Financials Deteriorating a bit faster now

This is a fast moving market in many ways, take your eye off something for a few minutes and there's a change that is material; for example, Financials.

 XLF 1 min

 XLF 2 min shows some fast deterioration


 XLF 5 min shows some REALLY fast deterioration.

FAS and FAZ in the 10 and 15 min timeframes are still not where I'd like to see them, but with the 5 min chart moving that fast it may very well migrate to the 10/15 min timeframes very quickly.

Leading Indicators-Market Update

I'll give you a written summary.


I see the market today as being in a worse place than yesterday, but very short term, intraday we should see some upside correction, this can be used to enter short positions tactically on price strength.

I'll continue to monitor the charts and make sure they continue to deteriorate in to a correction.

The Australian Dollar which is my favorite currency as a leading indicator is weak, it has been weak, it is getting weaker and this is not a good development for the market.

This morning I mentioned the EUR/USD hit >$1.33 and then lost it, yesterday I told you I see very high probability negative divergences there, it is starting to lead the SPX lower as the two are "Usually" in near lock step. This is another negative development for the market, although no where near as bad as the Aussie $.

Yields intraday have stayed strangely in line with price (SPX).

High Yield Credit is slightly weaker overall on the day vs the SPX which is good, but not a great signal, however we have seen some very fast moves in this asset such as yesterday when  I said they will want to close the market/QQQ strong and we saw that quick end of day ramp, HY Credit went in the exact opposite direction and hard so it was telling us that credit traders were not willing to take on that additional risk, so we could see this change quickly again.

High Yield Corp. Credit is marginally weaker on the day, no real strong signals there, Junk Credit is a bit weaker than HY Corp. on the day thus far.

Commodities are performing VERY POORLY vs the SPX, I suspect they are keyed in to the underlying weakness of the Euro and underlying strength of the $USD which is bad for most risk assets incl. stocks and commodities.

Treasuries (the flight to safety trade) are in an overall better place for a downside market reversal than yesterday, they do appear to be taking a breather at this moment.

VXX is in a much better place, it is taking a breather intraday and should see some downside consolidation about now, the same can be said of UVXY and XIV.

The impression I get is that we are at a pivot point or a reversal area and we are seeing a little more of the "reversals are a process theme" than the "sudden reversal to the downside", however I wouldn't rule out the sudden move to the downside as the price action is more like loitering in the area than involved in a process if that makes sense.

Financials, XLF, FAS, FAZ

XLF is the Financial Sector, FAS is the 3x leveraged Financial Bull or long, FAZ is the 3x leveraged Financial Bear or short (you buy each for their respective coverage, in other words you can short XLF for short exposure or buy FAZ, you don't need to short FAZ because it is already a bear ETF).

I'd like to add to FAZ, I'm a little hesitant at the moment, sometimes when we really have an itchy trigger finger we have to recognize the emotions behind that, there's both Fear and Greed; Fear that we will miss the trade and Greed, again that we will miss the trade, but I believe the only thing separating us from gamblers is having a real edge that you can point to and with Financials right now, they are so close, but not exactly where I'd like them to be.

 XLF Financials Daily chart, there's a triangle, at point "A" there's the expected breakout to the upside, this is a false breakout or head fake and quickly fails taking Financials down over 7% until they hit the 11/16 low with the rest of the market at the start of point "C" which is the rally we are now topping at. Point "D" I believe to be another head fake move, it is above all former resistance from the highest part of the triangle as well as the breakout at point "A", so it fits with a head fake move.

 I forgot to change the symbol back to XLF, but it is FAS which is the same thing, except 3x leveraged, all of the price patterns are the same. On this 60 min chart the area where the triangle from the chart above was,  is marked. At point "A" we have the head fake / false or failed breakout from the triangle-exactly what Technical traders expected, except it failed. At point "B", part of the reason for head fake moves is summed up in this saying, "From failed moves come fast moves" and we see a fast move to the downside catching all the longs who chased the breakout at a loss on a move greater than 7% down. On 11/a6 the entire market finds a bottom and we bounce/rally which is the current move we are in (probably stage 3 moving to stage 4 or top moving to decline). Point "D" is a new high head fake move as 3C is still in a deep leading negative divergence.

