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Wednesday, July 01, 2015

MARKET FORECAST from WOLF ON WALL STREET

This is tonight's Daily Wrap and Market Forecast from our members' site,


This should be a very interesting next few days packed with some explosively large moves. For more information about our members' service, Wolf on Wall Street, just click the link.


DAILY WRAP
POSTED BY: BRANDT Wednesday, July 1st 2015

Today was one of those days I've spoke of recently in which objective evidence has to trump emotion or gut feeling and while it wasn't easy to understand right off the open as signals that didn't make a lot of sense had not had the time to mature, it called for an immediate decision which was to not close the IWM call position opened yesterday and added to today and not to re-open shorts/puts that had been closed the last 2-days in favor of preserving profits and re-opening them at better levels with more appropriate expiration dates. My concern is not so much with taking profits on the IWM calls at the open as no damage is done should they run more tomorrow, but more in entering new put positions too early and not getting the best risk:reward ratio and making all of that earlier navigating of the market this week an exercise in futility.
Nothing that happened within the EuroGroup's Finance Minister's teleconference today was news, in fact Merkel had set the tone of news flow and market rumors yesterday in saying that no decisions or negotiations with regard to Greece will take place before their July 5th referendum as to whether to support the bailout program or vote against it. Merkel and others have been consistent and clear on the matter, which is part of the reason an oversold bounce made sense this week as there would be little in the way of risk news flow that could go against a bounce position and the EuroGroup Fin-Min's teleconference did nothing to change that.
We had some pretty decent gains today, one could ask, "Isn't that the oversold bounce?". The fact is, Wall Street doesn't do anything without a reason and they rarely do it half-heartedly. An oversold bounce should create a sense of questioning one's positions, wondering if it's really a good idea to sell or short in to such a strong move. If the move doesn't move traders' emotions, it's not likely to move their positions and if there's no movement in their positions, there's very little for Wall Street to gain, thus these counter trend type moves tend to be extreme looking and emotionally convincing. Despite today's +.30 to +.90% gains, that wasn't the move.
The Chinese stock story is another event altogether with the Shanghai Composite giving back all of yesterday's gains overnight with a -5.2% loss. This has meaning as the Global stock market is more interconnected than ever and will certainly play a role in global markets when we look back on this period, but for now, the story is Greece.
The meme that stocks are rallying on hopes of a deal is absolutley ridiculous.  If anything, stocks are rallying so hedge funds and institutional money can exit positions at better prices and enter shorts at better prices. It's not about risk on, it's very much about risk off, but that's too complicated for the average CNBC viewer who needs a 30-second summary as to why the market did what it did so they feel there's some sense or logic to the market that they can understand. The truth is far beyond most people's capacity to understand or deal with. In my nearly 4 years of teaching Technical Trading and starting every class with the same video, the one of Cramer on the Street.com talking about how he and everyone else manipulated and manipulates the market sent students in to a near depression. I'm serious, you never saw someone's demeanor change so fast as it did when you put someone familiar in front of them telling the truth about the market. They had a look of hopeless despair, but we had to break the lie to find the truth and it can't be done in a 30-second sound-bite.
In my last post I said I'd show you how we ended the day, considerably better looking than the way we started it or at least the way it went after the open.
s 1Despite whatever the intraday charts looked like earlier today, this is how they closed...SPY 1 min leading positive
s 2SPY 3 min leading positive
s 3Even the 5 min chart saw positive migration of the divergence
i 2IWM 3 min at a new leading positive high for the last 2-days
q 1QQQ 3 min leading positive

q 2QQQ 5 min positive
q 3
And QQQ 10 min leading positive with strong migration all the way out to a 10 min timeframe. These charts don't look like they are finished, but just getting started.
And even though HYG saw distribution earlier today and by the looks of HYG vs the SPX, diverged away from the SPX's price, it closed like this showing the lever is still being used or ready to be used to push the market higher, at least short term.
hyg 1HYG intraday 1 min
hyg 2
HYG 3 min leading positive.
As shown earlier today, if VIX futures were not confirming, it didn't seem likely that today was all the market had. While only a 3 min divergence, VXX was not confirming...
vxx
3 min leading negative, just as we saw in VIX Futures 3C charts and the early tip off that something wasn't right with the sell-off from the open.
While oil /USO didn't break the $19 support level I was hoping for today, it did hit 11-week lows.
uso 1
And on volume as stops were run right at the $19 level
And where were the short squeeze levels set-up for a head fake/counter trend/oversold bounce set up?
dowAt the psychological levels as usual such as the Dow's 200-day moving average and long term trend line.
spxOr right at the SPX's 150-day moving average
comp
Or the psychological whole number and better than centennial number, millennial number in the NASDAQ of $5000.

