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Tuesday, January 27, 2015

Odd Signals in Last Night's Futures Session Warned About This Morning's Market Decline

Last night at 1:15 a.m., I time I don't usually post on our member's site, Wolf on Wall Street, something so strange was going on in Index Futures on our 3C charts, I had to at least document it.

This is the post below that led to the overnight blood bath we are seeing right now, looking something like this...

This is a 5 min 3C chart of NQ / NASDAQ 100 Futures. Below is the post from 1:15 a.m. EDT this morning from Wolf on Wall Street...

Here's the full post with charts and all from 1:15 a.m. Tuesday January 27th.

I'm not quite sure what to make of this as of yet. I really only see this strange behavior on the 3C charts of ES/SPX E-mini futures, but in 3 timeframes. I suspect the signal may be stronger in ES than NQ and TF because of the obvious higher liquidity even though liquidity is very shallow at this time of night.

I'm not going to assume anything or make too big of a deal of it, but I do want to document it in case something else happens from here. At this very moment, just a few minutes after these charts were captured, we're seeing a little ramp of about 1 ES point in the Index futures on slightly more volume.

 On the 1 min Es/3C chart, the green arrow is the US cash open, the red arrow is the US cash close and the yellow arrow is midnight EDT. Note the very tight range in ES as well as 3C in a leading negative position.

Usually I wouldn't pay any attention to a 1 min chart in overnight futures trade, but it's on several other timeframes and just strikes me as a little odd.

This 5 min chart shows the weakness Friday which was part of our forecast for The Week Ahead post near the close which was looking for...

"As for early action next week, it looks like early weakness on Monday, although I think it will regain some strength in the later part of the day or some time afternoon-ish....

I think the IWM/Russell 2000 outperforms the other averages early in the week "

Both events occurred, even though we saw the opening Futures trade Sunday night (yellow arrow) gap down a bit and then recover right up until the cash open at 9:30 at which time we saw the cash market "Early weakness" that recovered not too long after and of course the dramatic relative outperformance of the Russell 2000 today over the other major averages.

Beyond the chart from Friday that led to The Week Ahead forecast for early intraday trade and relative performance among the major averages, the other interesting feature is the same leading negative divergence seen on the 1 min chart here on a 5 min chart of ES.

The 7 min ES chart also shows a negative divergence at Friday last week right in to the highs and the small gap down on the open of trade Sunday night at the yellow arrow. Again, that odd leading negative signal is in the same place on this 7 min chart.

I don't see anything after a quick look around that would explain it and as of right now, in this thin overnight market I don't want to make to big of a deal of it, but it did strike me as strange enough to be worth a post as this time of night.

We'll see what we have in the morning.

Friday, January 23, 2015

Precious Metals: Gold and Silver Update

From Wolf on Wall Street, Wednesday January 21st...

Wednesday, January 21, 2015

Precious Metals: Silver

For a while I've held the belief that gold and Gold miners would be moving toward a longer term, primary and maybe even secular bull market move. That analysis, while not having changed, was put on the back burner for a while until the longer term signals started to clear up.

Shorter term, you're probably aware I'm expecting some downside in GLD, from the looks of the charts, SLV too. However, it may be time to revisit the longer term GLD perspective, especially with a pullback in prices and a few things on the charts that look like perhaps precious metals may very well take the place of stocks in the very near future as risk asset of choice.

 This is one of several near term signals suggesting a fairly decent pullback in gold. Of course tomorrow's ECB policy announcement can have some wild fluctuations and I've heard everything from the ECB will come out with a bazooka and the market will sell the news to nearly the exact opposite, all from Investment bank analysis, the point, no one really knows, but for now, we've been expecting a near term GLD pullback, yesterday's post dealt with this, GLD Update, including a reversal down right in this very area which so far looks to be on track today from the loss of the early gap up.

GLD has never really recovered since our 2011 top call and Intermediate to primary downtrend to follow, if you look at a 5-day chart of GLD like this, you don't see much of interest...

However, add some trendlines and some macro versions of our head fake concepts, nearly exactly the same as what we are looking at with the short term market bounce we are expecting or at least that has been setting up, and you get a different view.

A closer look on a 1 day chart shows what we have suspected for some time was a large base being put together, albeit within the confines of what looks like a bearish descending triangle, although the price pattern is much too big to be anything of the sort, traders still view it in this manner.

As per usual with a head fake move, we see it just before a reversal 9to the upside), it builds momentum. In this case that head fake move would be in the yellow area, creating a bear trap and thus as it moves back in to the triangle, a short squeeze. So in fact, the short term action in GLD, may put us back on track to start considering the longer term position.

Silver is in a very similar situation...

