RANK

Again this isn't a victory lap because there are a lot of times the rank doesn't look so hot, but the idea is to be selling puts in to higher prices or buying calls in to lower prices and then close them on the reversal, the entire concept is really summed up as "Let the trade come to you" and this is just an example of how 3C lets us do that while almost everyone else (although it's a small pool this week, we are still in just about the top 1%) is chasing prices which is the last thing you want to do in a market that is this unstable because, as I have mentioned and have featured here, 1 or 2 months of gains can be taken out on an overnight gap or 1 day of trading action so all of those people who were chasing the market and seeming "winners for 1 or 2 months lose it all and often more in moments or what is a flash in market time.

#4 of 328 with a 21+% return for the week on the overall options tracking portfolio (I say tracking because I use it to track various positions, it's different than a trading or "model" portfolio as I would not trade all of the ideas that I put out for our various members because of excessive correlation, too much open market risk and other issues that are not favorable for model portfolio performance).

Not Going for IWM

You might still get a decent fill on IWM as it hasn't moved yet, but I think the timing is too late. I'd rather just let things settle and regroup

IWM $92 Closed

Filled at $.66 for a 14% gain.

I may look at a quick long/call position. I'll update charts and let you know if I do, but I want to look around a bit first.

Closing the rest of IWM $92 Puts Position

IWM P/L Follow Up - Closed 75 of 125

At the $.72 fill, the gain was +24%, still have 50 left.

Taking IWM 20th (this Friday) $92 Put Off

I'll probably take the whole position, may consider 2/3rds of it.

VERY SIMPLE CONFIRMATION

This not only confirms the bigger picture of this weekend's post, but the tactical picture of the pre-market update, 3 charts of the IWM...

By the way, if I can get the momentum and profit for the QQQ/IWM 20th weekly puts, I'll take the profit and re-establish them.

From the Pre-Market update...

"This means, take some profits on shorts/Puts in early selling, at some point we can ride the bounce long and then ...

ES 60 min VERY negative, we want to sell in to price strength or short.

Sell in to price strength for what should be the big move."

 1 min short term IWM action, leading negative in to Friday afternoon... Confirmation on the move down this morning...

 The longer 5 min chart not confirming the move down and positive.

The most important 60 min leading negative IWM divergence after nice confirmation of the Price/3C trend, this confirms the quote above from the pre-market update so far as well as the weekend's post on the Yen/$USD currency problem for the market.

Have fun, make some money!

Early Market Update

I'm already seeing ES, NQ and TF intraday accumulation right on the 9:30 open and since. In other words, the gap down is being accumulated as I suspected, we should see a dead cat bounce and be able to sell in to / short in to that dead cat bounce.

Pre-Market

BOOM!

Or Good Morning, but if you were long gold, it's BOOM! Last night gold and silver were selling off again, there's obviously something or several things behind this.

Overnight China had their GDP, Retail Sales and Industrial Production all come in below consensus (MISSED) and gold sold off, BUT this in itself wasn't the reason as the PMs were selling off BEFORE the Chinese data came out.

It seems Japan and the HUGE JGB (bond) market that is being crushed with limit down circuit breaker halts to JGB futures on the Tokyo Exchange not at all uncommon and all because of the BOJ's Buzz LightYear QE policy, "To Infinity and Beyooooonnnndddd!!!!", it seems as I speculated (regarding Friday's action) that gold is one asset with a fairly large market and a lot of profits, that is being sold to meet JGB margin calls (whether they have received them or know they will in days as JGBs continue to get crushed).

It's obvious from trade that "Stop-Fishing" expeditions were also in play...

However this was not the case of PM selling (Gold futures 5 min chart above), it just exacerbated it.

However as mentioned last night, we may have a chance to ride the Bucking Bronco known as gold/GLD so long as the divergences that are in gold futures continue to hold up and show up in GLD, the we have a high probability trade that few will probably be interested in until they start chasing it as it goes parabolic (still very speculative-we need GREAT 3C signals).


 Gold futures

15 min

 5 min

1 min-All held the positive divergence overnight so we can likely get accumulation in the paper market (ETFs like GLD). The 1 min has a positive divergence at the lows and a slightly negative now so it looks like intraday gold will pullback, perhaps allowing GLD to accumulate and all of the stop hunting sounds like accumulation too (because there's big volume created when hitting stops  which provides supply or liquidity that large buyers need to accumulate and they get it at a better price that is of course averaged). I know this seems like the last asset you want to but, but "when there's blood in the streets, that's the time to buy!" except I'd add in, you need an edge like 3C positive divergences to confirm.

Currencies- These actually confirm the signals and the initial theory/game plan...

 EUR/USD since opening this week has become market supportive from market negative

 Same with EUR/JPY

And USD.JPY

Now I still think initially we sell off which gives the ETFs a chance to accumulate...

 USD/JPY 5 min is showing a positive divergence, the 1 min is not, that means to me, early selling that is being accumulated for a market supportive move higher later in the morning or afternoon perhaps.

 $USDX 1 min positive which is initially market negative early on...

$USDX 5 min though is slightly market positive so the early market negative trade allows ETFs to accumulate on initial selling, the slightly longer signals allow a market supportive move up.

Index futres show the same.

