Quick Market Update

I'm just about to post a more comprehensive market update, but nothing much has changed, I expect to see more lateral price trending than we have seen over the last week, the reversal process as reversals are almost always a process and not an event, such as a "V" reversal which would be an event vs. a rounding top or choppy lateral top like a "W" or rectangle.

Each of the averages is a bit different so no one average is a great proxy for very near term price movement, but I'd consider it largely congested. I suspect the market and the SPX in particular are losing momentum right now and about to make a turn lower back toward the lows of this morning, there they should gather a bit of strength and keep this choppy pattern up. In my view, trying to trade this particular area is very high risk, very low reward, at least for short term trades, this is more or less the reason I let go of the GLD position this morning, the same essential sideways-ish trend which I'll cover in greater detail in the post I'm working on now.

However again, I'd urge patience here, you can be long, short or chose to stand on the sideline, PATIENT. I think this is a time for patient, but it is also the natural progression of a move like this that was forecasted on April 2nd for last week and of course this week for the move to start its end and after that, we are looking at something much more volatile, easy to trade, etc.

I'll have more in just a few minutes.

GLD/Gold Follow Up

As for the GLD trade just closed down, as I said it's not because I don't see a bigger pullback, but why give up gains or all potential gains when the position can just be re-opened at a better price, more appropriate timing and essentially double down those same gains?

The P/L for the GLD May monthly Put from Friday, Trade Idea: GLD Puts came in at about another 1/3rd gain today over yesterday.

Nearly +30% for just over a day of market exposure. With the way the market has been in a large range all of 2015 and more recently a tighter range, it seems that the hit and run approach with some leverage tends to work best for short term traders, a bit more nimble than usual.

Quickly I just want to give a broad update on GLD as we do have multiple timeframe analysis with several potential trades from short term puts to swing trades all the way out to a primary trend trade and I believe we are in the area where all of these are going to start coming in rapid fire succession, one after the next, each being a larger and larger price move.

 This is the weekly primary trend in GLD which was a huge gold-bug mentality type trade in 2011, you couldn't say anything about Gold that wasn't entirely glowing as everyone had drank the Kool-Aide so to speak, so when we called a 2011 top after a nice stage 2 mark up trend (@ #1) at the red arrow, I had some personal experiences with , well with a fund manager that again demonstrated the insanity of these bubble mentalities, a real study on cognitive biases. At the time the projection was for either an Intermediate or Primary (Dow Theory trend classification) downtrend, as you can see the call was correct and entirely based on what we saw in 3C at the time.

Note the large descending triangle in the market at the top, triangles this large are never consolidation patterns and almost always tops or bottoms depending on the preceding trend (usually opposite the preceding trend so a top at 2 and likely bottom at 3), so the current descending triangle through 2013-2015 looks like a bottom area or base.

 The 4-day GLD 3C chart isn't the best overall, but it's the best for showing the different stages and 3C reactions at them like confirmation at #2 at stage 2 Mark Up and distribution at stage #3 Top as well as leading negative distribution in to stage 4 DECLINE. Now we have a positive divegrence again at what appears to be a large stage 1 base, thus somewhat like oil's longer term prospects, I think Gold is basing and building support for a primary uptrend or what would be a gold bull market. This would be the long term primary trend trade in which I prefer to use less leverage and just let the trend and time do the work with very little oversight of the position needed, although I'll obviously stay on top of shorter term developments.

This hourly chart shows the recent pick up in the 3C trend which often happens near the end of a base before a breakout to stage 2 mark up or rally. Again this would likely be a longer term trend trade.

 At 30 minutes you can see the last positive divegrence that sent GLD higher, I suspect we are going to see downside, but this trend will reassert itself, making for at least a decent swing trade and a pretty large one at that.

However the 15 min chart has shown a recent 3C negative divegrence which is what the most recent put or short trade has been about. I suspect a pullback to the $110 area, this is what the Put position was based on although you could play it any number of ways.