 This long term 2 hour chart of SLV shows an impressive positive divergence, even though I'm not a big fan of silver for all of the manipulation through the years.

 The shorter term 5 min chart shows a base (white), mark -up and the same sort of near term negative divergence (pullback) that we are expecting in GLD.

The 3 min SLV chart shows this sharply, much like GLD's charts in similar timeframes.

As do the shorter intraday charts.

While we do have some GLD pullback positions, like GLD puts, I am starting to think more and more that we'll be looking at longer term positions in either PM shortly.

Wednesday, January 14, 2015

Crude Oil Bounce $USO Forecasting by: Wolf on Wall Street

The decline in USO has been a sharp one, but not one we didn't see coming. This is one of the stronger bouts of distribution I've seen in an asset class, so someone knew well in advance of USO's decline that it was going to be a doozy...

USO 2 hour 3C chart showing mostly in line trend confirmation to the left and heavy distribution in to the June highs, the rest is history.

This isn't the first time we caught an oil plummet, ironically at the same time Cramer on CNBC was telling viewers to BUY oil on the next bad EIA report as a "Contrarian Trade", which I never understood, all of those viewers doing the same thing at the same time hardly seems contrarian. In any case, that was 2008 and this is how that worked out as we called a top in USO about 7 days before the final highs and an approximate -80% decline.
USO 2008 top call...

Here are some excerpts from our members' site,

with respect to a USO bounce we've been looking for as recently as this morning....

WOWS USO post excerpts, charts and commentary from those posts...

From our "Daily Wrap", Tuesday January 13th, 2015 7:10 p.m.

"As per today's post,  I think we do get that bounce in Crude/USO, just remember the caveats.
USO ended with a nice leading positive divegrence for the day."

As to the post from earlier in the day, it was posted at 11 a.m. the same day...

 "This is the January range mentioned above, which looks like it had a decent positive divegrence; the break below and what looks like confirmation of a stop-run/head fake move with a positive divegrence on the break below support (stop run).

The 5 min chart, which also shows the volume spike under the small range (stops hit).

 The fact there's a divergence out on the 10 min chart makes me think this bounce has a chance.

As for Crude (Brent) futures, there's similar recent confirmation as well.

5 min leading positive looks like confirmation of a head fake move/stop run that was accumulated."

Then this morning after the EIA build in Crude Inventories, quite a bit above consensus caused a knee jerk reaction lower, we checked oil again this morning to make sure our anticipated bounce was still on track...

"This morning's 10:30 EIA Petroleum inventories came in higher than expected at +5.39 mm barrels vs consensus of 1.75mm barrel build with the last a draw of 3.062 mm barrels.

This initially sent crude lower at 10:30 on the report's release, but from everything I can see, we should still be expecting a USO/oil bounce.
 USO 1 min with the EIA release and a positive intraday divergence holding USO together from further decline.

The 2 min chart has no damage and the 5 min...

Still looks great.

This is one of those common scenarios in which once Wall St. sets up positions for a move, they rarely call them off, which is what makes the current market's 5 min chart so interesting."

Since our last update for Crude as we have also been forecasting a market bounce to start today, here's USO...

As you can see, the crummy EIA inventories failed to push USO down despite the initial knee jerk lower and just as our 3C charts have been forecasting recently, USO has started a bounce. At the appropriate time we'll be looking to establish a new short when the charts confirm (don't forget about the first 3C chart at the top of this post), but for now, it looks like the anticipated move is off to a decent start.

Monday, January 12, 2015

3C Forecasts Weak Monday Open

This is an interesting concept that we see over and over again with 3C charts during the cash market; we simply call it, "3C signals picking up where they left off".

Friday the closing charts of the major averages in the short term time-frames which we usually see this phenomena, which are so consistent that it is part of our forward forecast for the following week (it even works over long 3-day weekends), looked really bad.

On our member's site, Wolf on Wall Street, our late day posts and market updates started seeing this activity, these are excerpts, charts and the comments on the charts from late Friday at Wolf on Wall Street...

"After seeing some late day action, I'm thinking Monday will see weak opening trade, that's based on how the charts ended the day. These are the 1 and 2 min charts..."

 "SPY 1 min with a late day severe 3C drop."

"The 2 min chart isn't needed for this forecast, but backs it up."

"And the IWM saw a sharp EOD 3C move lower."

"Again the 2 min chart backs it up."

Last night, looking at the start of futures trade, the Index Futures like ES, NQ and TF (SPX futures, NASDAQ 100 futures and Russell 2000 Futures) started showing a 1 min positive divergence suggesting they'd see overnight upside, however we still had these very negative late Friday 3C charts suggesting a weak Monday morning cash open.