As for Leading Indicators...
vix inv 1Our VIX Inversion Buy signal was triggered Monday and Tuesday
vix inv 2You can see it has been very effective in the past as a buy signal as each signal (white) has at least bounced.
inv 1
However our custom SPX:RUT Ratio Indicator is showing a divergence vs. the SPX so I have little doubt any bounce which we had suspected by Monday afternoon, which is the reason we started taking put gains off the table, will be short lived as the indicator is already negatively divergent vs the SPX.
You can see the market needed some help today as it was a Whack-a-VIX short term market manipulation day...
vix 1Both the VIX above was whacked (Note SPX prices are inverted as the two trade opposite each other so you can see the normal correlation-to the left) helping the market head higher and...
vix 2
Short term VIX futures were also pounded lower, this to boost the market in to the afternoon. Why would traders be selling volatility in front of tomorrow's day in advance (because of Friday's closed market), extremely important Non-Farm Payrolls at 8:30 a.m.? The only reason I see for it is to facilitate a bounce, the NFP can be discounted on the way back down.
And what of our Pro-Sentiment Indicator that has been leading the SPX lower since its head fake/false or failed breakout we forecast?
hio 1Pro Sentiment vs the SPX on a 30 min chart leading the market lower since the SPX's head fake move (yellow) back in May, with extreme leading negative lows before this week's slice through SPX 150 sma support.
hio 2
Very near term , for the first time since May, our Pro Sentiment indicator is positive, leading the SPX short term on this 1 min chart, indicating the bounce we have been calling for.
And High Yield Credit...
hy 1Which has also been leading the SPX lower ever since the failed head fake/false breakout in the SPX (yellow) with an exceptionally deep leading negative divergence just before this week's plunge lower on Monday.
hy 2
It too is leading the market positive very short term on a 1 min chart indicating a bounce as well.
We can keep on going and going with 3C chart after 3C chart, all of the evidence points to a more extreme bounce and then a new lower low on a primary trend basis, with the next major event to occur at the October lows with the market eventually making a lower low. It's all about  following the signals right now, taking our long position off at the right time, re-entering our puts and some core shorts at the right time. We've managed to navigate the market extremely well with multiple positions closed this week at double digit gains and core shorts at nice gains as well. I have little doubt we'll have any problem navigating the next move and the end of the bounce where we'll set up new shorts and puts at the best price and lowest risk as has been the plan since we started closing them late Monday and Tuesday.
Remember, the major pay here is on the downside, I'd stay patient and just open new shorts/puts rather than enter longs if you are the least bit uncomfortable, they are meant for a VERY short term trade, will likely be closed on an intraday basis and are speculative. Our core shorts which were up 7% Monday alone and 14% over the last week with no options leverage at all, are the positions that are going to do the best over the longer haul and bigger picture.

Have a great night!

Monday, June 29, 2015

Our Core Shorts Without Any Options Leverage Are Up +7% Today Alone

From our members site at,


Core Shorts Up +7% Today Alone

Monday, June 29, 2015


A Basic Portfolio of Core Shorts including FAZ (3x Short Financials) which we have put out as a trade idea as recently as June 12th, Trade Idea: XLF Trend (short) which is now up 3% in XLF short since and +7.10% in FAZ, the favored trade...
Our Trade Idea: XLF Trend (short) / FAZ long at the red arrow. Our XLF/Financials Broad Update was posted 6/17, 1-day off the all-time closing highs in XLF with the following excerpt,

"I like Financials in the area short as its an excellent entry and much lower risk than say something like an entry in transports right now."

And our most recent post from Friday the 26th of June, XLF Position Follow Up with this excerpt:


"All in all, XLF is still in an excellent area. For an options/Put trade, I'd want to see a run higher to get a discount on the put premium, otherwise I like XLF short as either an equity short or the 2-3x leveraged inverse ETFs (long) like SKF or FAZ."

That would be approx. a -2.4% gain in XLF short or a near 7% gain in FAZ long since Friday.