However very near term as started to be seen yesterday, there's a small intraday 1-3 and 5 min positive divegrence since our entry last week, it's also at a support level so a bounce and some backing and filling in the local gaps makes sense, which should just allow us to re-open a new put position for the continuation of the divegrence on the 15 min chart (down), If I wasn't using a lot of leverage, I may have just waited it out, but with options leverage, a profitable trade can turn south quick and there was no reason to risk that.

So you can see there are a number of different trades, each increasing in size that look very probable. This is the nature of multiple timeframe analysis and picking the right tool for the trade.

Closing down the GLD May $115 Putt Temporarily

I suspect there will be a small bounce in GLD and I'd prefer to hold the gains already accrued since last Friday's GLD Put trade, even though I'm looking for a longer trade, lower prices, it just doesn't make sense to take draw down when I can just reestablish the position.

GLD follow up to follow.

A.M. Update

Good morning.

The Chinese super momo move in both mainland, but especially Hong Kong has finally taken a break with Shanghai +30% overnight and the Hang Seng -1.6% for an actual loss.

Also as suspected UK CoreCPI data came in light, below consensus.

In a absolute, "You got it wrong" tap on the shoulder flip flop, Japan's PM Abe's special advisor, Hara, who said yesterday that the $1.05 level for the USD/JPY was appropriate and he didn't see the Yen weakening much more apparently changed his mind or had it changed by someone this morning when he came out with a statement that USD/JPY $1.20 was acceptable and he wouldn't be opposed to further BOJ easing (seen as weakening a currency even more), so yesterday it was a message of Yen strength from Abe's advisor, today, "Well maybe not that strong. The funny thing is the market's reaction to Harada today.

 This morning's USD/JPY reaction, initially up (Yen down) on Harada's reversal and then the market decides to stick with the original message and turn back down less than an hour later.

In doing some research on the Yen and the current carry trade, I've come across quite a few comments about Yen strength, which is something I've been pointing out as we have seen 3C positive divergences building as well as a long term bias that I've had for several years that when the US market really is moving to a primary downtrend or bear market, Yen strength will be occurring at the same time.

As a reminder, the Yen trend in price and 3C on a strong Daily chart...

The price trend has gone from down to lateral and the 3C divergence from in line at the downtrend to leading positive at the lateral trend, it looks like a large base being carved out for a move higher as anticipated.

We've also seen some shorter term strengthening in the Yen, one of these shorter term bouts of strength will lead the Yen out of this base.

EUR/USD (a former/partial carry trade) I just saw this morning touched 2 year lows. With my larger expectations of primary trend $USD weakness building, this should weaken the USD/JPY pair further as well as have a gravitational pull on the broad market.

It hasn't just been the Asian markets seeing some downside overnight, but at last look Europe is largely red.

Crude looks to be moving closer to our target range and it has the divergences we want to see.

Brent Crude futures 5 min with leading negative 3C.

While Gold continues to move in the direction of our recent Put position Friday.

Retail Sales in the US missed for the 4th consecutive time, making it the worst string of misses since the Lehman era and the first consecutive drop since Lehman.

Otherwise for our larger market based purposes, the Index future chart as I showed were starting a negative divegrence on the 15 min charts yesterday, there's still some work to do between the 3 timeframes of 7, 10 and 15 min, different averages have different timeframes covered, but all 3 or 4 major Index futures don't have all 3 timeframes covered, I suspect that's something we will see on a downside pivot.

I'll be watching out for these today as well as further deterioration in Leading indicators, a bounce today would be helpful in getting that done since my wishlist of a Bearish Engulfing candle isn't coming true today (It was just a hope, no objective reason to believe it would happen), however we have stalled more or less in the area which is part of the reversal process. If you recall the best guess scenario I drew last week in candlesticks, it wasn't just strong days up followed by a strong "V" shaped reversal down, but the typical small bodied candles at the top that are reminiscent of a reversal process, there's usually a head fake move in the reversal process itself, that's the ideal area for puts broadly speaking.

Otherwise, thus far you can see the candlestick reversal process I'm talking about...

This shows the roughly lateral trend starting to develop, I expect to see a bit more of this, sideways chop in the area, maybe a head fake move of this little range if it becomes very defined.