This is last night's ES 1 min 3C positive divergence after the start of Futures trade for the new week.

It seems the 3C positive 1 min divergence on the ES/SPX futures chart late Sunday night was reflecting an overnight or early a.m. move higher right on the European open as more ECB QE stories made their rounds. However our concept of "3C charts pick up where they leave off", suggested a weak cash open.

This is the move up at the European open which is dwarfed by the move down in ES/SPX futures on the US cash open, just as the late Friday, closing 3C charts were forecasting.

Apparently this is the worst opening minutes of trade for the SPX since at least 2012 and it was being forecast Friday afternoon as this reliable concept proved correct once again.

Tuesday, January 06, 2015

Stock Market Bounce/ Forecast

This is a Market Update from our member's site, 

Get ready for some unexpected market volatility above and beyond what we've already seen. It's either an opportunity that is not to be missed or it's a steam roller, depending on whether you're on the right side of the trade at the right time in the right asset.

Daily Wrap

I think we have the broad strokes pretty well covered, however there are some interesting factoids and some charts I promised.

If you go back to our December 12th forecast, thus far everything has happened. As that forecast was fleshed out over the next several days, one of the events we anticipated was the taken for granted Santa Rally to lure in longs initially with good market performance in to the typical period for the Santa Rally and then for it to fail miserably setting a bull trap which it did, but there was a second part to that specific forecast which was the January effect which is also taken for granted by traders as if it was a birth right and that the failed Santa Rally would roll over in to the January effect. If you are thinking like a criminal, what better way to make the most number of people wrong at once with two seasonal events that are assumed to be a given.

TODAY MARKS THE 3RD DAY OF TRADE IN JANUARY AND THE WORST 3-DAY START TO THE MONTH EVER!  In addition, we have the worst 5-day performance in the SPX since Sept. 2013 with the Index finding support today at the 100-day moving average (recall the charts posted yesterday with moving averages and support areas) which also coincides with the psychological $2000 level on the SPX.

I think I have been clear about what I expect from a market bounce, an oversold bounce, not something that is supported and to that end, today put in the second Hindenburg Omen in a row. The last two clusters sent the market lower so this also fits with our near term and longer term analysis.

As for Leading Indicators, none of them are really screaming near term. The VIX short term futures (VXX) and spot VIX once again underperformed on a relative basis vs the SPX. TLT also underperformed on a relative basis, but I suspect we are seeing a very parabolic looking move in bonds and as such in yields as they sold off hard in to the noon time hour, taking the market along with them as they usually do. This could be a short term capitulation or exhaustion event which allow yields to give the market a little room for a near term bounce.

Take a look at the Treasury bond futures in 5, 10 and 30 years...
 This is the 5 year Treasury bond futures on a 5 min chart, in fact all are 5 min charts and all are negatively divergent with 3C.

10 year T-Bond Futures.

30 year.

Interestingly, the SPX caught down to the near term 5 year yields today, but not to the 30 year yields which are well below the lows of the 16th and have retraced all F_O_M_C gains, this I believe points to what comes after the bounce attempt we are expecting, the averages continue to feel the pull of the 30 year yields lower.

Remembering this is a 5 min chart and this is the minimum divergence that must be in effect for me to take even a short term trade, the negative divergences above confirm nearly perfectly the Index futures 5 min positive divergences.
 NQ/NASDAQ 100 futures 5 min positive like ES and TF (SPX and RUT futures). These are also confirmed by the 5 min VIX Futures (not VXX, but actual futures)...

VIX 5 min negative divergence.

However, this is part of the reason I'm expecting a short lived move on any bounce. At the 7 min Index futures charts they look like this...
 ES 7 min (SPX futures) are in line or confirming the downside, not positive and any move up in ES from here will create a leading negative 3D divergence.

Confirming this short term roof on a bounce, take a look at the same 7 min chart in VIX futures...
It too is in near perfect confirmation, thus any move down in VIX futures should leave a leading positive divergence in 3C, again confirming the shorter term nature of our expected bounce and what happens next.

These are confirmed in the major market averages as well.

The most often used ramping lever for the market is HYG, HY Corp. Credit and as such, we have positive divergences in the 1-3 min charts, short term...
 HYG short term 2 min positive to ramp the market and a bounce, but it doesn't move much beyond.

The 5 min HYG/3C chart is in line/ downtrend confirmation, thus another roof on our bounce.

as for other credit (HY) assets I've looked at, I've noticed most were positive on December 31st and January 2nd, after that at the 5th and 6th they gave up the positive divergence and fell back to in line. In fact our Professional sentiment indicators did the exact same thing.

