What's happened This Week So Far

We started the new week out a bit weak in S&P futures last night (ES)...

 ES was a bit negative going in to Friday's close, it opened a bit weak and lost ground. Overnight, China came out with their own PMI data (HSBC's Chinese Flash PMI comes out first), and the data missed. Last month China's PMI manufacturing was under 50 and signaling contraction, consensus for today's was 50.1, but came in at 49.8 which is the second month of contraction per the Chinese data, the HSBC data is worse as you might expect. There was modest improvement vs. last month's print and the sub indices saw modest improvement except for 1, the employment index which is now in its fifth month of decline with input prices seeing their second consecutive month of higher prices. Typically the Chinese answer to bad data like this would be some kind of PBoC easing action, but inflation is a concern and loose monetary policy will only make that worse, so China itself is now admitting to 2 consecutive months of contraction, HSBC's Chinese PMI has been in consecutive decline since about November of last year; this didn't help early sentiment in futures. *It should be noted that the Shanghai Composite is closed for the Chinese "Golden Week" so we didn't exactly see reaction in the Chinese market to their PMI data.

 However, at the European open, Italy, France and Germany saw slightly better PMI readings as well as the Euro-zone as a whole, except the UK. Euro-zone PMI came in last month at 46, consensus was for the same this month, it beat by...get this, .1 at 46.1 and that signaled a 100 pip move higher in the EUR/USD. UK PMI came in at 48.4, down from 49.5 on consensus of 49. The .1% beat in the Euro-zone PMI is hitting headlines as the strongest PMI in 6 months, but as always the devil is in the details. Euro-zone unemployment hit a new record at 11.4% per the PMI data. New orders fell from 43.7 to 43.5 and French PMI came in at 42.7 which is the lowest in 3.5 years, however, believe it or not, this new low was a beat of consensus with Spain, Italy and Germany also beating consensus in most cases by .1%.

The Euro's reaction.

ES going in to the North American open until present.

At 10 a.m. the market jumped up in the US as the ISM manufacturing index beat...

DIA 1 min.

Released On 10/1/2012 10:00:00 AM For Sep, 2012

	Prior	Consensus	Consensus Range	Actual
ISM Mfg Index - Level	49.6	49.7	48.0  to 50.6	51.5

Strangely, the ISM report is bouncing back following three months of contraction going back to June, but not for September with the index at a better-than-expected 51.5. 

Friday Chicago PMI saw the most deterioration in years, today the ISM beats even the highest consensus estimate. The sub-indicies were even very positive in today's ISM,  New Orders, Prices, and Employment, all of which posted numbers solidly in the 50+ range. Why ISM is so different from every other manufacturing survey is anyone's guess, it seems way out of place.

Meanwhile Goldman Sachs lowers their Q3 GDP for the second time in as many days!?!?

European stocks jumped on the US ISM, european Credit as much less excited.

In fact the same can be said here in the US as High Yield Credit wasn't nearly as excited as US equities.

 The green arrow is where High Yield Corp. Credit closed Friday so it has been in the red all day and didn't hold on to the post ISM read bounce very long at all before diverging to the downside from the SPX.

 Longer term the two have been moving together, but today's move in the market was not mirrored (thus far) by credit.

 Even Junk credit had the same negative divergence from the SPX.

 Commodities also strangely diverged lower.

 As did yields intraday

And longer term like High Yield Corp. Credit, Yields which have been tracking the SPX fairly well, weren't impressed at all on today's early data. 

With so many horrible multi-year lows in manufacturing data, perhaps the market doesn't trust this pre-election ISM read that is so wildly out of whack with manufacturing data released just a day ago on Friday.

Initial opening indications are following through

As we saw the early initial opening indications were good on the 1 mi timeframe, on 2 mins there was no follow through which looked to be a hollow move. US ISM beat solidly sending the market higher at 10 am (more on that in the next post), but now appears to be seeing a fade of that initial excitement.

Charts coming, it's a bit strange thus far today, especially the US ISM and the market's reaction now.

IBM Head Fake Reversal?

Typically a head fake move the size of this would last several days to a couple of weeks, but IBM is definitely worth looking at here especially because you could have a stop about $1-$2 away. I wouldn't use that low amount of risk to establish a huge position, you still have to consider gaps and such, that's why I typically don't like any one position representing more than 10-15% of portfolio value, even if the stop is so small that it would allow for a much larger position without violating the 2% rule.

In any case, take a look at IBM which is one I've been keeping tabs on since last week.

 Remember what I've said about double tops and bottoms, the second move (top or bottom) in Technical Analysis is supposed to fall short of support (for a bottom) and resistance for a top, but over the last several years , more increasingly so, we see that violation which makes traders think the top or bottom is no good and they either short (the bottom) or buy the breakout top, these are the head fake moves that are so common. IBM just made such a move on something that looks like a double top. This is the daily chart with the breakout today.

 A daily chart of MoneyStream that is negatively divergent.

 Daily 3C chart also negatively divergent.

