Kind of Unbelievable

If the market is indeed going for the set up that I think I best outlined in last night's "Daily Wrap" video, (it's not much different than any of the recent analysis on the subject), I'm really shocked at how poorly the majority of the market, even assets that have great head fake price patterns , really look today.

The general feeling I got was the only assets that are really showing any reasonably tradable divergences (for a short term hitch-hiker move) are strictly the assets that would move the market, for instance, the average or Industry groups (as I said yesterday, the direction of the market is responsible for about 2/3rds of the direction of any given stock and that's not from me, although I had heard this before from someone I trust, that's from the SEC's website. The second most influential group are the industry groups themselves, responsible for about 50% and then of course subindustry groups and last is the stock believe it or not). So given what I just said about what moves the market, it's odd that those are about the only assets despite some that have good set ups for a head fake move, that were showing anything near tradable even for a quick trade.

As I said earlier and just confirmed in the Futures, the QQQ and IWM look the best, the SPY isn't even really interesting, by itself, I'd have no interest at all and the DIA looks downright bad, not even in line.

The Financial group looked pretty good, but again this is one of the 3 largest industry groups.

Some individual stocks that I thought might look decent for various reasons, didn't and I mean to the point that I couldn't find any reason to consider them for even the most speculative of trades, these included:


AAPL, AMZN, GOOG, IBM (which I would think would appreciate a bounce after today), XOM (which I thought had more upside in its counter trend bounce), NFLX (which had a bull pennant already in place, traders would already be watching it, why not go for it there?), MCP (which had a bullish ascending triangle in place), HYG (again a bull-flag/bull pennant), PCLN (with a bullish triangle).

The engines needed to push the market, SPY Arbitrage and former Carry Trade currency crosses are in place, the components that create the SPY arbitrage are in place (that means this market has no legs of its own and is depending solely on not 1 manipulation trick, but 3). The Leading Indicators were confirming, although only for the briefest of moves, so it looks like if there were any investment in to this mini-cycle, it was small and only in the assets that could actually perform a helpful function, the high Beta/momentum positions you'd think they'd want to be in, no interest at all.

Technically today functioned as a confirmation candle for the two-day tweezer top, so it's hard to see this lasting more than a day, at least with what we know right now, if that's the case, rest up this weekend because we'll be very busy come Monday

Trade Ideas...

Just looking through the watchlist, which I'm not finished as the charts evolve faster now that most of the op-ex activity is over, I'm looking for the strength of divergence, how far it has migrated, the reversal process as some assets haven't even started and some are mature and there are a number of assets that have nothing positive going for them.

Of the market averages, whether using calls (I prefer Oct. Monthly even for a short term position), I favor the QQQ and IWM. The SPY looks ok, the DIA doesn't look good at all.

For equity long 2 and 3 times leveraged ETFs...

QQQ= QLD & TQQQ
IWM=UWM & URTY

If you have to play a precious metal, although conventional wisdom would say gold would perform better, SLV actually looks better, it's borderline for me and since I have GDX which is PM exposure, I chose not to get involved, but I think SLV looks pretty good now.

SLV leveraged long ETFs I prefer the 2x AGQ, there is the USLV 3x leveraged long as well, it is an ETN rather than an ETF.

XLK (technology was getting close), I think this is a toss up (more so in the context of relative performance and stability). If you wanted to use a long leveraged ETF, TECL would be a choice.

Trade Idea: XLF Oct $20 Calls / FAS or UYG Long

I'm going to open the XLF calls, there's a good signal and the price pattern has a reasonable reversal process.

To play a 2x leveraged Financial long with equities/ETF, check out UYG and for a 3x long Financials, FAS.

Again, I expect these to be pretty short (term) positions.

I'll put a list of some of the better looking positions, but all are very short term, 5 min charts at most.

Leading Indicators Agree

It's really a great feeling to have an expectation of what to expect based on charts/objective data and concepts/experience of probabilities as well as having some idea of why the market needs to do certain things, there's very little that is random and very little that isn't already discounted.

So what started as an idea somewhere around the 3rd week of August is now seemingly being fulfilled. The expectations that I have laid out as clearly as I can in post and videos are now taking shape and the best part is, all of it benefits our ability to set up our chess board for the trending trades that I think many people would prefer over these hit and run, highly leveraged trades among insane volatility.