XLF has decisively broken below its triangle's apex as expected in Friday's XLF Position Follow Up post.

Other core positions in the basic core short positions in the most basic core short portfolio include SRTY, covered on Wednesday June 24th, It's Equally As Hard Not to Like the IWM Short Here As Well which was one day off its all time high and at a -2.82% IWM short gain since then or the preferred SRTY 3x short IWM  (long)  core short with an approx. +8.5% gain since.

IWM is off recent highs and sliced through its 50-day moving average today on volume.

IBB-NASDAQ Bio-Techs is Another Favorite trend /core short or the preferred 2x leverage BIS recently covered last week, Thursday June 25th with IBB Short/ NDX Biotechs Looks Very Interesting 

"Charts are on the way... I like the BIS- 2x short NDX biotech ETF as well (long)"

and the follow up post with charts the same day, IBB / NASDAQ BioTech Follow Up.
IBB had a beautiful, textbook head fake set-up with 3 months of perfect resistance at the $368.25 level, without a single close above the level through the head fake set up until the head fake/failed breakout move that was standing out like a sore thumb last week. Today the IBB short is up for us +4.04% (or IBB down -4.04%) since our last short call and the preferred BIS 2x short IBB (long) is up +8% since last Thursday's call. IBB closed below the head fake area today (red trend line) as 3C charts showed us through the distribution through the entire head fake/false breakout and closed right at the 50-day moving average.

And NASDAQ 100/QQQ Short is another rounding out my basic core short portfolio. Although covered every day, our last position call was Thursday June 18th with Trade Idea: SPECULATIVE QQQ and the same day, Trade Idea: QQQ Put Position Fill-Out. Although the preferred trade was Options, it's left open as a QQQ short, the preferrer core short being SQQQ.

Since the call on the 18th the QQQ short is down -3.6% (or up if you took the QQQ short.
Here at the red arrow you can see the last QQQ short call with only two days closing above that level at a 1 cent and 10 cent gain above the 18th's close. The Q's sliced through their 50-day (yellow) today as well as their 100-day on huge volume.

The preferred core short for QQQ is the 3x leveraged SQQQ which is up, +10% since then.

My own portfolio with basic core short positions without any options leverage is up +7% today and +14% over the last week since our Friday, June 19th The Week Ahead forecast called for Market strength on Monday and weakness/the reversal process after that:

"...thus far I have not put out the VXX long call/add-to call, one of the reasons is this SPY chart (1 min), if we close like this then the concept of 3C charts picking up where they left off kicks in and the most probable outcome would be some early week/Monday market strength"

Our Tracking Portfolio with ALL recent trade ideas is ranked #3 of 178.

However this is no where near expected gains, we are just breaking the next level as forecast as far back as April 2nd and in both of the past two Friday's The Week Ahead forecasts as we slice through recent support on our way to the October lows, at which point the whole game changes.

+80% QQQ Gain @ Wolf on Wall Street

We just posted this and just booked this +80% QQQ Put (July 17th $110 put) gain at our members'  site,


This is why...

QQQ Follow Up
Posted by: Brandt 11:40 a.m. Monday June 29, 2015


It looks like we may have hit the intraday or a.m. low right on the nose and  if you are fa,miller with our concept of an intraday flameout or what you might consider intraday/short term capitulation , a mass selling event that often marks a short term/intraday low, then you'll recognize it in these charts and see why there was an objective reason for closing the QQQ position.

First the P/L:


At a cost basis of $1.52 for the QQQ July 17th $110 puts and a fill of $2.79, the P/L came out to a gain of +83%

 The charts...
 The intraday NYSE TICK chart has been range bound, albeit in a volatile range, of about +/- 1000, no real huge extremes, but rather persistent extreme levels of 1000 (above and below) for the entire morning.

Our custom TICK indicator that I developed to give us a better sense of trend...
 Shows the morning trend of increasing downside so I stuck with the QQQ put position after putting out this earlier warning that I may be closing it sometime today, Position Management-QQQ Puts.

While VERY early, to the far right it looks like the trend may be starting to change in intraday breadth as the histogram ticks up. I usually would wait to see if this is noise or if it develops further, but there was additional information.

