A.M. Indications

If you caught yesterday's A FEW EOD CHARTS then you have a very good idea of what we expected for this week from last Friday's Market Update and Some Probabilities.

While we didn't hit every single move right on, we did get all of the moves expected and the overall theme of why there was a bear flag, why a Crazy Ivan shakeout would be used and to what effect, were all right on. The main point of last night's post is to show that this super mini cycle or expectations for this week and the reasons for them have been fulfilled or are in the very tail end of being fulfilled.

Last night's post put's it together more completely than I can here so if you missed it, you might want to read it real quick, again this is the post, A FEW EOD CHARTS and after understanding what we were looking for and why and how that has come to pass, the charts below and the Futures update that I'm posting next will make a lot more sense. The bottom line is it's time to start looking for those shorts that we were looking to short in to price strength on a Crazy Ivan head fake move of a bear flag which would have been a VERY simple affair if the concepts of Technical Analysis weren't used against traders every day. Monday or Tuesday of this week, the bear flag would have made a new leg lower and that's it as far as what Technical traders would be looking for. We had signals that told us it was a bit more complicated than that, but in the end the result is the same, it just gives us opportunities. Most of our opportunities that are low risk and high probability will be found at the top or bottom of a pivot.

Here are the charts for the averages this morning, the post is only half complete though as far as what I'm trying to demonstrate. With the addition of the Futures Update next, the picture emerges more clearly. You can't understand the real importance and meaning of these posts without understanding several of yesterday's as well: Definitive Change in Character , SPY Arb, USD/JPY, VIX Futures , Almost Forgot... , Closing TBT (long) For now , Market is Losing It's Levers , TBT / TLT Follow Up and SPY Arbitrage and A FEW EOD CHARTS

Charts...

 DIA 1 min pretty much in line which is not surprising on an options expiration Friday as they typically steer price to the level of maximum pain, the area where the most (dollar value) amount of options will expire worthless, so we rarely see big divergences intraday until after 2 p.m., but these have to be viewed from the forest perspective, not the trees.

 DIA 1 min trend, note where the area of the bear flag from last week was, even though there wasn't a true technical bear flag in all of the averages, it has been the key to all of the action this week.

 The 5 min charts were largely positive very short term last Friday, this is why I said that while a Crazy Ivan shakeout was a good probability, a move above the bear flag was the highest probability, a Crazy Ivan shakeout would just make the move above the bear flag more effective as its purpose is to add momentum to the move.

The fact the 5 min charts are in this kind of shape tells us a bit about where we are in the process from the bear flag, essentially everything we were looking for has competed and the reason for the move was distribution in to higher prices, perhaps a head fake move above the multi-month SPX range/top as that's a very large range and a very significant reversal to the downside in the most watched asset in the market, all things that increase the probability of a head fake move.

 IWM 1 min today, in line, but again it must be viewed in context.

IWM 1 min, note the positive divegrence at the bear flag from last week, if this were a true Technical Analysis bear flag, there would be distribution in the consolidation/continuation pattern, this is partly why we were forecasting a move above the flag this week.

 IWM 10 min shows what has been done with higher prices this week, the bear flag was only the mechanism or set up to get those higher prices.

 QQQ 1 min intraday, it's a little lagging compared to the other averages as far as 3C, but close to in line today.

Again, the perspective/context of the VERY same chart gives you much different information starting at the bear flag and then the move above confirming that this set up was exactly for what we expected, distribution.

 QQQ 5 min tells you what was done with those higher prices from the bear flag of last week. I don't think I need to draw in the divegrence here.

 SPY 1 min intraday, there's also a ROC loss in price momentum, look for a flat range. Yesterday several of you scalped the Q's, it was a tough trade the first half of the day, but our signals were good for a decline in to the close and from those of you I've heard back from, you made at least something on the scalp, I think it's great that you kept emotions in check and went with the objective data in the face of deceiving price action.

SPY trend of what was done with higher prices, this is where the bear flag and Crazy ivan were most evident.

Futures update coming

Market Manipulation Comes out of the Tin Foil Hat Era

I mentioned in the A.M. Update that I'd have more to say on manipulation of the market , specifically speaking about the USD/JPY.

If you've been around the market and specifically precious metals the last 5 or so years, actually since Bear Stearns was taken in by JPM, then you probably remember the viral campaign to break the Silver manipulation fix by Blythe Masters of JPM. When JPM took on various units of Bear Stearns just before the Lehman crisis in 2008, they inherited a VERY large short position in Silver.