For longer term members you might recognize this as a Crazier than "Crazy Ivan" shakeout as it was shaken out to the upside, the downside and the up side again, it's one move down from 2 consecutive "Crazy Ivan " shakeouts.

 FAS-3x long Financials 15 min chart shows a positive divergence at the move that started this quest to take out QQQ resistance, since it has seen a negative divergence, but to me it's not strong enough for me, I'd like to see it leading negative.

 FAS 10 min chart is negative in the area, this is the transition from the 5 min charts yesterday and today the divergence going deeper to 10 min and 15 min charts.

 This is FAZ, the 3x leveraged BEAR or SHORT Financials ETF on a 10 min chart with a leading positive divergence, that's confirmation, but again it is not as strong as I would like to see here.

Back to FAS-the 3x leveraged BULL/Long Financials ETF on a local 15 min chart showing the start of a worse 15 min negative.

"If" I had no short exposure to Financials at all, i would probably enter a partial position in FAZ or if you want less leverage SKF (2x leverage) or just short XLF. I would prefer to leave a little room for either a better entry or better signals, but I would want some exposure. In the equity model portfolio I already have 66% of a full size position in FAZ so there's room to add, but because I already have the exposure, I will wait to add the last 33% or so until the signals are screaming and jumping off the chart.

Going w/ AAPL January 535 Puts

I anticipate this to be a very short trade.

AAPL Update- Possible Trade

If you have the stomach for this, there's a possible Put trade (Short AAPL), although I think it has risks and may be short lived, thus the need for leverage. At some point soon, AAPL should be a nice long trade, I think it needs to pullback 1 more time first though.

Let me show you on the charts, it's the only way to understand the opportunity and risk.

 AAPL 1 min is clearly negative

 As is the 5 min

 If we zoom in on local trade, the 10 min is negative

 and the 15 min is negative, this is where there may be a short term PUT (short AAPL) options trade, here's the risk....

 Scale out the 15 min chart and it takes on a much different longer term look, VERY bullish here, that doesn't mean a quick Put can't make money.

And the 30 min which I have been talking about as having had built a longer term area of support, this is where I'm most interested in AAPL, a small pullback and long the stock.

However in the near term a Put trade may work very well, it' just not without risks as you can see.

I'll probably look at a Jan Put in the money for the options model portfolio, but it will be speculative in size and any remaining open call positions (1) will be closed.

Market Update

Yesterday as I noted many times, we saw negative divergences, but weren't getting to any timeframes beyond the 5 min charts,later in the day I suspected it was so they could gap the Q's up this morning and take in more retail bulls.

Now that we've had some time for trade to develop, we are moving to 10 and even 15 min charts on the negative side, so what we hoped for in a head fake move is now becoming higher and higher probability.

The next several posts will likely be some trade ideas as long as they are at the high probability level that I was sure we'd reach yesterday, but just had not done so at the time.

Here are  few key charts...

 DIA 10 m

 QQQ 10 m

 SPY 15 m


 UVXY (inverse confirmation) 15 m

 VXX (inverse confirmation) 10 min


 XIV 15 min

 ES- S&P Futures 5 min


 ES 15 min! WOW!

 NQ NASDAQ Futures 5 min

NQ 15 min-Double WOW!

BEAV Follow Up Trade Idea

Monday I put out a follow up post, in this post  the two previous posts are also linked. We were looking for a head fake move above a resistance level and a bullish ascending triangle right below the resistance level. What we got was an opening gap above that quickly faded so it would have been very hard to get  position in BEAV as that gap faded so fast. In the last post linked above I said I was hoping for a more sustained break out above those two levels that offer you enough time and opportunity to take the short trade if you like it at a better price, less risk and when all the 3C signals line up, higher probabilities.

