Closing Out Half of the QQQ Calls from yesterday

They expire today so momentum is important, they are at a decent profit, I'm not taking any chances with them.

Pre-Market

There was more trouble out of Europe last night, as if indices over there didn't already give you a hint, the ECB's second LTRO repayment was far below consensus of $200 bn Eur., coming in at $3.5 bn Eur. hinting the banking sector is not as well capitalized as some hoped after the first LTRO early re-payment.

Secondly the Netherlands saw their first banking failure since 2008, which will lead to its nationalization at substantial cost to the taxpayers and this in the country that is considered to have the healthiest banking sector in Europe.

ES futures behaved very early last night, spending most of the night in a tight 3-4 point range, that is until Non-Farm Payrolls hit this morning and added 157k jobs which was a small miss of consensus of 165k, but above the previous which was 155k and revised to 196k.

The bottom line, the market will open the way we expected yesterday and the way all evidence pointed.

A neat 3 point range that persisted most of the night.

However don't get too comfy up here, the 5 min ES chart that has served us so well in predicting the next day's movement is losing it's positive tilt and going negative like the bigger picture 15/30 min charts.

Preliminary Findings...

First let me reiterate that I hate CNBC, we need to have a contest for the best acronym for CNBC. I had to turn it on today to see if I could find news on the very sudden drop in the NYSE TICK index which is all NYSE stocks moving up on the timeframe (1 min) less all NYSE stocks moving down, there was a 1400 point (stock) move in a mere 3 minutes to hit a moderate extreme of -1100 coming from+300 or so. Considering today's very mellow volatility and TICK readings, this move was somethingI'm not sure what caused it, but it was something coordinated.

As for CNBC, they said today was the second down day for the S&P and it's because of concerns over the economy after the horrendous GDP print (and these are the same people telling us the economy had been improving?) How is an economy imptoving when it goes from +3.1 in the previous quarter to -.1 the next quarter and the quarter when business picks up with the holiday season, etc.

Does this look like the market is down the last 2 days over concerns re: GDP?

To me it looks like trend #1, which if you recall we predicted would happen probably close to two weeks before it happened, we predicted that it would be a very strong move, so strong in fact that it would likely surpass our expectations for what we already thought would be a very strong move. The chart looks like the accumulation of stocks before and leading right in to the day before trend 1 started have been under some distribution in to higher prices and then last week the pace of that distribution picked up substantially, so much so we have to assume that it's not only selling, but heavy short selling.

This is how market cycles work, they accumulate cheap and sell high.

However CNBC has become the apologist for GDP, yesterday claiming it was Sandy (but remember that was already factored in to consensus for the print which was 1%, down from 3.1 the previous quarter) while playing these movie trailer sounding segments, "The market is closing in on DOW 14000" Dun dun dunnnn!!! All in a deep voice that would make Darth Vader jealous. Today CNBC is now calling "Sandy", "Super-Storm Sandy" which I assume is something new as I didn't hear it yesterday after mentioning it 30 times.

It's unreal how people crave to know why the market did this or that and CNBC feeds it to them in the form of the lowest common denominator, "The market was worried about GDP", I'm really sorry to say this, but the market is way more complex than a simple 1 line reason. In fact, today the market was likely in short term accumulation mode rather than fretting over GDP because these cycles are planned out long before they start, they are proactive, that is why we could predict them, they are not reactive.

Why do I say the market was likely accumulating today short term? For one we saw it, for two, this 5 min ES chart which was positive late yesterday kept the R2K from plunging 1.15% like yesterday and actually closed up +.55% which is a fairly big move for this low volatility tally we have seen for the last two months.

5 min ES positive is a good short term indication.

Other hints that there's short term accumulation(and I mean short, not short like trend 1), the Dominant Price/Volume relationship (of which there hasn't been one recently) was Close Down/Volume Up for the Dow, the S&P-500 and shared a co-dominance in the Russell 2000 (how you might ask could there be a co-dominant close down when the R2K closed up?-The relationship isn't based on the market average's performance, it's based on all of the component stocks in the average and weighting skews that).

What does Close Down/Volume Up mean? Short term bottom, usually these are about 1 day moves, but pretty reliable, if all 4 averages were clearly showing the same dominant relationship, it would be a better indication, but this is still the closest we have had to a dominant P/V all week.

What else? Tick actually...

 The early TICK data made sense, it moved with the market, it helped us enter the Q's at the right time, but then...

 It got really crazy toward the close, but the trend at the close was clearly TICK moving up wit the SPX moving down, this is short term bullish, maybe a half day, maybe more.

Here on my custom indicator we see it again, look at the LN for the SPY vs the LN for the TICK as well as my cumulative histogram at the bottom.

Also the price/volume action looks indicative of a short term bottom, but why a bottom here and now if the trend is growing more bearish? Because the thing that accompanies tops and bottoms of all sizes is extreme volatility, even if no new upside gains are made, it can move up hard one day, down hard the next, it keeps traders on their toes and guessing or chasing, but it almost always shows up at the end.

As for longer term implication, Credit is the go to asset. Earlier today I posted what was going on with leading indicators, you can compare to these if you like.