Silver has historically had a fixed price ratio compared to gold prices, it has jumped around over the years, but if you knew what gold was selling for you'd have a rough idea of what silver should be going for, that ratio just kept going lower and lower after 2008 as gold started to run and silver essentially went no where.

If I remember correctly, the line in the sand for Silver prices was about $19.50 in SLV (adjusted). Finally the JPM manipulation of Silver led by the infamous Blythe Masters was broken and this is what happened next...

After 2008 JPM maintained silver in a range, you can see a pretty clear breakout, increased volume and some short squeeze, although I don't know if JPM had dumped their silver short by then or not.

In analysis by a 40 year veteran of precious metals trading, he concluded the following about JPM's price rigging and manipulation of the silver markets, some may sound VERY familiar to you (my bold added for emphasis)...

"While the key to the silver manipulation is JPMorgan’s dominant market share or market corner on the short side (same as in the London Whale case), there have been some important outside factors that have contributed to the silver price-rigging. The most important have been in the modern mechanics of trading, from HFT to the presence of technical traders and funds which mechanically and consistently buy and sell on price signals; buying as prices move higher and selling and selling short as prices decline. These technical funds are the enablers which allow JPMorgan to sell high and buy low in silver. These technical funds and traders are important contributors to the perfect market manipulation."

Unfortunately, the CFTC never charged JPM with manipulation on a massive scale. 

Silver Price-Manipulation Probe Closes

CFTC Files No Charges, Says Not Enough Evidence

"U.S. commodity regulators closed a five-year-long investigation of silver-market manipulation claims without filing charges, the latest setback for authorities cracking down on alleged trading abuses.

The Commodities Futures Trading Commission said there is no "viable basis" for a case that had its roots in emails commissioners received from investors amid market volatility in 2008. The decision to close the case amounts to a victory for J.P. Morgan Chase & Co., a large silver trader that was the subject of manipulation allegations."

However, in another price rigging/manipulation of another precious metal, Gold, Barclay's just received a slap on the wrist.

Barclays slapped with $44 million fine over gold price fix

""(Reuters) - Barclays Plc has been fined 26 million pounds ($43.8 million) for failures in internal controls that allowed a trader to manipulate the setting of gold prices, just a day after the bank was fined for rigging Libor interest rates in 2012.

Britain's Barclays is the first bank to be fined over attempted manipulation of the 95-year-old London gold market daily "fix", although a source familiar with the fine said it was a one-off and not part of a wider investigation into gold price rigging."

The key to all of the manipulation which is just scratching the surface, today's Max-Pain options expiration is nothing other than manipulation. Our article last night detailing what we expected this week from last Friday, 

A FEW EOD CHARTS is nothing short of manipulation, how else could we predict what was going to happen this week almost perfectly a week in advance (relating to action around last week's bear flag and the move above with a Crazy Ivan shakeout)?

This is a market wide problem, luckily we have tools that allow us to see what's going on under the surface of price action and we've seen these manipulations play out so often and so consistently that they have become concepts that we know to expect with fairly high probabilities, such as the "Volatility shakeout of the initial stages of stage 4 decline (a shakeout of shorts at the break of a top like a H&S ), the head fake move that we see right before reversals approx. 80% of the time and on ANY TIMEFRAME and in ANY ASSET.

The bottom line is this happens every day, likely every minute of every day and adjusting to the market rather than following century old technical concepts and thinking outside the box give us an edge over other traders, as the precious metal expert said,

"there have been some important outside factors that have contributed to the silver price-rigging. The most important have been in the modern mechanics of trading, from HFT to the presence of technical traders and funds which mechanically and consistently buy and sell on price signals...

These technical funds are the enablers which allow JPMorgan to sell high and buy low in silver. These technical funds and traders are important contributors to the perfect market manipulation."

 Don't run with the rest of the sheep, if there's anything I want to pas on through our analysis and trade examples, it's to think for yourself and never doubt the lengths these Wall St. criminals will go to, I'm sure even with our most imaginative thoughts, we don't even scratch the surface of how much they manipulate the market. Luckily, we follow what they are doing.

A.M. Update

Yesterday I posted Market is Losing It's Levers between HYG being flat on the open and in bad condition (15 min charts) and yesterday's positive movement in TLT which caused us to close the Ultrashort of TLT, TBT Closing TBT (long) For now  (TLT gapped up this morning) and VIX futures looking like they are now in demand on a sudden move from complacency to fear, the market as of yesterday was losing all of it's ramping levers even though the SPX psychological magnet of $19000 is nearby.

