FB Update

I had a couple of emails about FB and my reply has been the same, "If you are trading around FB then I would use a trailing stop in this area, if you are holding for the longer term, then be patient and you'll probably get a chance to add on a pullback soon".

To me FB is near some stiff overhead resistance, it's near a breakout to stage two mark-up and it is also quite extended so just a normal reading of the price chart only would tell us to expect FB to pullback a little and gather some strength before making an attempt to break out to stage 2, especially being this extended with no real pullbacks yet. Here are the charts and some possible trailing stops as well-I personally would only take partial profits on a trailing stop and leave some long exposure to FB and hope to add the partial shares potentially sold, back at lower prices on a pullback.

 Here's the daily FB chart and there's quite a few areas of overhead resistance here, which is also close to where a breakout from the base would be. The nearly straight line advance has had few pullbacks, no real consolidations at all and therefore is extended, a pullback/consolidation would most likely be beneficial here.

 The 1 min FB chart has seen some deterioration since those emails earlier this morning.

 Lets put that 1 min chart's trend in context though, very nice.

 The 2 min chart is also seeing some weakness migrate over so this could very well be the real deal for a pullback.

 The 3 min chart is also showing the same.

 The 5 min chart is yet to show that migration of a negative divergence, but it is very possible, then the pullback probabilities increase even more.

 The fact there's negative divergences on the 10 and 15 min chart tell me that FB was likely to see a pullback before continuing higher, the fact the 30 min chart looks good tells me that after a pullback the probabilities are high that FB continues higher.

 The 30 min chart, all makes good sense right now among the different timeframes and offers both a couple of plan and a probable opportunity.

 The Trend Channel 60 min chart is pretty close, it had 1 candle that stopped out at the red arrow, other than that it held the entire trend up on this leg.

Here's the daily Trend Channel trailing stop.

Other possibilities include the 10 day moving average as the first pullback to the 10-day on a X-over Screen initial long call. Also the 50 bar 30 or 60 min chart works well, depending on how tight you want a trailing stop.

Again, I would only take partial profits and leave at least half of my FB exposure still long, if you don't mind a little drawdown, I can also see just being patient and leaving the position alone, I suppose that depends on whether you have the time and/or want to add.

Breadth performance

It will be interesting to see how breadth performs, so far the EUR/USD is just barely above the pre-market highs, however the market is MUCH less enthusiastic with the SPY, QQQ, IWM and DIA no where near their opening highs and of the 4 major averages, the IWM is the only one that even seems to be acknowledging that something in currencies is going on, although far from tracking it.

The NYSE TICK chart has been enlightening this morning, the opening trade saw most stocks gap up with a strong opening TICK, from there it went downhill.

 The opening print of the TICK (number of NYSE advancing issues less the number of declining issues) was at an extreme at +1500 on the open this morning which we haven't seen anything approaching extremes the last couple of days, then the same very limp trade in to the morning with +500 capping the high-end of the range and -850 (a bit more extreme than what we saw last week) on the low end of the range until we hit another extreme in the -1250 area. This tells us intraday market breadth is following the price indications, lots of stocks gapping up and then lots of stocks losing that gap and moving down.

 When looking at the TICK vs the SPY (red) this morning, everything pretty much makes sense, the lows at -1250 almost seems like a short term capitulation, but the overall TICK seems to confirm trade well rather.

Here's the 3C chart of the EUR/USD with the early pre-market high with a negative divergence in to it and the recent move in the Euro just mentioned in the last update also seeing a negative divergence. Perhaps the market senses this move in the Euro wasn't going to hold or isn't likely to hold?

In any case, so far the 3C charts and the TICK (breadth) all seem to confirm trade very well so far.

Futures Update

Both S&P and NASDAQ intraday 1 min futures are showing the likelihood of a near term intraday move up, nothing that is technically significant, just a little relief from the a.m. selling of the gap.

This looks to be rooted in the EUR/USD intraday

Opening Indications & Market Update

The opening indications look perfect, the QQQ I think is the best example, but all the averages are similar and the follow through trade is moving like I would have suspected barring a gap down open, which I'm glad we didn't see as early gains or losses are hard to hold throughout the day.