I'll be posting any positions I think are ready as some will likely be ready just before or just after the market. Financials I'm very interested in, but we are right in the middle of Financial earnings this week, but I've seen a number of other areas, the Dow mentioned yesterday that look nearly bad enough right now. Either way, we have moved almost exactly according to expectations not only in price, but in underlying trade, Leading Indicators and Index futures' underlying trade which is a good sign that our forecasts based on highest probabilities are working out as expected, making it easier to plan ahead, but planning ahead rather than reacting instantly to price requires a bit more patience, but it's well worth it.

Daily Wrap & AAPL Re-Visit

Since our AAPL post from April 2nd in which it acted as a proxy fro the broad market, IMPORTANT: AAPL Set-up & Market Movement , we are already seeing what I'd consider to be important signals in AAPL.are they screaming right now? I'd say "No", but are they moving in that direction? I'd say yes.

Remember AAPL reports April 27th after the close so they have a bit to go.

Some of the signals you'll see on a shorter term basis, seem to line up perfectly with anticipation and hope over the Apple Watch out last Friday. Otherwise, we have some significant movement , which is where the April 2nd Forecast really started more or less.

 After having gone through my watchlist April 2nd and having seen so many triangle based price patterns and those in the broad market, it all started to make some sense, a volatility pinch like Bollinger bands creating an upside breakout that was expected since before the breakout to see distribution based on a number of factors. The same 3 main things I'm looking for are still in play, however after looking at more and more charts, they are falling in line the same was as the broad market.

AAPL's triangle is too large to be a consolidation/continuation triangle as are most of the other ones in the market except maybe the Spot VIX which I suggested Friday was in a coiling of tension and a Crazy Ivan shakeout which we'll look at below.

Volume is also totally wrong for a triangle breakout as it continues to decline in AAPL, the reason I used it was because it had one of the cleanest triangles and I just happened to be at AAPL when I saw the patterns were overwhelmingly repeating warning of last week's upside move.

Look at the 4/2 warning and what AAPL did the next day, since then, AAPL hasn't closed above last Monday's initial breakout attempt, there has been no follow through, no volume.

 I think the 6 hour AAPL chart speaks for itself with the triangle in the yellow box, which is one of the trends and reasons I said in April 2nd's forecast that I expected the triangle breakouts to be under distribution, as such false or failed head fake moves which we often see just before a major trend reversal.

The 60 min chart shows the AAPL "W" base that saw its second half form on April 1st, since and in to this morning's opening highs on a Doji Star, there's a very clear negative divgerence on an important timeframe after this base/forecast started.

 The 30 min chart should show a stronger, more detailed divegrence as it does, including the "W" base just prior to the April 2nd market forecast.

 The 15 min chart shows the same so we have multiple timeframe confirmation which was already being forecasted by the longer term AAPL charts before April 2nd.

Starting from the very short 1 min chart, you can see a lot of detail in to forming the "W" base area as well as keeping the triangle's shape intact, even at distribution to the left in between the "W" at the high of the 'W'. Also note some accumulation just before the AAPL watch order debut on April 10th, last Friday, it seems there's some disappointment looking at the divegrence to the right of that (last 2 days).

 Next AAPL's 3 min chart, again more detailed and numerous divergences all marked (positive and negative) and again just before the watch release, a positive and then nothing to really follow up as today's signal is negative.

And a closer look with a stronger 5 min chart, again accumulation just before the watch release/buy/order date of 4/10 and today's leading negative in to the open.

On the day,  the market acted exactly as forecasted for the start of the week with 1 min positive divegrence in to Friday's close suggesting strength, but nothing positive in the 2-3 min range just after which is why I suspected initial strength on the open followed by weakness which was quite spectacular as a forecast today.

While I still don't think this is absolutely over, remember the reversal process which it many ways it seems we started today, but a number of signals went south as expecting including 15 min Index charts, Yields across the curve as of the open so it wasn't Greece and their possible default/Exit which came out around 1 pm, as yields led the market lower since the open.

The Dow lost 18k, the SPX lost 2100 and the NASDAQ lost 5k, all psychological levels.

