Euro vs the SPX, the Euro is leading the SPX

 Intraday this is the $AUD carry currency vs the SPX, it  is much more in line with the market and slightly lagging the market. I think there are two currencies pushing and pulling on the market, the Euro on the upside and the $AUD on the downside.

The $USD seen here in green vs. GLD saw a stronger opening, pressuring the PM's, it is now moving back toward yesterday's flat range, the $USD would normally have the greatest influence on the market algos, however it seems the $AUD/$USD pair is exerting more influence lately.

 This is the Energy complex vs the SPX, it is lagging

 Financials are the strongest on the day thus far, leading the SPX.

 Tech had an initial strong open, that has since faded.

 Sector rotation from yesterday afternoon to today shows Financials coming back with good relative strength, however the defensive sectors are also coming back in to rotation, Utilities, Staples, (earlier Healthcare). You can see Energy is off today as is Tech. Industrials weakened significantly yesterday, they continue to slide today. Expect the most pressure to be on the Dow.

 Here are semi-conductors (Tech) gapping down from yesterday and trying to fill the gap.

 AAPL is down -.95%, note the small parabolic move from yesterday near the close to the open today in yellow and also the common intraday reversal in red (in a downtrend look for a spike in red volume with a candle with a long lower wick, it's almost always an intraday reversal, although it works on daily charts too).

ES showed NO positive divergence on the bounce off the open (yellow box) and 3C is lagging ES a bit.

The Context Model for ES shows ES still overvalued vs the model (ES red/model green)

The Context VIX model shows the VIX undervalued.

For now it seems Financials are the story with the tug between the two currency pairs of EUR/USD and AUD/USD.

Early Update

 DIA 1 min was leading negative yesterday, showing the move was being used to sell in to. there's a small positive divergence this a.m., perhaps some backing and filling of the gap?

 DIA 2 min was leading negative yesterday and is in line this morning thus far.

 IWM 1 min, the IWM has had the most 3C short term support, that's why I think it has been playing catch up to get a closing breakout like yesterday, until yesterday it was the only average that had not done so. As you can see, it was leading negative through most of yesterday, there's a decent 1 min positive divergence this a.m., again, I suspect an attempt to fill the gap as the market has been relentless about filling gaps. If the gap is left open, it will be a bearish breakaway gap.

 IWM 2 min negative divergence and a small positive this a.m. thus far.

The IWM 5 min is more important to the overall trend then the 1-2 min, it is deeply leading negative.

 QQQ 1 min leading negative through yesterday and in line this a.m.

 QQQ 2 min leading negative ysterday and in line this a.m.

 QQQ 5 min is also deeply leading negative, especially at yesterday's move.

 SPY 1 min leading negative yesterday with a small relative positive divergence this a.m.

 The longer view of the SPY 1 min to see the extent of the divergence.

SPY 5 min leading negative.