The only lever left as of yesterday was USD/JPY (more to say on manipulation of the pair later) and as sure as the sun will set, they tried very hard overnight...

 Around 2:30 a.m. EDT they ramped USD/JPY as hard as they could in the low volume overnight hours, just to fall short of the $102 target where they might have found additional momentum.

ES and the other Index futures however...

 Were not playing along, they failed to ramp with USD/JPY overnight.

As far as the Yen as it relates to the USD/JPY pair, it has a nice positive divergence which is not good for additional USD/JPY upside, although it's still on a 1 min chart. However...

The $USDX has a very negative divergence on the intraday 1 min which also is not good for the pair and...

The 5 min $USDX has a VERY clear negative leading divergence. This means, even the last lever of USD/JPY is losing its footing.

As for the 5 min Index future charts I was wondering about after they were routed earlier in the week, well they are right back to leading negative divergences- 5 min ES

5 min NQ

And 5 min TF.

We'll see what oop-ex combined with SPX $1900 nearby produces, one of the probabilities based on our concepts from earlier in the week was a head fake above the multi-month range, $1900 should do it if it happens which usually happens around 80% of the time before a major reversal (in this case with such a large top).

We'll see what opening indications look like, early on things looked a little parabolic and I never trust parabolic moves up or down.

A FEW EOD CHARTS

Last Friday in laying out some probabilities for this week in the post, Market Update and Some Probabilities I had said...

"Now that we are getting more data in since we saw the first positive divegrence yesterday after the move lower, we are starting to get a few possible scenarios , which I like to try to put out there as it may help you with closing or opening certain positions, whether they be short term option trades or core positions entries/exits....If" this were a real bear flag, I would not expect to see positive divergences in to its formation, I'd expect to see distribution in to the correction to the upside, thus the case for a head fake move above the bear flag just got stronger."

and...

"the point here would be, the appearance of a bear flag alone suggests a high probability of a head fake move which would be to breakout to the upside first, however while they can manipulate short term trading action, they can't hold the manipulation long, there's a reason there's a bear flag forming and that's because of the strong sell off of the preceding couple of days, that trend almost always re-emrgers despite a head fake move, thus they are excellent to use as entries, in this case we'd short in to the head fake breakout above the bear flag."

I was talking about this area...

The probabilities as of Friday afternoon were lining up for a move ABOVE the bear flag for this week, this isn't a long range forecast, it's really still noise within the multi-month range/top, but still movement.

Also from the same post last Friday...Market Update and Some Probabilities continues...

"this is also introducing a slightly more complicated head fake pattern that is more effective....the "slightly more complicated head fake move", still puts the emphasis on the upside breakout of the bearish price pattern (Bear Flag)...The concept would be a Crazy Ivan Shakeout...A Crazy Ivan Shakeout will shakeout both sides of a price pattern...So the Crazy Ivan would look as I've drawn it above, a bear trap first on a downside break down which is what I suspect the 1-3 min charts recent weakness is depicting and then a breakout to the upside, which is why I think the larger 5 min positives haven't moved negative as this is the direction expected ultimately for the head fake move, allowing them to short price strength and more demand/volume before price naturally falls back down."

We didn't get the EXACT move imagined, but we did get all of the elements...

We first got a breakout above the flag, when this happens (unexpected breakout for the bearish price pattern), technical traders are taught to reverse their positions and go with the breakout, at 2 the move below the breakout point is where stops are typically placed, this forms the Crazy Ivan Shakeout, both sides of the flag were hit, THE ENTIRE POINT OF A CRAZY IVAN IS TO CREATE MOMENTUM, note the momentum increase at #3, but ultimately as was posted Friday...

"while they can manipulate short term trading action, they can't hold the manipulation long, there's a reason there's a bear flag forming and that's because of the strong sell off of the preceding couple of days, that trend almost always re-emrgers despite a head fake move, thus they are excellent to use as entries, in this case we'd short in to the head fake breakout above the bear flag."

You've already seen the charts today and Leading Indicators in Definitive Change in Character, SPY Arb, USD/JPY, VIX Futures, TBT / TLT Follow Up and SPY Arbitrage and Market is Losing It's Levers

Beyond the charts there, in to the close we got...

SPY (red) vs VIX (green) note the end of day action and recall the 3C charts for VXX/UVXY posted, VIX closed up +.76%, a far cry from yesterday's -8.10% and even the red VIX just before the close.