As I have suggested the last several market days and late last week, I suspect the VIX (spot) has being in a triangle (smaller) coiling energy and I suspected we saw the first half of a Crazy Ivan shakeout late last week as the VIX sits just below its 50-day moving average. Today it was up over 11% and making a stronger case for a Crazy Ivan shakeout as posted Friday in the Daily Wrap, this is to shakeout both sides of a well known price pattern in an important or closely watched asset.

Daily spot VIX which was WAY outperforming its correlation as posted earlier today with a small leading indicators update here, Talk of a Greek Exit Adding Pressure Note VIX is just about crossing its triangle's apex or completing a Crazy Ivan shakeout (both sides of the triangle-a head fake move.)

Apparently protection is bid now unlike April 2nd strangely in front of the jobs report on a 3-day weekend.

As for the charts, they were mostly in line in to the close, looking a lot like they'd continue lower on tomorrow's cash open. As for the 15 min charts, today was the first day the SPY 15 min moved out of perfect correlation/confirmation, the others look quite worse.

 DIA 15

QQQ 15

IWM 15

SPY 15 starting to lead negative for the first time since 4/2.

HYG's 3C charts are falling apart badly as well, so that should be interesting over the coming day/s.

Our SPX:RUT ratio was one of the few indicators suggesting the market find a toehold rather than just decline straight from here.

Interestingly, just like NFLX left a very bearish daily candle on the close,  most of the averages left a candle that would be very interesting as a reversal if it were to see a bearish engulfing candle as confirmation, as well as giving some great opening entries. Even beyond that, you'll see they don't look good in the trend since the April 2nd forecast.

*All red candles drew in by myself represent bearish engulfing candles, opening at the day's high like today, closing below today's real-body .

 The Dow which looks a lot like a flag and this would make for an excellent head fake and confirmation at the close.

The Russell with a Shooting Star-like bearish reversal candle today.

The NDX with a Star-like closing candle.

And the NASDAQ Composite with a Star-like bearish reversal candle. These are the type of candles I drew in last week as an example of how I expected this particular move would end.

One of our two Pro sentiment Leading Indicators suggests the draw in candlestick for tomorrow is a possibility and we have short term intraday support being signaled by our SPX:RUT Ratio indicator.

Otherwise Leading Indicators (1 of 3 conditions) are deteriorating s are the other 2 right on track. Yields, commodities and HY Credit are among the others leading negative as hoped we'd see.

The 15 min Index futures charts I was looking for to turn... As you can see, PATIENCE PAYS...

 ES 15 min

TF 15 min

NQ 15 min

And don't forget, the highest probability chart...

ES/SPX futures 60 min in an ugly leading negative divegrence, timing has been the only real question.


INTERESTINGLY THE $USD WAS ALMOST UNCHANGED ON THE DAY, SOMETHING I WROTE ABOUT IN THE A.M. UPDATE this morning and the feeling I get that it's not only related, but has much broader implications. All of the overnight gains in $USD were wiped out as the near term 3C charts have been telling us after we saw a bounce which we have.

 $USDX 60 min including the reason I suspected we get a near term bounce and after that a larger move to the downside, this has significant implications on the carry trade.

As you can see, it looks as if the $USD is going negative off that initial positive (bounce) divegrence.

 The 1-day chart shows the larger negative as my forecast on 4/2 was for a near term $USD bounce followed by a larger move to the downside.

And the 5 min chart is clearly negative looking like the $USD's bounce is ending and the next move to the downside should start.

The closest thing to a Dominant Price/Volume Relationship was "Close Down/Volume Down", which has the least bias which is why I nick-named it, "Carry on" as in price keep doing what it was doing, which we saw last week and had a second flat day within or nearly within the first day's range, although it was hardly dominant, 58 of the NASDAQ 100, 214 of the SPX 500 with the Dow and R2K having no relationship.

As for sectors, only Financials closed green (I suspect as we have a lot of Financials reporting this week)  with 8 of 9 in the red with Energy lagging at -1$ and Financials up +0.37%. If anything we are closer to a 1-day oversold condition although I'd hardly call it that, just an overall ugly day for the market losing this morning's price strength.