We have all of that today.

On a daily chart here are the two resistance areas (bullish ascending triangle-when I say bullish I mean according to Technical Analysis and resistance) and in yellow the gap above that hit about 40,000 shares in 5 minutes, this time it was more like 17,000 as the original accumulation of stops and limit orders were cleaned out.

 Here's an hourly chart so you get some idea of what we are dealing with.

 The trend of a 10 min chart doesn't even need any comment, the divergence is clear.

 However short term on intraday charts like this 1 min, there was a small area of accumulation before BEAV made this move.

 That stretches from 1 to 5 min chart, but again as you can see, it's not a large area and not a large divergence so they are counting on retail to chase the breakout to send it higher, but there's not enough institutional support to make this a lasting move meaning it almost certainly will fail and when it starts to, we want to be there.

Here's the 10 min chart on a close up intraday range, you can see the support isn't there, so keep BEAV on your short-short list.

QCOM Analysis

I know several of you are in QCOM and it's in a pretty decent position as a potential short sale trade so I figured I'd cover it for everyone.

 First a 5 day chart gives us an idea of the past, the tone and character of QCOM, I see a large triangle that has taken up most of 2012. When triangles are bigger than several weeks (at most-usually less than 2 weeks) they are almost always either tops or bottoms. If the preceding trend was up and the triangle forms, it is usually a top (as we see here), when the trend is down and the triangle forms, it's usually a bottom (UNG is an ascending triangle after a long downtrend). So this appears to be a major top.

 There's even a head fake move, it may not look very big, but ask a Technical Trader where SPX support is and they will tell you $1343.35, which is not true, resistance and support are zones, not exact numbers because they are created by emotional reactions, not calculators, however many technical traders would place and SPX stop at $1343.34, thus head fakes and stop runs are easy to create.


 QCOM 4 hour in the large triangle

 60 min chart with a recent break down and a bounce back in to the gap.

 15 min chart with the break down and bounce...

 Here's QCOM vs the SPY (red), you can see how the market's direction influences a stock's direction, it is actually the single biggest everyday influence on most stocks, however as the market slows in this area, QCOM is showing even worse relative strength at the bottom.

 That diminishing relative strength recently can be traced back to recent 3C action in the bounce-10 min chart going negative.

 At the fastest chart, 1 min, we can see that went negative, so it looks like the bounce in QCOM is coming to an end and soon we'll be looking for a break below the daily chart's triangle.

The migration of the 1 min negative to the 5 min chart and we see it on the 10 min chart as well, the 15 min chart is the only one left that hasn't turned negative yet, but I suspect it will soon. It would be great to get QCOM short above the triangle at >$64 - $65, but we may not get the chance. Keep an eye on the market as it could lend support for QCOM to make another head fake move a bit stronger than the last and maybe set some price alerts for QCOM.

You can always email me for an update.

Some Simple Intraday Direction Hints

These are really easy to use, you don't need 3C to see every intraday move and since the market is fractal, these concepts work on all timeframes even though I'm only showing you short term intraday movement.

 Simple Rate of Change applied to price, look for divergences the same way you would in 3C, this is the broad concept of, "Changes in character precede changes in trend". Of course this is a 1 min chart so the change in trend is in the same timeframe.

 The reversal candlestick patterns with heavy volume like this doji-star

And of course the trend in TICK, especially when it diverges with the trend in price.

SPXU Add To

I think there's a chance of getting a slightly better price intraday sometime in SPXU (3x leveraged short SP-500), but the signals are getting strong there so I think I'll fill out that position here.

That also means the SPY or a less leveraged ETF like SDS could be used as well, overall we are still in very good position up here.

You might consider a partial entry if you like the idea and then add on any pullbacks, remember it is very early in the day so a lot can happen.