As for the charts for the averages...

 IWM 2 min

IWM 3 min

IWM 10 min

Most of the positives from last week only went out to 5 mins, as far as forecasting the upside move above the bear flag...

QQQ 2 min

QQQ 3 min

QQQ 5 min

SPY 2 min

SPY 3 min

SPY 5 min...

THE POINT IS, THE MOVES WE FORECASTED LAST WEEK WERE FOR 1 PURPOSE, THE BEAR FLAG WAS THERE FOR A PURPOSE, THE CRAZY IVAN SHAKEOUT WAS THERE FOR A PURPOSE AND THAT WAS UPSIDE MOMENTUM THAT COULD BE SOLD/SHORTED IN TO... 

I THINK WE ARE AT THE LEDGE OF FULFILLING THAT PURPOSE.

TBT / TLT Follow Up and SPY Arbitrage

As mentioned in the last post, it's pretty clear from relative performance and the normal correlations that the VIX is not going to be pushed around much more, I suspect from the 3C charts that it's actual demand (it's a bit rare to see actual supply/demand dynamics in the market, at least since 2009), but fear will do that and the level of complacency in the market, well I'd think it's generating some fear, especially these moves since the F_O_M_C minutes and their volume.

 The VIX was down -8.10% yesterday and -0.92% today, not at all the same bullying of the VIX or "Monkey Hammering", but that was evident in the earlier SPY Arb, USD/JPY, VIX Futures post today as the VXX correlation vs the SPX was clearly not giving up the ground.

Therefore TLT and HYG was used, but seeing some initial moves in TLT makes me think that this lever is shot , at least near term and the HYG 15 min charts from this week tell me that one doesn't have much left in it (then there's USD/JPY).

So I closed the TBT (UltraShort 20+ year bond / TLT).

This basically came in about break-even...

 TBT has been working pretty well for us the last 6-days, but it is nearing resistance. It's not that I don't like TBT, it's not that I don't think something is going on with TLT that should send it lower, whether to base or perhaps the normal "Flight to Safety" properties of TLT have changed as the F_E_D pulls out of its bond buying and China and Russia are obviously not going to pick up the slack, if anything they'll create more slack so we'll have to see what TLT looks like on the way down which I do believe is coming.

 TLT 3 min showing positive divergences early and suggesting the TLT manipulation or use as a lever to ramp the market is no longer dependable.

Remember the typical F_E_D knee-jerk reaction usually lasts between 2 hours and 2-days (although this one seems clearly engineered, not true knee-jerk) as there really was nothing of consequence in the minutes.

 TBT gave us good reason to go long as a trade which it was with a nice positive divegrence, but the 5 min chart there is going negative which means the TLT 5 min chart...

Should be positive to confirm which it is. That's enough for me to close out the TBT trading position for now.

However, as I said in the close out post, Closing TBT (long) For now, I'll likely be back, this is but one reason.

 TBT 60 min large positive and...

TLT 60 min large negative. Again, what the dynamics are at this point are unknown, whether TLT will pullback to the base area around $102 and be a great long (which should show good positive divergences on the pullback) or whether there's real concern that there won't be demand for Treasuries (in which case a TLT pullback will not show positive divergences/accumulation), either way it allows us to enter the trade with the knowledge of which way it's going by the time it gets there.

 Even intermediate charts make TBT look like a good long, 15 min positive with...

TLT 15 min negative confirmation, however, the near term charts suggest that this trade is probably a bit off if TLT is going to regain some "Flight to Safety" strength. VXX is showing signs of the same.

 HYG's 15 min leading negative divegrence, there's something going on here, I doubt HYG will be able to hold up as a ramping lever with trouble like this brewing and intraday...

HYG is showing near term trouble on its ramp today, along with TLT and VIX sitting it all out, this doesn't look particularly good for the market.

 At least yesterday's TICK data was strong as there was a short squeeze and that boosted intraday breadth, today since the noon time we've been in a VERY shallow +750 to -500 range with a 3:05 shot down to -1100 which is out of character for the day, that -1100 stock decline on that bar was right here on the SPY...

SPY- 1100 TICK reading.

And as mentioned, VXX/UVXY are showing clear demand today...

 VXX 1 min

UVXY 2 min

VXX 3 min

As I said, it looks like the VIX isn't giving up anymore ground and it looks like it's due to real demand or put another way, real fear.