In similar fashion only 52 of 238 Morningstar groups closed in the green, again I doubt very much it's a 1-day oversold condition, but I suspect the effects will be similar,

There are some other indicators that haven't been updated yet I need to check on and will let you know if they hold anything of interest, but so far it looks like we are on track from last Friday's The Week Ahead post.

Although I'd be surprised if the market just rolled over so easily without some kind of shakeout as I suggested above on the daily charts with a bearish Harami, I think the gist of the timing and result of the forecast for this week are on track, which should guess some very interesting positions, likely tomorrow I'd suspect.

I don't want to start high fiving and underestimate the market based on the ugly price action today, however for us it was more about the signals in the averages, Leading Indicators and the Index futures, not the red close. But as I said, the market shouldn't be underestimated as Wall St. makes their living by making the most number of people wrong at any given time, I just feel very good about what we have been looking for and what has transpired.

Right now Index futures have an intraday positive divegrence, perhaps I'm a bit too bent on wishful thinking, but perhaps it could lead to the gap up opening we'd need for a bearish Harami reversal confirmation candle 

NQ/NDX futures 1 min is representative of Index futures right now going in to the overnight session, although the 5 min charts are negative so normally I wouldn't expect this to hold the overnight session.



I'll check on futures before turning in and post if there's anything of excitement, but for the moment I think patience is still required, although I think we have now just about met all 3 indications I have been looking for.

NFLX Closing Update

It's VERY hard not to put out an NFLX short idea right now.

The closing charts have deteriorated, the closing Daily Candlestick is a bearish Shooting star on a huge gap with huge volume, making the bearish reversal signal at least 300% more effective in my experience, not to mention the additional size of the gap as it is a Shooting Star candlestick or as the Japanese call it, "Trouble Overhead" as that long upper wick represents higher prices that were rejected, right in line with churning-based distribution.

 Daily closing chart for NFLX, a textbook "Shooting Star" (bearish reversal) and the increased and indeed extra heavy volume just makes that candlestick's bias that much more effective as we have seen time and time again.


The 5 min chart needs no interpretation, especially in to these gaps of the last several days, however what is interesting...

The 15 min chart is already technically leading negative. I'd like to see it SCREAMING or jumping off the chart, but I suspect that we are very close to that signal with the way things are moving.

NFLX

As I'm going through a lot of stocks on my short list for positions (it's still quite a long list), one of the better looking is DIA short / Dow short with good confirmation in the 3x leveraged long UDOWn and the 3x leveraged short SDOW. I'm not a huge fan of a Dow short over some of the other opportunities, if you look at the 2007-2008 period, large caps held up longer and they did not break down as hard as even say just the SPX, however I am impressed by the amount of confirmation. I'll try to bring you as many of these as I can as they move in to position.

I'm NOT a fan at all of trading stocks before their earnings. There are simply too many wildcards, options premiums are insane, often such as with NFLX last quarter, the knee jerk reaction isn't representative of what the earnings said and what Wall St. ultimately thinks as NFLX took a significant dive since the last earning's knee jerk highs where we had entered, about -15% with no leverage in just over a month.

However I think stocks like NFLX, which is up today on an ANalyst upgrade 2 days before earnings and at very attractive prices to sell/sell short in to (and since when did analysts start having their salaries paid by us? Think about their motivations as we use to make jokes all the time about what an analysts opinion was worth, it was a lot, just in the opposite direction). Furthermore they announce that the shareholders board meeting will take up the issue of a stock split that if approved, would likely be recommended by management to be paid out in the form of a dividend, all this 2-days before earnings...stinks a bit huh?

However, at least 2/3rd of the market will move with the broad market meaning if you get strong signals the market itself is going to move, you know a majority of stocks will move in the same direction. Using the reverse theory, if you find an overwhelming number of stocks that all look similar and like they are about to do the same thing, you';ll often find that's a great head's up for the broad market, there's just that much correlation between the two so I do like NFLX for several reasons, that included.

