MCP Position Update

I was just preparing a post on MCP before AAPL, I had captured the first chart and was going to say, "MCP's range since the post-earning's plunge is looking very well defined, the charts have held up great, it looks like a quick head fake move under the very defined range and support would make for an interesting entry or add to." as MCP is still a partial position (from pre-earnings) and I've been waiting for the right moment to add to it which I feel is near, thus the reason I started putting the post together.

This was the first chart I captured before moving on to the AAPL update and coming back to MCP. Notice the 2 min trend of a leading positive divergence at the post-earnings range, ALSO NOTICE HOW I PUT THE WHITE (LEADING POSITIVE DIVERGENCE) BOX RIGHT AT SUPPORT so I could say, "This looks like it's ready on the charts and just needs to hit stops below a defined support level.

This is right after I finished the AAPL post and came back to MCP...

 To the left we have short term capitulation on the post earnings decline and the range that formed, the charts have held up excellent in this range and that's the reason I've kept MCP open; it's VERY much like the RIMM scenario/trade we had with positives in to earnings, bad earnings and a big drop, but the charts held up, then we got an upside move on a big management shakeup of the two CEOs moving on which not only got us back to pre-earnings entry level, but a double digit gain from there. The positive divergence we were tracking in RIMM pre-earnings was thought to be an earnings leak, but what it really was reflecting was inside information about a huge RIMM shakeup that changed RIMM to BBRY (Blackberry).

You can see to the far right as I was putting the AAPL post out, MCP made the move I was going to point out.

This is a closer look (5 min), volume surged so stops were hit as they place them at such an obvious level, right at support.

The price action here should be watched very carefully if you are interested in an MCP long or add to as I am. I'm setting upside price alerts at $2.70 which will end the stop-run, then $2.75 and $3.00 which is the big one, if we get above $3.00 I think MCP will run and I'd even be willing (not my favorite scenario) to take on shares above $3 even though that's chasing. I'd much prefer strong 3C signals before we move above $2.70 to add to (or start) MCP.

 This 15 min chart shows the distribution or supply just before earnings, it seems there was some inside information, then the positive divegrence in to the move lower.

You may remember we had an MCP trading position that broke out of a triangle of some size (multiple months) and we exited the trade that day even though it was up around 6% (most traders don't exit a breakout from a triangle that's up 6%, but one of the main reasons was MCP's year plus base had VERY defined support and that had not seen a head fake move at that point and I didn't trust a breakout of such a large base area without a head fake move first. Later in the day 3C confirmed there was no confirmation of the breakout and we exited the trade that day at a 5+% gain on the day.

However the real strength and interest in MCP long is on stronger charts with higher probabilities.

Like this leading positive on a 60 min chart. The trend is even larger.

60 min trend, you can see the GS report that knocked MCP lower in to an accumulation zone at the bottom of the year plus range, I assume the vampire squid (GS) used that move to accumulate as someone with some firepower has sent a 60 min 3C chart leading positive ever since. Additionally the trend of the 60 min chart has kept MCP in a leading positive position EVEN AFTER the earning's price collapse, which looks exactly right proportionally for a head fake move on a base of that size with support at the exact same area since April of 2013. Even the reversal process is proportional to the base size and the charts obviously not only held up, but moved to even higher leading positive levels, at new highs (3C).

And the 2 hour MCP chart with a sharp leading positive divegrence right at the post-earnings range.

If interested, I'd set those alerts, > $2.70 will be the first significant move, stops were hit this morning as volume makes clear.

AAPL June $625 Put Update

The Trade-Idea: AAPL Scalp (Puts) are just moving in to the green. I had put this out as a scalp trade with some leverage because the longer term is in a transitional area in which it may make for a nice core short entry, but we need a little more evidence that it is turning, the 30 min chart is right about where that evidence is building, but for now I thought a scalp would be best as the signals are there for it. As for the last AAPL update, this is from Friday and covers the longer term scenario in more detail AAPL Update

 AAPL 1 min negative in to last week around our Put entry and a small positive, there's some light support in the area on a small H&S-like neckline which AAPL is sitting right near.

 AAPL 2 min and right in the area of that neckline, although this isn't a major H&S top.

Again, AAPL at near term support, the scalp trade I envisioned would be a break below this support.

AAPL 5 min which is the minimum timeframe that needs to be negative to enter a trade.

AAPL 15 min negative at the highs and...

The 30 min chart negative, this is where AAPL is getting transitional and may turn in to a larger trend trade than just a scalp.

Tech in general is also turning on this 30 min XLK (Technology Sector) chart.

However, very short term (1 min intraday), you can see some support kick in this morning right as AAPL enters the congestion area of that small neckline.

I'd have some alerts set if you are in AAPL or interested, the first near term downside alert will be <$625, $624 and $614.75.