QQQ charts...
 The 1 min intraday chart caught up early to the futures decline as it is the fastest chart we use. Note the divergence from late Friday, the one I was a bit torn over as to some early price strength which I would say was there as an intraday bounce toward a gap fill, but as I also said Friday, "This is nothing like the previous Friday (June 19th) The Week Ahead post in which there was a fairly strong intraday 1 min chart signal that made it a high probability that we'd see early week/Monday price strength such  as we did. This one was much weaker.

The intraday 3C chart shows the positive divergence I am talking about in white and then this morning's cash market charts catching up to the drastic change in price action from Sunday night open of Futures with price turning down and in line/confirmation at the green arrow, but notice the volume increasing.

Looking for an intraday FLAMEOUT/short term mini capitulation selling event...
We use this concept a lot for flameouts as well as the opposite concept, "churning" events.

Note the QQQ 5 min chart shows a decent up-tick in volume on a bullish candle, Doji Star (upside reversal candle).

This isn't a huge event or what I'd call a screaming signal that jumps off the chart, but subtle changes in character lead to changes in trends and with options, price can change quickly and go against you in a minute or two.

In any case, whether right or wrong on the timing intraday, we still booked a nice 80+% gain and still have all core shorts open.

I'll have an intraday market update out in a few minutes.

Wednesday, June 24, 2015

Daily Wrap

The Wolf on Wall Street Daily Wrap from our member's site,


Looking ahead to Wednesday's market...

For more information on Wolf on Wall Street and our forecasts, click here.

Tuesday, June 23, 2015

Daily Wrap

First I want to just touch on the Greek Drama because as envisioned, it's not over, it's never over with has been a characteristic of all Troika/Greek negotiations even when Greece had the former Goldman Sachs Technocrats installed as Prime Ministers who sold the country out wholesale.

The apparent capitulation by Greek leadership does not necessarily equate with Greece "being saved" as one Greek lawmaker put it yesterday. The agreement to extend the current Troika (excuse me, "the creditors") bailout program, the same program that Syria has railed against for nearly 5 months, in which time more than 30 billion Euros have left its banking system, essentially  making it an ECB asset as they have back-stopped all of the cash withdraws and put the country in to recession, is not necessarily going to pass Greek parliament and the German Bundestag won't vote on the extension until the Greeks do.

In other words, nearly 5 months after Syria received its electoral mandate to end the Bail-out program and "bury the Troika", they are in worse position then when they started as the country was not in recession and the banking system did not lose $30 bn euros which were replaced by the ECB with ECB loans amounting to more than all Greek deposits and collateral. You could say the ECB owns the Greek Financial sector. Greece could have avoided all of this pain had they simply went along or had a plan "B". You don't bluff like this unless you have a plan "B" which Syria didn't.

To make matters worse, if Tsipras can somehow get the Syria idealouges on board, the same ones who came to power by swearing to defeat the very thing they are now being asked to approve, there's still no guarantee that the rest of the EU parliaments will pass the bailout extension, particularly Germany where the Finance Minister and Merkel's own CDU party have a wide rift between them over what they see as her coddling of Greece. So nothing's sure, but even if it was, it appears it wouldn't matter. Why?

Because the "T" in Troika, the group of 3 which is the IMF has already stated they do not agree with the Greek plan (or rather the EU bailout extension plan) as submitted to yesterday.

Wednesday when Tsipras flies t Brussels to meet with the Troika: Juncker, Draghi and LaGarde, it apparently will be the IMF's LaGarde who tells Greece that this simply will not due and to come back with something else.

The sticking point for the IMF is in hiking taxes in Greece where the IMF believes they are not only not collectable as has been true, but they are already over-taxed which won't foster an environment for investment which Greece desperately needs to get back on its feet. Almost 92% of the Greek proposed methods of coming up with capital are all tax based, especially corporate. The IMF will insist on no more tax hikes or at least much , much less and spending cuts instead which will be directly aimed at pensions which is the one red line that Syriza hardliners will not cross, thus it's very unlikely that Greece will be able to pass a new draft version even if they can come up with it, get ECB and EU approval as well as IMF approval and then pass it through their parliament who doesn't like the current version, they'll like the pension cuts a lot less as will the populace and they have 7-day to do all of this, hardly even enough time to call for snap-elections or a referendum to shake up the government to make it passable.

In other words, while Greece has been able to dance pretty well and extend and pretend, in the end it looks like it did at the beginning, this is a can of worms they should not have opened without a plan "B". 

OK so that's the basics of where Greece stands. Now some very interesting information that confirms not only our expectations in forecasts, but the charts since putting forth our expectations.