 Only PIMCO's HY Fund is leading.
PHK vs SPX indicative of a near term bounce, but the lack of HY credit confirmation again puts a roof on a bounce.

HY Junk credit is perfectly in line with the SPX's downside with no divergence at all.

As for the rest of the Index futures, they are clearly showing where the probabilities lay...

*Remember the 5 min charts are positive, at the 7 min charts we move to confirmation, essentially losing any supportive indications which may be considered the line in the sand and after the 7 min charts...
 TF 15 min leading negative

ES 30 min negative

NQ 60 negative

TF 4 hour showing how bad I really expect the downside to be once our bounce is finished.

As for the averages... If you didn't get in when we were putting out Trade ideas like the December 23rd's I like QQQ Short Here or December 30th's Trade Idea: (Trend) Transports (IYT) Short (and many others), I have encouraged a lot of you to NOT CHASE the trade, but be patient and let it come to you, such as the December 30th, QQQ Update & Trade Set-up or today's trade set-up, Trade Idea: (Longer Term) Financials Short / FAZ LongAl of these are showing the same thing as Index futures, Treasuries/Yields/Leading Indicators, 3C charts, etc just like the averages below...

 SPY 1 min showing accumulation in to today's intraday lows which is interesting because our custom VIX Term Structure Indicator that has had a remarkable track record flashed this today...

 After the red SPX:RUT custom Ratio Indicator started showing a positive base forming and then gave out just like several Leading Indicators mentioned above, the VIX Term Structure below flashed a buy signal at the intraday lows. There have only been a handful of these signals and each one has been accurate, although the size of the signal is proportionate with the expected move it is flagging, for instance on a longer term basis...

Note the small signal to the far left and the proceeding small bounce following it and then the larger signal at the August lows where we forecast an oversold bounce and its size and of course the largest, "Face Ripping" rally at the October lows we forecast over a week in advance and the size of that signal. Today's to the far right was intraday and fits with the short term intraday charts like the 1 min above or...

The QQQ 5 min which has a much larger negative divergence as the main theme and a smaller positive divergence now as a kind of corrective theme.

 However there's no larger divergences like at the October lows, this 10 min IWM shows numerous small divergences along the 6 week range, they are dwarfed by the leading negative divergence we forecast on a break above the range, which is still very much in effect, thus the shorter term charts represent smaller, near term moves and these intermediate or longer term charts represent the highest probabilities and what comes after the short term chart divergences a usual in Multiple timeframe analysis with multiple asset confirmation.

And the QQQ60 min chart which has deteriorated badly, but just a expected.

Thus far, EXCELLENT confirmation, the F_O_M_C minutes are really the only wild card and why I've chosen to approach trade set ups the way I have, it's a no lose proposition or as close as you get to it in the market.

Finally, our breadth indications...

The Dominant Price/Volume Relationship among the component stocks of the major averages was almost identical, all saw Close Down/Volume Up like yesterday which is a short term oversold indication, almost always resulting in a next day close higher. The only average that didn't have a dominant theme was the Dow. Of the averages in the theme, 67 of the NDX 100, 1011 of the RUT and 273 of the SPX 500.

Additionally only 9 of the Dow stocks are > than their 50-day, only 41 of the NDX 100 are > 50-day and 174 (less than half) of the SPX-500 > than their 50-day. Of the Russell 2000, less than half (027) are > 50-day and 1011 are > 200-day so very poor breadth. If you look at this as a market of stocks, we are in a bear market, it's only the magic of Index weighting that makes things look better than they are.

Of the 9 S&P sectors, only 1 closed green, the Defensive Utilities sector (watch it be the laggard tomorrow) at +0.06% and the laggard today was Financials at -1.53%, interestingly featured today, watch them lead tomorrow!

Morningstar Industry groups were worse today than yesterday with only32 of 238 closing green.

The Percentage of NYSE Stocks > Their 200-day Moving Average is less than 44% at 43.96%

The Percentage of NYSE Stocks > Their 40-day Moving Average is worse at 33.96%.That will do it for tonight, you know what we are looking for and what looks to be the best use of a bounce, I'll put out the best looking assets for trades as we see how much we get, the Minutes at 2 p.m. tomorrow could be a wild card, but just as with the F_O_M_C, I suspect the market price action will initially determine the sentiment of the market despite what they say, people get the minutes like the F_O_MC and see the market react well and assume all is well, it clearly was not at the F_O_M_C and as I showed earlier today, we already retraced almost all of the F_O_M_C gains since their release at 2 p.m. on 12/17, we retraced ALL of the 17th's closing print.

If anything should change in futures tonight, I'll update you.

If you're into trading currencies, learn about the forex market and find out why No Dealing Desk Forex Trading Execution could be your best option.


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