 HYG above and Junk below-both added more downside today, this is a longer term indication and it's not good for the market, if you look at the credit trend I've posted every day, you can see the smartest of smart money has been moving out of risk assets for a lot longer than just the last 2 days.

I'll be back with more, I'm sorry, I just get so upset with CNBC, it's like a Disneyland character of finance and misleads so many people in to believing things that just aren't true, you simply can't explain the market in 30 seconds.

Leaving the QQQ short term Calls open

I think I see enough in the ES 5 min chart and there's still enough congestion I think that there's still a decent shot at some upside so I'll try to be patient.

TICK is improving, perhaps it was some fund selling before the end of th month even though t+3 was over a few days ago.

For Perspective

There's a fine line between getting the best and most timely entry and just getting too greedy. If your risk management is up to snuff, you should be able to enter any trade in this area and be able to sit through any short term drawn down, if you are throwing 50/% of your portfolio behind 1 position, then you really need to read the risk management link at the top right of the site or get in touch with me.

Here's some SPY, UPRO and SPXU perspective, I'm having a REALLY hard time justifying just sitting still and being patient with signals like this.

For a SPX short, personally I'd go with SPXU, but that may be too much leverage for some of you, if you can't sit through the corrections, then you shouldn't use that kind of leverage because you'll get kicked out of a good trade because your trade has too much risk for your risk tolerance, there's nothing wrong with low risk tolerance, you just have to trade accordingly.


SPY

 The intraday charts have enough congestion it doesn't seem like a downside move is imminent, but look how fast the TICK just dropped and went from +250 NYSE stocks up to more than a thousand trading down in 3 minutes.

 SPY 3 min still looks congested, still like it could put in a little more downside and maybe even grow a little more bullish

 At 5 mins there is equilibrium

 At 10 min charts, it's clearly turned negative

 30 min, forget about it, I don't see this market coming back, it may look that way short term because of volatility, but that's enormous damage done.

3X Bull SPX-UPRO

 10 min, damage

 30 min, insane damage

SPXU 3x leveraged BEAR SPX

 5 min positive

 15 min very positive, extreme momentum

30 min, speaks for itself.

This is a very personal choice.

QQQ Update

At last look the weekly Q's that expire tomorrow are down-4.58%, that's a portfolio loss of less than 1/10 of 1% so it's not a problem in that manner.

Here are the charts.

 As the Q's passed above the 50-bar 5 min chart, check out the resistance, every candle under the red line has a long upper wick, that's resistance and then back under the moving average.

 1 min chart, officially still positive and in line, but volatile.

 2 min still positive, suggesting overhead is available unless something happened that we don't understand yet.

 The 5 min chart, ugly overall, but still ok for this short term trade.

At 10 mins, nothing but trouble, there is still the gap from the head fake move, that's also where the distribution picked up as normal.

I'm going to look around and see if I can find anything

I told you volatility would pick up

I pretty much define volatility in this case as , "Huge moves both up and down that make no sense, there's no reason for them, there's no trend in them", but we see it all the time as the character of a trend changes and we have been in such a low volatility environment (investor friendly), it looks to be changing.

Here's the TICK showing some of that volatility, I watched this as it happened, this isn't normal action, either something happened or some HFTs were turned lose trading at one-one millionth of a second.

That's not normal on a day like this, that's why dull days are so dangerous, you have to be on your toes and it continues.

I'll get some QQQ charts out.

There's a lot of interest in ERY, the leveraged Energy short, I'm pretty darn close to saying, "Close enough" to fill that one out and yes I know about the Syrian craziness.

Something Big Just Happened

I even turned on CNBC to see what it was, I don't know so if you know, email me.

The TICK chart went from +250 to -1100 in 3 minutes, a major move in stocks selling, it has remained very volatile.

I'll bring you more when I have it.

Movement?

The Q's just crossed the 50 bar 5 min chart, so this might be the momentum they need to get going. The intraday positives are still there.

Market Update:Leading Indicators

So far the QQQ weekly Call position that expires tomorrow is up over 10%, not a big gain for what the weeklies can do, but in such a low ATR environment and a fairly quiet day so far, if you have solid signals, why not make some money with them?

Leading Indicators for the most part seem to be taking a bit of a breather, there's no improvement in them, some are even worse, but as I showed you with the ES 5 min chart, a little bounce and some increased volatility is to be expected here after yesterday. I'm not calling out a bunch of short entries/add to positions right now because I think they can be had at better prices, but I am keeping an eye out for any that look ready to go now.

Here are the updated charts...

 The Euro vs the SPX hasn't seen any real momentum the last 2 days, that's a bit out of character for the FX pair so this may be close to a move/reversal.

 EUR/USD 5 min, still not much movement, if the market is going to see some upside then it would make sense that the EUR breaks above this most recent range before it reverses to the downside, volatility should start picking up.

 FCT which has been a goos leading indicator for us has put in more downside today vs the SPX.

 High Yield Corp. Credit is not looking any better, but seems to be taking a pause.

 The same is true of Junk Credit.

As for the trend in the market, it's kind of clear to see on the TICK chart, the early action was negative and the afternoon action is more positive so the BIDU calls and QQQ calls should make a little money which is good.

Other than that, I'll just be watching for anything sneaky cropping up or some opportunities.