This interesting bit of information comes to us from BofAML (Bank of America/Merrill Lynch), and it is the recent and YTD net buying/selling of 3 client types, Institutional, Hedge Fund and private.

At this time I'd like to point out last Thursday's Daily Wrap which chronicles what has happened back to last Monday and since. You may recall last Tuesday the Fear in the market which was posted on with the Fear/Greed Index  which fit with Monday's proposition that the SPX would create support at the 150-day moving average and bounce from there. The information posted Tuesday in support of such a move looked like this...
"EXTREME FEAR just yesterday triggering the comments above also from yesterday, And What does Wall Street do when the boat is leaning too far in one direction? They take advantage of it."

This was posted Tuesday as I had only seen it on Tuesday, but was posted in support of what was posted Monday June 15th about the market creating a support zone at the SPX 150-ma that would allow the market to bounce from there and specifically posted Monday,

"The one thing I don't like is the increased market perception and fear, that tilts the ship too far one way and it's very lucrative for Wall Street to rock the boat in the other direction quickly, stopping out or triggering trades, it''s short term maneuvering that has little to do with the bigger picture, but it makes them money."

The idea as of Monday was the SPX 150-day support and extreme fear in the market tilted the boat too far in one direction, making it easy for Wall St. to earn a quick buck and to sell in to price strength or short in to it, that has looked a lot like we expected. As of today's close...
As of last Monday at the white arrow when the above excerpt was posted with a follow up of the Fear and Greed Index Tuesday showing the extreme fear mentioned Monday, allowed a short squeeze and eventually flipped sentiment to the bullish side, exactly what was expected.

I think the idea that we put forward last Monday and Tuesday of a bounce off obvious support with the SPX 150 ma being tagged twice and such overwhelming fear, making a short squeeze easy ad making the upside move look impressive to get new longs behind it as we saw in sentiment posts from last week.

This entire idea has been posted in chart depictions of 3C distribution in to the move, however today we got something additional confirming our expectations of how smart money would use this to their advantage. Bank of America has released their net selling/buying by client type and it's a doozie...


Last week saw broad-based institutional selling throughout all 10 sectors, led with distribution in Financials which have been a recent favorite, Trade Idea: XLF Trend (short) and Wednesday's XLF/Financials Broad UpdateLast week alone there were over $4.1bn in net sales led by Institutional clients, THE MOST SINCE JANUARY OF 2008! While hedge funds and Institutions all sold alike, this was the biggest institutional selling bonanza on record with BofA's data base. 

A lot of the selling was Large Caps, in fact the most ever in their data base which is odd because during the 2007-2008 market meltdown, Large caps held up the best, they seemed to be the flight to safety, this time they were sold to the greatest degree BofA has seen in the history of their data. This didn't preclude small or mid-cap selling, they were sold as well, it's just a bit surprising that large caps were targeted so seriously as they usually hold up the best in a bear market.

Hedge funds were net sellers last week in 8 of 19 sectors and led with selling in healthcare, which has also been a recent trade set-up, specifically in biotechs as posted last Thursday in Trade Set-Up: IBB NASDAQ Biotech Index (short) and coming in second was Materials.

As for biotech, the post above, Trade Set-Up: IBB NASDAQ Biotech Index (short) was from June 18th as Biotechs made what I assessed as a head fake move above a easily recognizable resistance area...

IBB/NASDAQ Biotech Index. The same day I posted the above trade set-up I followed up with this set of charts, IBB follow up with an excerpt.

"IBB/NDX Biotechs is what I'd call a screaming head fake set-up... Beyond that, the reasoning for their existence is a bit longer to explain than is appropriate in this post, but it has everything to do with the size of institutional positions and entering and exiting them at the best prices for smart money without attracting attention to the trade and without driving the trade against themselves because of the size of their positions (basic supply/demand dynamics)...it's a perfect head fake set-up because technical traders who have been following IBB and waiting for a new high, expecting it to return to last year's trend have their buy orders set right above the clear resistance level, a breakout to the upside triggers them, at the same time triggering demand which can be used to sell in to... Here comes today, a perfect break above the trendily,a convincing break for technical traders, one they'll buy, one they'll chase giving larger institutional money the demand they need to either sell or sell short into, both transactions come across the tape as sales."

