Core Positions

There are a number of Core /Trend Short positions that are seeing rapid deterioration, one of main problems with entering now is the NFLX scenario. NFLX is one of the core short candidates along with JPM, PCLN, AA, GS, XOM, etc.

NFLX shows one of the problems I have, lets call it resistance at $334.50 or so, a move above that level makes it such any easy short and it sets up the snow ball effect, in fact there are a lot of reasons which you can find on the member's site near the top right, "Understanding the Head Fake Move" part 1 and 2, this shows you why a bull trap just a bit above current prices is so effective considering the small distance it needs to go.

There are some other issues like some divergences that are not all the way there yet, some credit markets like HYG that haven't failed because I suspect they are likely trying to hold the market up to get to areas like >$334.50 in PCLN.

I may start adding some core positions, either phased in, add-to or in total. I think focussing too much on the very near term action makes sense from a tactical point of view because of the volatility, but it's easy to forget to step back and looking at the big picture.

I'll be updating a lot of these and the areas I'd like to see them.

Opening a Speculative SPXU Long Equity

SPXU is S&P 3x short ETF.

I'll probably have about a half size position for now. The only caveat I'd say to be careful with is today's VERY OBVIOUS volatility, I don't like to day trade, I don't intend for this to be a day trade, but I also won't sit on a losing position if I need to close it quickly if Cruz filibusters which he said he wouldn't, but who knows.

With an Apparent Deal In Place and Cruz Not Blocking

It "appears" we'll get a sell the news move just like we got a buy the rumor move this morning.

For the moment, I'm just staying with established positions like VXX calls and NUGT long, I don't want to get in to a day trading bonanza here and rather look for something more substantive.

ES does continue to move negative intraday as I showed before as well as several others, I'm checking in to what looks like an effort to kick in the SPY Arbitrage with HYG/VXX and they could do it without TLT, it looked like it might stick, but HYG is now on the fence, if TLT is not involved (and it's not), HYG has to lead for it to work, otherwise, we fall.

Quick Market Update

I think for any trades to fade the market, keeping it simple is best, pick a couple of assets. Right now I'm looking at FAZ, maybe GLD or a 2x leveraged Gold ETF, but even more than that I like GDX or the 3x leveraged version, NUGT.

This is what is happening in ES (SPX futures) as well as the SPY.

 ES 1 min, at each successive move higher, they're chipping away at ES and SPY, this isn't the kind of signal I'd take right now, but it gives us some idea of what's going on, it seems someone is getting some great utility out of this to move a position or establish a short.

I glanced at Leading Indicators quickly and I am not sure what I expected to see, but I was surprised at our two sentiment indicators (these are not retail sentiment like StockTwits).

Both are not following this market move, in fact  quite the opposite.

Here's the second.

HY Credit is about what I expected, the key here is it is not following the market, it has giving up a little as well, to me it looks more like it's setting up for a fade/sell the news type event than an all out collapse. The thing I don't see yet is the fear, I think we need to see that.

Again the assets that are of most interest to me are Financials, Gold miners, gold and silver to a lesser degree and of course just simple inverse ETFs.

There's often a feeling of, "I don't want to miss this move" and people get in way too early. The situation in D.C. is way too fluid right now and we still have Fitch as you may have heard last night taking the S&P's place for a possible US credit downgrade, that may be on the horizon no matter what happens.

I'd rather miss the trade than to get in on a shaky signal. I think when the time is right, the signal will be clear, I'd urge some patience until then.

PM's and Miners

There's something interesting about both Gold (GLD) and Silver (SLV) today and not surprisingly as GLD has been trading inversely to the SPX, however, even more interesting is GDX or the 3x leveraged NUGT.

 GLD this morning which is interesting for a fade trade.

However GDX in both short and intermediate timeframes, above is a 3 min leading positive divergence that is very impressive.

Here's a 15 min leading positive divegrence that is very impressive.

I like GDX or GDX calls, I'm not making any sudden moves, but I really like NUGT long (3x long gold miners). I  (and a lot of us) already have NUGT exposure long, I personally would not let it go and may look to add to it if the situation looks right.

I do like these charts a lot though.

Quick Update

There's so change of tone, TICK is falling off, several of the Index futures are going negative and several of the averages (intraday ).

I'm interested in Financials, I think if there's a strong fade of this move, Financials may be one of the stronger areas to look at, short XLF or long FAZ, I'm not looking at opening any position there yet, it just looks to be one of the more interesting areas.

The Yen looks like it has found an initial toe hold as well.

