Wolf on Wall Street

Monday, April 8, 2013

Not 100% Sold on this move

There are a few averages that look like the migration of the divergence was good like the DIA, but several others where it could have and should have been stronger.

One quarter we did an experiment to see if we could find what I considered to be leaked earnings, I went through nearly every stock that was reporting (with at least somewhat respectable volume and market cap) and picked the ones that seemed to be really out of place very recently (before the earnings announcement ) and assumed because of this strange behavior which was nothing like the market's or other stocks in the same sub-industry group as well as the strength of the signal (it really had to stand out) that this was likely a sign of institutional activity on leaked earnings, after all, what do you think professional networks that serve hedge funds really are?

We identified something like 22 and I posted which way I thought they'd move after earnings (most likely the next day, not so much in volatile after hours and we were right something like 19 times out of the 22 I found, that's after looking at hundreds, maybe a thousand or more stocks, but that's still a pretty darn high success rate.

Some that stood out were GOOG, we didn't see any signal here until the last 15 mins. of the day before they reported AH and that was on.

RIMM was showing odd behavior and we went long, we totally missed earnings and RIMM fell, but 3C stayed positive and we held RIMM even at the loss, then they had a big shakeup in management and we made 10% on the position, we saw a leak, it just wasn't earnings, it was forehand knowledge of a company shakeup.

As far as AA, I don't recall ever catching anything here. I do see positive behavior, it's subtle, but thorough since about the end of March so if I had to guess I'd say RIMM reacts positively over the next day on earnings, I'm not saying earnings will be good, just a probability of how the stock will react.

I do not think this is an earnings leak, but perhaps some Whisper numbers on the street.

Waiting on AAPL

I may miss the position, but I'm not taking it until the 1 min chart looks the way it should. If this were an equity long, I'd probably take it, but timing is so much more important with options, especially weeklies.

This is what is holding me back, the 1 min and if I miss the position, so be it.

2 min looks good

3 min looks good

5 min looks good and so on, but that 1 min is holing me back

Went with GOOG 4/12 (weekly) $760 Calls

Also got a nice move down (lower premium) in to a positive divergence

Adding to the GOOG Call Position

I'll let you know what expiration and strike

Other Indications

I just took a quick look at our Leading Indicators along with the CONTEXT model and I can see why there's such a positive differential, now +10 points in favor of the model.

CONTEXT's ES model is about 10 points higher than ES.

Looking at TLT, you wouldn't see this if you didn't look close, but note how treasuries are seeing lower lows at areas where the SPX is not making higher highs. TLT is one known lever used to manipulate the market.

TLT'w10 min chart is also in a negative divergence that looks like it wants to pullback enough to fill that gap in yellow, that would give us the market move to the upside we're looking for.

I don't want to take anything away from the real and strongest underlying trend, TLT has seen a major flight to safety at new leading 3C positive highs out at 2 hr charts.

VXX (VIX futures) are another known lever to manipulate the market, they also are making lower lows where the market isn't making higher highs.

HYG is the 3rd known lever to move the market, HYG's 3C chart shows a 15 min positive divergence, you see what happened to price after the negative, the positive would be supportive of a risk on environment.

HY Credit is also supportive intraday as well as longer term.

The market is showing some strength to be holding up against a dollar moving higher intraday

However the market is in a very supported position considering where it is vs. how much the $USD has pulled back short term

Signs of Market Improvement

The first post today showed the pre-market negative divergences very clear in NASDAQ and Russell 2000 Futures) if you haven't read or don't remember what the first post of the day said, check it out, we are right on track. From there we expected a range where accumulation could start to build, if you haven't read or don't remember what the first post of the day said, check it out, we are right on track.

DIA intraday is the first to go positive as the range is created, it's just getting going.

The SPY was in line (green) then went in to a negative and down toward a range where it is starting to put in a positive divergence, we still have some work to do, but this is what I was looking for.

The pre-market negative divergence in R2K futures and a positive divergence forming now.

Like I said, I think we still have some work to do, but the point of a pullback or a range was so accumulation could continue and it looks like it is.

Even the TICK is starting to go positive.

SPY vs he NYSE TICK Index

AAPL Options Add to

I also like AAPL and GOOG as equity longs.

Here's AAPL, not too different than GOOG...

At first I thought the AAPL divergence was just the 15 min leading positive on the right side, now I suspect it may be an entire "W" base from early March.