A NEAR PERFECT DESCRIPTION POSTED LAST WEEK OF WHAT WOULD HAPPEN WHICH WE NOW HAVE CONFIRMATION OF ACTUALLY HAPPENING IN HC STOCKS.

Hedge Funds have been bet sellers the last 9 consecutive weeks! This wasn't just about last week's F_O_M_C or Greek "Lehman Weekend", the selling has been broad based for much longer, but last week in specific saw new records hit as the bounce and distribution off the 150-SPX moving average was exactly what we expected and our charts have shown.


Again...
The bounce we forecast last Monday at the white arrow as support was created, giving traders the illusion the market was safe and the red arrow showing the record setting institutional distribution last week in to higher prices as forecast...

"EXTREME FEAR just yesterday triggering the comments above also from yesterday, And What does Wall Street do when the boat is leaning too far in one direction? They take advantage of it."

"The one thing I don't like is the increased market perception and fear, that tilts the ship too far one way and it's very lucrative for Wall Street to rock the boat in the other direction quickly, stopping out or triggering trades, it''s short term maneuvering that has little to do with the bigger picture, but it makes them money."

On a 4 week smoothed average basis, Hedge Funds have been net sellers since late April. What happened late April that we forecast nearly a month in advance on April 2nd.

First our forecast in March was there would be no significant downside until obvious resistance that had been forming in the market was broken to the upside. More specifically on April 2nd we forecast that the market would breakout above Triangles in the major averages like this ascending triangle in the SPX and that the breakout would be a head fake move or false breakout used to sell in to as you see in yellow at the May head fake move above the triangle.

YTD, hedge funds have been net sellers. Retail was a net seller last week, although YTD Retail has been a net buyer. So who was buying last week? Believe it or not, corporations seeking to boost their share price, but there's bad news for the market and part of our The Week Ahead forecast nailed it...

From the Week Ahead...

"I think the short term chart craziness reflects knee jerk possibilities over Greek news. We've all been wisely conditioned not to expect much from Greece, but this is now a country with the clock ticking down. I can't figure out why the ECB keeps extending them just enough Emergency liquidity to just about even out the outflows each day and I can't figure out why after the horrible failure of a EuroGroup meeting yesterday, Tsipras would go to such trouble as to get an emergency meeting scheduled for Monday and why the Troika who clearly thinks or says Greece is not serious, would give them the chance. So the very near term looks a bit cloudy, although I doubt smart money is carrying much of anything in to the weekend which is largely what I think this week was all about, not just the close today."

In retrospect the reason Tsipras asked for the meeting and the reason the EuroGroup agreed was Tsipras had resigned himself to accept whatever the EuroGroup demanded, which was an extension of the current bailout program as we saw accepted yesterday so our early week forecast was right on or at least the gut feeling in addition to...

"As for short term charts, I don't think anything overcomes the news and we really don't know what the news is going to be. However thus far I have not put out the VXX long call/add-to call, one of the reasons is this SPY chart (1 min), if we close like this then the concept of 3C charts picking up where they left off kicks in and the most probable outcome would be some early week/Monday market strength..."


And beyond early in the week,

"The larger trends and higher probabilities are quite negative thus I think we see significant downside next week, but beware the Greek rumors unless sourced.. The 2 min chart shows the same as everything else, distribution in to this week's price strength...The longer term trend charts through this week look horrible, it was a hollow counter trend bounce off the 150- I suspect we slice right below it next week."

If corporations/share buybacks were the marginal buyers last week, that leaves the market in a bit of trouble this week as we enter earning's season and the Blackout period for buyback begins, being Corps were the only real net buyer of stocks last week. By the way, along the lines of our "Week Ahead" forecast and weakness after initial strength, the Blackout period begins this week!

Otherwise, everything from BofAML's data is right in line with our YTD projections, our April 2nd forecast and even last week's closing The Week Ahead forecast so far. This doesn't mean we sit on laurels and take the BofA information as a victory, we listen to the message of the market as it is one of the most dynamic systems you'll ever encounter, it's just good to know we have been on the right track with hard evidence.

Last night in the Daily Wrap, I expected a similar Doji/Star type of candle close today...


"As for the market, I showed the daily SPY and the star daily candle looks bad, but I'd think it would be more reliable on some real volume...
A gap fill, Doji star, but volume isn't high which tends to make these reversal candles very effective. We expected early week/Monday price strength, however that doesn't preclude tomorrow from putting in the daily candle/volume reversal I expect to lead to weakness through the rest of the week after the initial early price strength materialized (bounce from Friday), which was today."