I don't need charts for Leading Indicators, they are exactly what I'd want to see and more.

First VXX is underperforming the SPX, TLT is in line and HYG is outperforming the SPX, so TLT is neutral in the SPY Arbitrage and both HYG and VXX are supportive of the SPY Arbitrage which is really short term manipulation because the market won't do it on its own unless they can get price past an area where traders are interested in buying.

The SPY Arb is now positive $.80 meaning the model suggests the SPY should be $.80 higher right now based on HYG and VXX's current position. This fits perfectly with the currency pairs mentioned earlier.

Speaking of currencies... The $AUD vs the SPX put in a higher low and thus positive divergence at 2:20 today as 3C predicted earlier today, it also predicted the Euro see strength short term and the Euro is even a better leading positive signal vs. the SPX. The tricky one that fills out details is the Yen, it has been range bound and we often see that before a reversal so as 3C suggested, the highs that are range bound in FXY (Yen) look like they will come down as 3C suggests, you probably remember what happens after that and why this is looking like a short (term) operation.

Sentiment Indicators are fairly negative, especially HIO, but in to late afternoon trade I see FCT improving.

High Yield Credit (again as another indication of the short term (I'm thinking day/days-not week or weeks) is range bound trading sideways, but vs the SPX, that is a positive correlation. The more important one is the dislocation of HY credit from the SPY over weeks.

I think we are right on track, I'm hesitant to trade this move because it has a high chance of turning on a dime, that reversal confirmation candle can gap up strongly in the a.m. and close significantly lower by the end of the day and the Tweezer top is confirmed.

So unless I see signals that really are worth it, I'll probably spend more of my time looking for the best core position set ups as this is the market gift pinnacle.

IWM P/L

It was a small loss, but worth it just to free up dry powder.

At the fill of $2.57 and cost of $2.66, the P/L was a loss of -3.3% of position, it was maybe 1/10th of 1% of the 2% rule so absolutely negligible.

FSLR Update

I don't need charts, yesterday I posted on FSLR, the area I expected a pullback to and where I'd like to verify accumulation and look for a long entry.

There are intraday charts that are positive, but to me I think they either at best provide a parabolic spike up which is very unstable and can fall just as fast or "maybe" these divergences are the start of that reversal process of a larger consolidation in which case FSLR would remain flat and the timing wouldn't be ideal.

Either way, I see improvement in FSLR, I just don't see a trade with the kind of edge we are looking for, although I feel 90% certain it will come with a little patience

Gold & Silver

I give Gold and Silver a 75% probability of a bounce from these levels, likely at least to fill today's gaps, however I will not be opening a position in either even though the entry looks fine, I'm just not sold on the charts and that may express itself in the risk vs reward equation. To me GDX/NUGT long looks like a better position.

 These charts and the set ups which I covered a bit yesterday, are well worth going over again with the bearish descending triangle, the break down as TA traders expect, a head fake move that acted as a perfect timing flag, there are a lot of our concepts on these charts this week.

This is the 3 min, I think it heads for the orange gap and fills it and find that to be a high probability, however, beyond that, even using leverage with options, I don't see strong enough charts to indicate a high probability of profit potential, it may develop before the EOD, but it's not there now for either asset, although Silver looks a little better.

 5 min GLD, not looking good at all and it's hard to justify any position that isn't strong on at least a 5 min chart. The trade concepts are on the charts.

SLV 3 min has the same head fake concept as GLD, the chart is about the same.

I just find the 5 min chart to look better in silver, but not good enough for me.

CLOSING IWM Oct. $108 Put from yesterday

I'll take about a 1% loss on position, but why stay with so little to lose?

CLOSING IWM Oct. $108 Put from yesterday

I'll take about a 1% loss on position, but why stay with so little to lose?

Trade Idea: Re-opening GDX $25 Oct. Call / NUGT long can work

I'll probably leave the current NUGT long as is and just open GDX, but for new positions, I think either work, although I don't expect either to be anything even close to a swing trade, maybe a day on the calls, maybe 2 on NUGT.