NFLX will be reporting Wednesday April 15 after the market close. I don't know how many of you remember their last earnings report which was actually pretty bad if you read beyond the headline print, which is why we decided to add to NFLX (or as a new core short/Trend position) for others. However, there you may recall there was a large gap down from October 16th, we also identified and that looked very alluring.

In our trade set up for the most recent entry which I just posted I believe Friday in talking about NFLX, we identified a large accumulation area just before earnings, no one can read an earnings report faster than an HFT can react and it's always price that sets the tone of the "perception" of an event, therefore as we have demonstrated and argued in the past, it doesn't matter what the report says if HFTs drive price up 10+% in a fraction of a second, people will perceive the earnings report as strong even if it wasn't as was the case. But remember, we identified a large accumulation zone BEFORE earnings came out so it seems NFLX was destined to make that move no matter what earnings were which would allow market makers/middle men to get out of losing inventory from the large gap down.

Thus, especially with the gaps of the last several days and today, NFLX looks like a very interesting barometer, what does it look like pre-earnings this time and why do I like it as a long term trend short, although obviously an interesting trading stock?

 That's quite a parabolic pre-earnings move and today's daily candle with the long upper wick on heavy volume is indicative of churning or what some would call a distribution day.

As with some other longer term charts (5-day) like AAPL I have recently l posted, note the volume difference between a healthy move with rising volume and a dangerous move up on declining volume/declining institutional support.

I've also note RIS divergences, but you can catch those pretty easily.

NFLX also has a similar Broadening Top formation like the SPX and several other averages/Industry groups and not in a good position overall within that price pattern,

 Here's NFLX on a daily chart, RSI as well which is not currently at a divergence, but has been a pretty reliable indication, it may be worth looking for here.

The daily long term 3C chart for NFLC from stage 1 accumulation/base at a rounding bottom with a leading daily divergence, stage 2 mark up with 3C confirmation and I trust you can see the leading negative divegrence at the large, volatile , lateral Broadening Top-like price pattern. In either case, whether you believe this is a broadening top or not, I don't think you can argue the trend has changed from clearly up, to a wildly volatile lateral range, the 3C chart would indicate strong (daily chart) distribution through the area with more credibility for this being a top formation and about right in size.

 The 6 hour chart shows that pre-earnings accumulation just before their last earnings, it was an interesting feature we picked up and I suspect it was about middle men caught with large inventory at a loss on the gap down preceding this area which was filled on earnings here. The yellow arrow is our entry on a 6 hour leading negative divegrence and if you look at point a and b and where price is and draw an arrow from where 3C was to now, you see a very clear, large negative divergence.

 The 60 min chart shows the same, also note the positive divergence right before the last move up, the exact data was April 2nd, the same day I posted the market forecast for the triangle based breakout on that Thursday before Good Friday.

That divegrence being the EXACT same place as the market is no coincidence.

On a 15 min chart you can see April 2nd as the clearest divegrence area, the same day as our upside forecast and don't forget, 2/3rds of a stock's gravitational pull is the broad market.

Right now like the SPY at last look, the 15 min chart is in line, a divergence here and the SPY is where I'd want to be looking to possibly short NFLX as a longer term trend position/trade because of all of the long term 3C charts above.

 As for the 5 min chart, it is clearly leading negative and migrating as you'll see below so I do think it goes negative on the 15 min chart, especially after today's candle/volume action. CHURNING.

Not to mention the news 2-days before potentially ugly earnings allowing smart money an opportunity to sell at attractive prices.

The 2 min leading negative, just to show migration...

The 3 min leading positive last Friday at the close along with a lot of the market, but in this case, a larger divegrence in to Friday's close, I suspect the analyst report and stock split were well known to smart money last Friday before coming out. Thus... the positive divergence, but note it's only a 3 min, not a 60 min like last time pre-earnings.

And the 5 min which includes a positive divegrence right at April 2nd, and a leading negative one now. I suspect this will show a negative 15 min soon, whether before earnings or not, I would hope so, but I think it's one of the stocks that needs to be watched going in to mid-week considering the way the market behaved today in line with our forecast for Monday specifically , thus our mid-week forecast should be interesting as well.