We did get the Star expected today from last night's Daily Wrap post, 
 SPY daily Doji Star, but volume didn't pick up.
The same with the DIA
As well as the QQQ
And a slightly different reversal candle in the Russell 2000, a Hanging man, again volume didn't pick up which is not a prerequisite, but it increases the probabilities just as two consecutive reversal candles do.

While the bearish reversal candles today were right on, internals were virtually no where to be found as you saw them writing most of the day via the TICK. There's nothing even close to a Dominant Price/Volume Relationship tonight and of the 9 S&P sectors, 8 closed green leaving the short term / next day directionality up in the air.

Our forecast for the EUR/JPY was right on today as the pair lost ground and the $USD saw it's best 1-day move in about 3 months.
 Daily $USDX chart...
And the decline forecast in EUR/USD, as the charts have been pointing in that direction, however as puzzling as it was this morning with Greece accepting the terms and the forecast being a bit larger and further out as seen here, EUR/USD, Greece and Goldman, perhaps it does make some sense given the IMF's position and the unlikely probability of Greece being able to get through an entirely new reformed package of cuts they absolutely don't want to make and then through the various parliaments within the next 7-days.

Earlier I covered Crude, USO Should be Coming Down Intraday and I'd think the strong $USD today is not going to be helpful as the slight weakness earlier in the day was for crude.

The API data for crude came in at a draw of -3.2 mm bbl tonight, there was very little reaction from crude futures.

Other than a quick knee jerk at the release of the data (white arrow)  the chart looks the same as when I posted the afternoon, USO Should be Coming Down Intraday with negative 1 & 3 min CL charts, as well as negative 1-5 min intraday USO charts. I'll be looking for an early short entry near the open and before or up until the 10:30 EIA data, otherwise I intend to still hold the crude puts and equity short as the 10-15 min charts are the primary  / strongest charts for near term action and still pointing to a move well inside the 2015 base range.

As for tomorrow, while we got the candlestick in all of the averages I was looking for, we didn't get the volume and internals aren't telling us much tonight. However all of the averages saw negative divergences in to the close today to go along with the second Star/Doji Star daily candles in the major averages, I have little reason to doubt the Week Ahead forecast of early strength and later in the week weakness as there's rarely a "V" shaped , immediate reversal, but some process or time which the second daily candlestick charts today gave us.

As for Index futures going in to tonight,  ES is still in line as it has been all day, but Russell 2000 and NDX futures have a significantly more negative tone.
 NQ 1 min negative
TF 1 min negative.

I never use to trust the 1 min charts to hold up until the morning, so in that spirit  I'm going back to 5 min charts which have shown recent weakness as posted earlier today in,  Quick Index Futures Update and Index Futures Update with examples.

The 5 min charts...
 ES negative right at the two Doji Stars on the daily chart.
 The NDX futures looking worse
And Russell 2000 futures looking worse.

Last week I had waited for a VXX long call, I mentioned it in Friday's The Week Ahead forecast,

"As for short term charts, I don't think anything overcomes the news and we really don't know what the news is going to be. However thus far I have not put out the VXX long call/add-to call, one of the reasons is this SPY chart (1 min), if we close like this then the concept of 3C charts picking up where they left off kicks in and the most probable outcome would be some early week/Monday market strength"

In retrospect the 3C concept of picking up where it left off was completely right in sending the market higher yesterday and VXX lower which is why, despite the fact I really like VXX long here, I did not feel the timing was right.

With the Index futures above and those shown earlier today, I think we are exceptionally close to that long/add-to call position for VXX and that means a negative forecast for the market as they trade opposite each other.

In other words, I expect the second half, the more important half of the week ahead forecast to take shape. The expectation of what would happen last week and why was proved to us with hard data today, Wall St. used the extreme bearishness to push a bounce through, force shorts to cover, create a somewhat impressive bounce that changed sentiment and CLEARLY sold in to it last week, to the point of record breaking stats in many cases. I seriously doubt that the market reacts like that last week, as anticipated and then finds footing with 44.1 bn in equity support sold by strong hands.

However as I said earlier, we'll let the charts tell us when the time is right and what the right asset is, I just have little doubt in my mind that the forecast for the rest of the week is close to the downside turn that slices through the SPX 150 sma.



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