 The DIA 1 min, like all the others, shows the early rejection of the gap up, although it did hit an area that would trigger some stops.

 The 2 min charts all vary a bit, but they are migrating in the right direction.

 The 5 mi chart shows the larger trend/probabilities for near term trade and this move today which we could call a head fake gap up thus far is reacting (price) exactly as it should considering the charts including this 5 min.

 IWM 1 min also shows the opening gap seeing almost immediate distribution in to the gap.

 The 2 min which warns that would be the case...

 And the larger 5 min picture-at least these are the charts caught up to trade at this point in the day, there are longer term charts in worse shape, but they need more time to develop.

 QQQ 1 min shows a small accumulation area, I'd have thought it was burnt up late Friday on the closing action, but as you can see the gap is part of it, but sold immediately on the open.

 2 min chart is perfectly in line intraday

 And the bigger picture 5 min chart is leading negative .

 the SPY 1 min with the same small positive divergence before late closing trade Friday and the gap up just sold from the get-go.

 SPY 2 min leading negative here...

And 5 min is the same, the longer trend view looks worse, but I'm interested in what today's action is like and how it interacts with late last week's.

Futures Update

Futures and FX (EUR/USD) look like they went stop hunting overnight, as of last night's post ES didn't qualify for such, but this a.m. it has, things are changing though or perhaps staying the same...

 ES futures with the Euro open at the green arrow have stayed in a large negative divergence all night and are moving in to a leading negative near the open.

 NASDAQ futures did see a 1 min accumulation period overnight right in to the European open, that has turned negative since.

 Here's the EUR/USD which also looks like it went stop hunting, but is now coming back down in what initially looks like a failed move.

 A closer look at the FX pair...

And the 3C chart for the pair, showing a positive divergence around 5:00 a.m. and a negative divergence after the move above stops was complete.

Futures are Ugly-Confirmation is VERY HIGH

After what was apparently a weekly op-ex pin (the AAPL pin of $.02 CENTS) was ridiculous, but that's all it takes for those weeklies to comeback as (WORTHLESS). The pins in the averages weren't far behind in the "OBVIOUS" category, but AAPL was the clear winer as it trades option contracts in $5.00 intervals and came in TWO cents short. The SPY was pinned by 5 cents, the QQQ by 18 cents, the IWM by 11 cents and the DIA by 10 cents, a little on the obvious side as these op-ex Friday's are turning in to a joke.

Over the weekend "The Arab Spring" is seeing the other side of the coin we predicted when it was happening with Egyptian protestors making a stand against a new ruler trying to claim Pharaoh-like powers and in Tunisia where it all started, the riot police are clashing with protestors.

Early Futures pricing looked a bit optimistic on HSBC's Chinese PMI coming in at the best reading in 14 months, although the 3C charts weren't so optimistic as they had not been last week and Friday. Optimism seems to have faded along the lines 3C was pointing to as opening trade for futures and FX got underway today. Perhaps the better Chinese numbers make the chances of stimulus less likely (the market loves stimulus as it creates new money to slosh around in the market) so it remains to be seen whether Chinese "good news" is taken as good news or is taken as bad news as it further reduces the chances of the PBoC pumping cash in to the system.

We have a boatload of PMI data coming out or already out, what's out right now is pretty close to mixed with a bit of an edge going to the "beat" or at least better than previous (I'm not sure what consensus was), but the futures are not as optimistic as they were earlier, for example... ES (S&P Futures)

Although we still have a long overnight session, 3C was not optimistic on opening ES trade with a negative 1 min divergence that ES seems to be following lower now after initial price strength.

NASDAQ futures are similar.

NQ 1 min early opening trade.

FX (EURO/USD and AUD/USD-as the $AUD is one of my favorite leading indicators among currencies) opened like this...

 The EUR/USD opened a bit lower and went higher above the $1.30 mark, but again underlying trade doesn't look as optimistic as you will see and as has been the recent trend.

 The $AUD lost some serious ground as FX trade opened this week.

A longer term view of the $AUD which tends to lead equities is not good.

Here's the EUR/USD underlying trade in several timeframes...