Market Update

I want to try to get this out quick as things change pretty fast intraday, but there's a lot that is "bigger picture" as well. I'll also get to the Futures Update, there are some interesting goings on there.

I've talked a lot about the "Bear Flag / Crazy Ivan Momentum, Sling Shot", I want to show you the process on the charts as I'm not sure I've shown it clearly so those charts are below and important given what the prevailing trend is in the Trade Candidate list, specifically I'm talking about what the trend was I saw Friday and used NFLX as a proxy for the watchlists as it captures the essence of that trend as I explained Friday afternoon here: Forward Market Forecast and more specifically here: NFLX Trade Idea Follow Up

First for the open, as I mentioned in the A.M Update, USD/JPY (after having been ramped overnight on low volume as China/Hong Kong markets are closed) was negative intraday in to the open.

 USD/JPY 1 min negative from pre-market.

This is ES in purple vs USD/JPY in candlesticks 1 min, ES has fallen off pretty bad on the open. However ES is still significantly dislocated from USD/JPY and has a LOT of catching down to do even with the overnight USD/JPY ramp.

This is ES 1 min in line, but the stronger underlying trend...

ES 5 min leading negative, note how much 3C dropped as the Most Shorted Index gave out on Friday, this was the purpose of the bear flag/Crazy Ivan sling shot, to trap bears and then squeeze them to get our head fake move above the multi-month range/top.

The reason or the way the market was lifted was using the bear flag as a short trap/short squeeze, so the fall off of the Most Shorted Index is significant.

This is the SPY vs the Most Shorted Index, you can see the MSI fell off badly Friday and has gotten worse thus far this morning.

 DIA 1 min negative in to the open with a leading negative divergence, this isn't the norm as most averages saw a small positive right at the Friday 2 p.m. removal of the op-ex pin as most contracts are closed out by 2 p.m.

DIA 1 min showing the negative divegrence as the short covering abated and the general trend of distribution through all of last week as prices for the SPX moved above the range (this is how we differentiate a breakout from a head fake move, a true breakout would show confirmation, not distribution.

This shows the entire concept of the move and how it was achieved, #1 the 2+ day bear flag, #2 shorts chasing the Crazy Ivan head fake move below the bear flag's support which created #3 a short squeeze as seen above in the trend of the Most Shorted Index, that short squeeze gave the market the momentum to break above the multi-month range on short covering/squeeze, the trend of distribution through all of last week is the exact area of the break above the range we had been expecting (head fake move).

 IWM 1 min, note the intraday positive divegrence in to 2 p.m. Friday as the Max Pain Options Expiration pin was removed.

However on a longer chart the trend of distribution is seen clearly on the IWM after the initial short squeeze moved the market far enough to break above the range (SPX).

QQQ 1 min, also showing a small 1 min intraday positive in to 2 p.m. at the removal of the op-ex pin.

And the larger underlying trend of distribution as the Most Shorted Index failed Friday.

QQQ as the MSI fell off, leading negative.

SPY 1 min 2 pm positive Friday at the op-ex pin removal.

Distribution in to the failure of the short squeeze Friday.

And the entire process of the bear flag (yellow) and the bear trap at the Crazy Ivan (yellow), the sling shot momentum created by shorts being trapped and forced to cover and distribution through all of last week as the SPX moved above the range as we had expected (both the move above the range and confirmation of that move as being a head fake). 

30 min trend.

More to follow...

A.M Update

Friday in The Week Ahead the first chart I posted was the decline Friday in the Most Shorted Index I keep of the top 100 R3K shorted stocks, this is the short squeeze we had talked about creating a head fake move above the multi-month range/top that started in February, it's the same move that was generated not by accumulation, but by sling-shotting around a 2-day bear flag with a Crazy Ivan shakeout that trapped shorts then forced them to cover. The drop off of that short covering on Friday looks like the end of that move which had been expected before it started as a range this large doesn't typically reverse without a head fake as that is what creates the reversal momentum, it's simply the head fake before a reversal concept that we see 80+% of the time before a reversal on every timeframe and in every asset.

Overnight however with very low volume as China/Hong Kong markets are closed, a +0.1% beat in Chinese Manufacturing PMI at 50.8 is being given credit for lifting USD/JPY in the extremely low volume overnight market, thus lifting Equity Index Futures.

In Europe, the ugly mix of low inflation and near record unemployment as well as another (second in a row) overnight miss in Eurozone May PMI (from 52.5 to 52.2 on consensus of 52.5) that sent bonds higher has set expectations even higher than the already lofty consensus expectations for Thursday's (6/5) June ECB meeting, with an overwhelming number of economists expecting NEGATIVE INTEREST RATES via cuts to the deposit rates with additional expectations of the main benchmark lending rate to also be reduced. Furthermore there are expectations for a new ECB long term LTRO program and easing of lending standards with many expecting Draghi to do more than "HINT" at possible outright QE at the press conference after. I believe the economists surveyed are largely on board with this line of thought with something like 56 of 58 holding these expectations which leaves a lot of potential for disappointment with Thursday's meeting/policy announcement and press conference. This is one of the main events this week along with Friday's US Non-Farm Payrolls.