 ES 1 min nothing here

 NQ 1 min showing some early accumulation, but still small

TF 1 min intraday should see negative action, 

But go out slightly longer...

 ES 5 min positive

 NQ 15 min positive

 TF 15 min positive

This means, take some profits on shorts/Puts in early selling, at some point we can ride the bounce long and then ...

ES 60 min VERY negative, we want to sell in to price strength or short.

Sell in to price strength for what should be the big move.

Coming Together

Often we get signals and chose to act on them or not, but rarely know what is behind them, if you wait to find out why the signals are there like this leading negative divergence in ES as we have seen in the averages...

ES (SPX futures) 60 min chart with a leading negative divergence (distribution)

Then by the time you understand, your chance to make money has already passed you by.

Friday I suspected from our longer term analysis of the Yen, the Japanese JGB market, the $USD, the market averages, leading indicators, etc... that the Yen was going to move higher as it started to on Friday and that the BOJ may have truly lost control by trying to push QE too far. In addition the $USD's base that looks like it will move to the upside (which has seen a recent pullback), appears that the pullback is ending and the $USD will head higher pressuring the market, risk assets and the highly leveraged carry trade institutions use to leverage up their AUM.

USD "W" base on a longer term daily chart with large 3C positive divergences suggesting a strong move higher (in line with our VIX/market analysis)...

 $USDX 1 day "W" base with strong 3C positive divergences and a recent pullback

The 30 min $USDX chart looks like that pullback is ending and the $USD will head higher as there have been recent 3C positive divergences.

If the Yen moves lower and the $USD higher, then the timing of Japanese PM, Abe's win and his nomination of Kuroda to the BOJ with several other ultra-doves, makes sense in context of when to close the carry trade, perhaps that's why the divergences have been so extreme as it wouldn't just be selling, I suspect that was done a while ago, but short selling.

The longer term ES chart (as I showed Friday morning) with a number of Index future charts as well as the breadth posts and leading indicators would all suggest the market is ready to see a deep downside move.

The carry trade and Japanese politics would seemingly be the last thing you think of in the timing of all of this, but it seems it can't be ignored.

Short term tonight ES should bounce and the USD/JPY should bounce as well, there are short term (1 min) negative divergences in the $USD and positive in the Yen as well as ES, but that's just short term (likely overnight).

The signals have been there, the signs have been there. I wouldn't be surprised to see a massive unwind of the carry, in fact I think the action Friday in gold and even tonight (as a longer term position for many funds and a profitable one at that) is part of closing the carry and meeting margin calls, especially if they are in Japanese JGBs and that market is so large, I'd think most institutions have some exposure there.

Our buy at the bottom for GLD and sell at the very top last week were perfectly timed, good thing we stayed away, this is why I don't look for probabilities, but high probabilities.

This Gold futures 30 min chart shows the positive divergence as we bought there at the lows and the negative divergence as we sold there at the high and then backed away.

Interestingly though...

Even though (as this 5 min gold /3c futures chart shows) gold has been slaughtered, if this 5 min positive can keep up, we may have a short term, high probability trade to the upside or it may set up a nice short entry, either way, the signals here have been good for trades when they have been high probability.

It looks possible that the market may even bounce...

ES futures, 5 min chart. I'd love to get XLF puts on a bounce, but I would not at all be caught believing or buying in to the idea of price strength, you saw the 60 min ES chart above.

NASDAQ futures on a 5 min chart look the same (like they can bounce), but the longer term (higher probability) 60 min chart has gone down the tubes...

Again, for me, any bounce is good for 1 thing only, selling in to, this is a VERY dangerous time to chase prices higher, as I always say, "There's nothing more deceptive than price alone." and this 60 min NQ chart proves it.

TF (R2K futures) look similar, but they are definitely weaker than the others so they are an obvious target if we can get a bounce to hold in to regular hours trade.

The Russell 2000 futures (TF) 30 min chart, it's clear to me what I want to do, SELL PRICE STRENGTH or short it even better, if it can hold up. The timing looks good as these longer term charts have never looked so bad. This one shows accumulation in to the lows and HEAVY distribution in to the highs, they are selling in to strength or shorting it, I want to be doing the same as them.

I think this will hold up through regular hours, the FX pairs like EUR/JPY and USD/JPY are moving short term toward supporting a bounce (I hope it's not just overnight), the XLF chart looked to be in a head fake zone, everything I see above and in this weekend's post, suggests that's true.

I'm pretty excited, we don't often get signals and tops/bases this big, this looks like it's going to be a monster move, but we could tell that more than a week ago with the VIX/Market analysis and expectations that have played out exactly as expected thus far, the last part of the expectations are where it gets really ugly for the market.

If you want an idea of how ugly...

The CONTEXT model for ES is at an astounding 45 point negative differential!!! I HAVE NEVER EVEN HEARD OF SUCH A THING!

This looks like our week and according to our analysis form a couple of weeks ago and positioning, we expected last week to be up and this week to be down, thus the calls for last week and puts for this week.

This is one of those times I feel really excited about the market, I feel like all of the hard work and analysis has paid off against what seemed to be impossible market action, but can you imagine what a 45 point correction in ES could do to the market? A month of gains could be lost on an opening gap!

I'll see you in a few hours!