 Here's the kicker, IBM formed a very clear bullish bull flag which would lead technical traders to expect an upside breakout, it's these obvious patterns where you have to be most careful as they are often bull traps. You can see today's breakout above the last resistance area.

 However, like GOOG, going in to the breakout, the 60 min chart as well as the daily, were already negative casting suspicion on the breakout as a possible head fake move.

 On the breakout the 1 min chart is deeply leading negative.

 As is the 2 min

 The 5 min is negative

And the 15 min.

This is why IBM looks like it is a strong candidate for a head fake move in which you can short in to price strength with underlying weakness, the only thing is often these moves linger above resistance for days or weeks, even BIDU did. One way to deal with it is a partial or phased in entry, you can still keep the stop tight at $1-$2 above, although I'd prefer a little larger stop with fewer shares, but thus far today's intraday activity doesn't look that great. Another approach would be to short IBM as the head fake is confirmed with a price move below support at the $209.50 area.

This is definitely one to keep on the radar.

UNG up +4%

UNG has a nice move up this morning and we still are waiting for a large volume spike to move to stage 2 mark up. However from the looks of things, I'd think the most probable outcome would be a pullback to fill this morning's gap.

 UNG daily has a gap today and a long upper wick indicating resistance in roughly the same area as July highs. Volume has not yet built in.

 UNG 60 min chart today also shows the long upper wick which is higher prices hitting resistance/profit taking, this is a bearish reversal candle and on volume so a gap fill or a move toward one seems likely.

 2 min chart is in line.

 10 min chart is in line.

The 15 min chart though is lagging and this is where we need to see some improvement, a gp fill could help that situation.

BIDU Update

Overall BIDU has a decent looking little base to stage an upside move from, however Friday I warned if I were trading BIDU short term I'd be taking profits now as it looks thin and ready to pullback, that's exactly what happened this morning. This may offer a new long entry in BIDU as it pulls back and reduces risk, but we need to see positive accumulation in to the pullback before considering the trade.

 BIDU base and the pullback this morning near resistance.

 BIDU 15 min negative divergence from Friday pulling BIDU down this morning.

Friday's 3 min negative divergence.

We'll need to see these charts repaired with positive divergences,it's too early to expect them yet, but we'll watch for these to start coming in positive, there we'll likely have a long entry on a pullback with much less risk and a better price position.

GOOG On Track

If you recall Thursday and Friday's posts on GOOG, what we might expect and how we can use that as an entry for a trade (short), GOOG is doing what we thought would be a likely set up; so far so good.

GOOG this morning...

 The triangle in GOOG I mentioned reminded me of the short set up in BIDU, twice and the likely move to the upside which may offer a head fake entry as GOOG is already looking weak in underlying trade. So far we have the start of that move in price.

 The 1 min 3C chart is weak.

The 5 min and beyond is where the set up is as these are negative, so a price pop out of the triangle is what technical traders are looking for and that creates the possibility, if not probability at this point that the move is a head fake giving us a better entry at lower risk.

I'd like to see a bigger move to the upside and continued or worsening negative divergences. I'll have it on my watchlist.

Crude/GLD looks like they will pullback

USO/Crude futures also look similar to opening indications, maybe a bit more extreme at least on the futures side. GLD opening indications on the 1 and 2 min charts are not confirming.

 USO 1 min confirmation on the open.

 USO 2 min failed to do the same.

 Crude 1 min futures negative

 GLD 1 min failed to confirm

As did the 2 min which is now leading negative

This is why early trade is often unreliable as there are a lot of games being played with overnight/pre-market orders.

Opening Indications

As just mentioned, this looks like an early order triggering move. In most cases the 1 min confirmed, but is either starting to fall behind or in all cases the 2 min failed to confirm, which looks like a strong, but thin opening move.

 DIA 1 min

 DIA 2 min

 IWM 1 min

 IWM 2 min

 QQQ 1 min

 QQQ 2 min

 SPY 1 min

SPY 2 min

Closing remaining URTY R2K long

The opening indications show the 1 min chart mostly in line, but with this parabolic move early, it looks like a stop or limit order triggering move. The 2 min charts which should be confirming aren't so I'll take the move on URTY and close it here.

Futures in to the open

The reason for looking at Futures in early opening trade i often the trend in to the open reverses sharply at the NY 9:30 open, whichever way that may be. Thus far I don't see any significant signs of reversal, I'll be keeping an eye on them as I still have 25% of the URTY (3x long the Russell 2000 ETF) still open.

FX

 EUR/USD since last night's FX open, a move down and then higher to this morning's open as $1.28 acts as support.

 The Euro at the 9:30 open (5 min)

 Crude futures overnight looked pretty strong, there's a decent relative negative divergence as we move to the NY open.

 ES was in line most of the night with a slight positive right before the open continuing the overnight trend starting around the European open at 3 a.m.

 NASDAQ Futures also in line with a smaller positive divergence in pre-market, this is almost in line, slightly more negative.

Gold futures have been in line nearly all night