The Calendar for the week in the US...

 Today we also have US Manufacturing PMI right after the open and ISM Manufacturing at 9:45 and 10 a.m. respectively as well as Construction spending at 10 a.m. for US tier 1 data.

Back to China, there are increasing expectations that the tweaks China has been making in RRR for small and now larger banks may be signaling more aggressive policy from the PBoC. In April RRR cuts were made for smaller rural banks, the new round is for larger banks that have met certain loan ratio levels specifically to the Agricultural and SMALL BUSINESS sectors, imagine that, small business!

China's PBoC has a different take on policy than most central banks, a very long perspective of decades, not years, so it's very likely these are "tweaks" to policy to help with lending costs, despite last week's China Securities Journal that suggested actual debt monetization (QE) which has no official source, just speculation from a magazine.

In any case, with the data overnight, it has helped the QE crowd sentiment and thus driven USD/JPY higher overnight, which now has an intraday negative divegrence on the charts.

USD/JPY 1 min

Obama is going to propose cutting US power plant greenhouse gas emissions by 30% from 2005 levels, thus UNG may be very interesting this week.

This general overnight movement is somewhat in line with Friday's charts as I went through watchlists, there were numerous great looking set ups, but almost universally they all looked like they needed a couple of days to flesh out their reversal process as shown with the NFLX charts Friday, they are a good proxy for the watchlist in general.

I'll also be watching the most shorted names.

I'll be posting a look at Futures in general, I saw some interesting things last night.

The Week Ahead

I'm not going to cover stuff we've already beaten to death like falling yields and what that has meant in the past. I will say that the "Trade Ideas" posts went down by about 90% over the last couple of months and I didn't really like that, but the signals just weren't there. Now in retrospect I can see that we have had a range in effect of +/- 3% since the end of February, that's a horrible area to try to trade.

Making money in there market isn't just about successful trades, it's knowing when to preserve capital and stand aside, I didn't forecast the range (of that size), but 3C did give us warning in poor signals that weren't up  to snuff for a lot of trades.

Some of thee things we have expected included a run above the range (head fake) before a downside reversal, there was no accumulation for that move, instead it was built around a bear flag and a sling shot until short covering took us the rest of the way.

As far as that short covering, these are the 100 most shorted R3K stocks in one custom index the SPY...

Most shorted in red, SPY in green. Note how the short squeeze fell off today.

One other Index I have been watching is the Transports...

 1 min

5 min

30 min

60 min.

It looks like the transports rally is over and that is a big deal when we are talking about market expectations.

HYG was used today to ramp the market

 flat during the pin and up at the EOD

However not all credit was so impressed, High Yield actually went the other way.

Nor were professional traders,

 Sentiment intraday which has been a trend as of late.

 VIX was also   monkey hammered in to the close, but closed up on the week

TLT continues it's strange correlation with stocks...

And Yields are calling equities lower, the white arrow was a ramp today, just for perspective... and that looked like...

This over the past 2 days, still it's a drop in the bucket looking at the chart above.

As for the market, there was a little end of day strength, which is why I said,

"Essentially, if you take the NFLX Trade Idea Follow Up from earlier today and apply the same expectations and the same logic, you have the market forecast in to next week, "

 SPY 1 min, this is the kind of noise that is actually useful for tactical entries, but it's not giving us the really important information as the short squeeze abates...

 Migration didn't make it far, 2 min SPY

This is the trend since the bear flag that sling shot the market in to a short squeeze and head fake move, the fact we have a negative divergence on a 15 min chart tells us the probabilities are very high we have a head fake move.

And as far as the longer trend, what the head fake move jump starts, here it is since the start of the February cycle.

To the right, this is one of the best examples of a divergence no matter the indicator.

Speaking of which, I found this while looking around at news, smart money flow from another indicator..

 Someone else's smart money flow indicator...

 And ours with the first major neg. divergence at January highs in both indicators and distribution right in to the February cycle's rally and just worse from there.

As for the Dow...

The same divergences in the same places.

As I said about NFLX, I think there's a day or so left in the reversal process, THIS WAS A THEME THAT WAS MARKET WIDE ACROSS NUMEROUS WATCHLISTS AND DOZENS UPON DOZENS OF STOCKS WE ARE TARGETING.

So, I say sit tight, if NFLX, BIDU and many more want to come to us and give us the kind of signals we haven't had for months so we have the best timed entries possible, I'll take that.

Now, it's my birthday and II'm going to celebrate!