This isn't the time for rash decisions or to swing for the fence, but there does look to be a nice fade opportunity if we are a bit patient, whether it's out of false rumor, over-reaction or sell the news, I don't know, I just care that it gives a strong signal.

Now, as expected the counter rumor: Republicans Deny

Apparently whether or not the Republicans or Boehner are going along with Senate Democrats, it's unclear whether Boehner has the Republican votes in the House and more than that, the procedural hurdles in getting any deal done are becoming increasingly difficult.

To me it sounds like the Republican party has two factions, each saying something different.

For my part, I'm watching for the fade signal or anything else of interest.

Boehner Bows to Senate Plan...

That's the word across twitter and other media sources and the spike in the $USD and market.... Lets see

Pre-Manic

Unreal market, from 1693 at 4 p.m. up to 1706 last night, down to 1696 earlier this morning and back up to 1702 and almost all of it is JPY cross chasing, meanwhile however the short term T-Bill market is getting utterly destroyed out to about the end of November.

It's actually getting hard to reconcile the market's view vs. the Bond market's view, I know which I would trust more and at this point, that market doesn't think a deal is getting done.

Well since we seem to be chasing  JPY weakness, we know what to watch.

Midnight Futures

I said in the Daily Wrap tonight that I had hoped to look at the futures later tonight and discover something about the market.

Near the end of the post when talking about Index futures, I also said ...

"There's a symmetrical triangle forming in ES and NQ and an ugly version of one in TF, this would normally be taken as a bearish consolidation/continuation pattern, I'm betting though it will do as they usually do and run a head fake move to the upside, the divergences are already there for it, what happens after is where it gets interesting."

I posted the entire article at 6:34, at 6:35 which was probably about 10 minutes after I had written the above, this is what happened in ES and the other Index futures (as they already had a 1 min intraday or overnight positive divegrence)...

 First there's an upside break from the triangle, the volume isn't huge, but there's a noticeable uptick and then there's a downside break, this is shaking out stops on both sides of a pattern or what we call a "Crazy Ivan" shakeout, then around 7:30 we get a pretty solid move up of about 14 ES points. I was listening to talk radio and recall there was a lot going on at the time in the House, votes scheduled and cancelled, etc and apparently "Enthusiasm" from Harry Reid. In any case prices are fading, having lost about 6 of those points thus far, but this is overnight trade and why I don't take 1 min charts too seriously overnight, there's just too much time, too many markets and too much that can happen.

Instead of getting any real information here, 3C is nearly perfectly in line with price which suggests the move was news driven in the thin liquidity of overnight futures.

The only interesting thing is the 15 min chart below of ES...

This chart is looking worse and worse, that would be coming from the 5 min chart, but I suspect what will be important come pre-market tomorrow will be the shape of the 5 min chart unless some massive 1 min divergence forms overnight. right now this doesn't mean much to me, it doesn't tell me anything, 3C isn't leading suggesting a lot of real money behind enthusiasm and it isn't leading negative suggesting a lot of heavy distribution , however with the thin overnight market, the 15 min chart may be the better judge of that.

The $AUD is close to in line at one min, it has a negative bias beyond that, the Euro is a bit moved, I'd say short term overnight it starting to see some weakness, the $USD still has a negative bias despite some upside movement. The Yen finally is inline on the 1 min and has definitive positive bias beyond 1 min charts, which could be trouble ahead if there's nothing else moving the market like bi-hourly Congressional leader cheerleading, especially because...

Strength in the Yen which I'm 80% convinced is coming will damage the carry cross like the Euro/JPY above in candlesticks, when you look at how ES (purple) has been hugging the pair both up and down the last 4-days (yesterday up, today down, tonight up), you understand why a falling EUR/JPY (like today during regular hours) is damaging to the broader market.

This is why I'm putting a lot of time in to looking at the currencies to see what the likelihood or probabilities are. For example, overnight the 1 min EUR/JPY...

 is close to in line, there was a positive divegrence at the same lows the market or rather ES and TF hit and developed positive divergence at this afternoon, there's a slight negative in the pair now.

To break that down further, for the pair to rise and help the market, the Euro must outperform the Yen, Euro up and Yen down, when you buy the EUR/JPY you are going long the Euro, short the Yen so I look especially close at single currency futures...

 This building positive in the Yen (30 min) is why I say I'm 80% positive it's heading up which is bad for the EUR/JPY and bad for the market as long as it follows it as it has been doing for the last week and really much longer. That's a strong Yen positive.

The Euro's negative already happened, there's not a LOT to get off this chart, but I can say I'd give the Yen much better chances at outperforming the Euro, that tells us something about the market when we have signals like tonight in Index futures, neutral.