The 2 hour AAPL chart positive in March and leading positive since, especially at the recent lows.

The other charts in AAPL look good, 5 min, 15 min,etc. I'm waiting for the same thing in AAPL as GOOG...

improvement on the 1 min chart that suggests market makers are loading up for a move shortly.

Like GOOG, I'd like to see the market or at least the QQQ improve around the same time.

GOOG Add To

I'll almost certainly be adding to the open GOOG call position shortly, AAPL is also in a similar situation in which I'll probably add there shortly.

As for GOOG...

GOOG 2 min, I'd like to see some rounding up like seen to the left at the green arrows.

GOOG 3 min

GOOG 10 min

The charts are even positive on the 15 and signs on the 30 and 60, this looks to be a bigger divergence than first thought.

I'm looking for the 1 min to look like it is done and getting ready to move, I'd like to see it do that as GOOG is near the lows of the day. I'd also like to se the broader market also improved around the same time

AAPL is coming next

Quick Market Update

We have intraday negative divergences in just about every average, but as I said earlier, we'll likely see a pullback or the best scenario would be a trading range for accumulation to take place through as it rarely happens chasing higher prices, the intraday negatives seem to be aimed at controlling the intraday trade and creating the range or perhaps pullback.

As we near the bottom of the range, we'll see if we have positive divergences, this is what I expected earlier in a market update.

The 1 min intraday chart seeming to pull the DIA in to a range.

The 3 min chart still leading positive. In this case we should see some positive divergence in the 1, 2 and 3 min charts near the bottom of the range or under it in a pullback, however we should see the 5 and 10 min charts improve as well.

3C Quick Start

Many of the charts you see here at WOWS are my proprietary indicator 3C which reveals underlying institutional money movements and often contradicts price. To understand the annotations made on charts, you must first understand that 3C has no numerical value, it is a pure divergence indicator. Positive divergences represent accumulation by smart money, negative divergences represent distribution by smart money and when 3C trades with price, that is trend confirmation.

The chart annotation system is simple; white arrows represent relative positive divergences, red arrows represent relative negative divergences and green arrows represent trend confirmation. When 3C is in a white or red box, that represents a leading positive or negative divergence, leading divergences are the most powerful.

We analyse 3C in multiple timeframes, the longer the timeframe the stronger the accumulation. 1-2 min timeframes represent intraday moves, a 5 min timeframe can represent a day or two and 15 min timeframes average trends of a swing trade nature. 30 and 60 min charts can move the market for a month or more and daily charts can be over a year.

You'll get use to seeing the charts and understanding how the multiple timeframe analysis works and works well.

Welcome to Wolf on Wall Street.

The trades featured here are meant to maximize returns with the least risk and highest probabilities. Unless otherwise mentioned, all trades are meant to be executed at market. I prefer long-term trending trades which perform well in rising markets, but really stand out in declining markets. However, we get occasional one day gifts 30,40,60% 1-day gains. I'd urge you to consider taking some or all off the table in such cases, the markets don't give gifts like that often or for very long. Most of the returns that make the system outperform so well come in short-entry trades. If you are opposed to short trades, this is not the system for you, unless you are ok with buying an inverse ETF. If you would like more information about the truth about shorting stocks, just email me.

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Each trader is different and must determine their own level of comfort with risk. I do have a channel stop which I provide to TeleChart/StockFinder users for automated stops, I appreciate you using my links to sign up if you do. The Trend Channel catches trends and works well as it automatically adjusts for each stock's volatility. Arbitrary exits based on nervousness about the markets WILL decrease the portfolio performance dramatically. This system will not ever get you in at market bottoms or tops. The recent 1 year performance against the Russell 2k buy and hold had the system beating it by 3:1. Ultimately it is up to you as to how you proceed, but I'm always available to help you determine what might work best for you.

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The MOST IMPORTANT tool you have to bring you long term success is RISK MANAGEMENT. There are plenty of articles linked at Trade-Guild.net on Risk Management. We can be wrong 75% of the time and still outperform the market with solid, consistent risk management.

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The position sizes noted in the positions @ 2% risk of portfolio are based on a $20,000 portfolio-adjust as needed. Due to tight stops, there is the possibility, even probability that one position could take up the entire portfolio. You need to decide how many positions you want to trade and reduce the position size according to that. For instance, if you want to trade 5 positions in a $20,000 portfolio, no one position should be valued at more than $4,000-not risk money or 2% rule, but share price entry x shares.