 Here's the 1 min EUR/USD pair with a slight positive divergence late Friday and a negative divergence early this week as trade starts in FX.

 The 5 min EUR/USD is showing several negative divergences in to higher prices, no positive divergences.

 This is the Euro Futures (not the EUR/USD pair, just the Euro futures) 1 min with a nasty negative divergence on opening trade and the Euro starting to respond with lower prices after what may have been a run for stops, it remains to be seen as this is still early in the overnight session.


 Early or not in the overnight session, the 5 min Euro futures shows a leading negative divergence stretching through most of the later half of last week and in to the opening trade this week.

 The more important longer timeframes like the 15 min Euro show negative divergences above $1.30 as the Euro was rejected earlier and sent lower with an even worse leading negative divergence now.

 The Euro 30 min is also in leading negative position

 And most importantly, the 4 hour Euro futures after having seen accumulation in July (white) are seeing a bad leading negative divergence and this is a long timeframe, meaning it is representative of the heaviest flow of funds.

 The US Dollar Futures on a 15 min scale went from a negative at a pop above resistance (head fake or failed breakout) with a positive divergence in to the recent lows and this week's early trade. Remember a strong dollar is bad for the market and most commodities, really most risk assets.


 The Us Dollar 30 min chart shows several positive divergences and what looks like a period of accumulation in to lower prices, at least the last two (probably 3 ) positives all look like they are part of the same cycle.

 The USD 60 min shows a negative divergence sending it lower and a large leading positive divergence now, this also being a longer term chart is indicative of heavier flow of funds.

 This leading positive $USD DAILY chart may very well be a longer cycle that is not on deck as a trade yet, or it may be part of what will be a VERY nasty move lower in the market before it can put in a serious leg higher.

Stock Indicies Futures-S&P E-mini (ES)

 The 1 min chart with the start of opening trade and ES making another lower low (not seen here) with a leading negative divergence in 3C.

 The ES 5 min chart  with a damning, really nasty 5 min negative leading divergence, this is really ugly.

 ES 15 min leading negative

 ES 30 min from a relative negative to a leading negative

 The ES 60 min chart is the really scary one (and the 5 min is really ugly) with a mid November positive divergence at the lows and a leading negative divergence currently.

The most damning evidence here may just be the confirmation among so many timeframes and confirmed in EUR/USD , Euro and Dollar Futures, ALL SAY THE SAME THING.

NASDAQ 100 e-mini Futures (NQ)

 

1 min NQ leading negative on the 1 min on the open this week

 NQ 5 min with a huge relative negative divergence

 NQ 15 min are turning leading negative in a couple u of recent places as well as longer term, $NQ prices are also heading lower as I type this.

 The NQ 30 min leading negative is really ugly-this is much like the ES charts.

The 60 min NQ leading negative divergence rounds out the confirmation after having seen confirmation on the downtrend and a slight positive divergence in mid-November, this is the most serious divergence in a month, probably longer, but I don't have that much history.

I feel very comfortable with Friday short positioning and Puts, the weight of the evidence is quite ugly and very strong, those relying on price only are very likely to get a quick and very sharp downside surprise.

 Remember the basic plan based on multiple timeframe analysis is what is looking to be a worse and worse move to the downside, it appears at some point in that move we will see accumulation of the decline and then a longer move to the upside setting up a final short set up in to higher prices so if I were to put out a trend table, not based on the typical trend tables of classifying current price trends, but the implied price trends from multiple timeframe 3C analysis it would look something like this...

Short term trend: (could be a week to several weeks-price targets become more apparent as underlying trade shifts)- DOWN

Intermediate Trend: (UP)

Long Term Primary Trend: Down

Of course as any new developments become apparent we will shift our outlook according to the probabilities, but our intent is to be in front of the trend, not to chase it. My playbook would be shorter term short trades, selling some profitable longs or partial sales of them, wait for positive divergences to form within a pullback/downside move and start adding to or establishing longer term long positions and finally as we see distribution in to that move up, setting up CORE short positions for a serious, longer primary trend down.

Of course in between these trends we will surely see smaller volatility waves that should be tradable as well, we'll deal with those as they become apparent.

Have a great & profitable week ahead!