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Tuesday, July 28, 2015

Wolf on Wall Street Market Analysis

This is a free post from our members site, 


This is the Daly Wrap from Monday, July 27th 2015

Daily Wrap

Friday's The Week Ahead forecast started with this paragraph:

"There are numerous smaller indications that make me think we either open higher early next week or we try to put in more of a base for a bounce, but I mean bounce in the most nearly meaningless way, nothing I would trade (other than a speculative position) and nothing that would make me think that our course is going to be interrupted by anything more than some short term noise if that."

Today looked a lot like that "trying to put in more of a bounce for an early week bounce",however it's important to take the forecast above for what it is. This is the 5th consecutive red close for the SPX, with the 200-day expected to act as a brief speed bump and after that, everything changes. 

It appears the retail crowd who was so bullish on Friday with the "Buy the Dip" motto have changed their mind today which is perfect for the Week Ahead (early option of the week) forecast above.

Although staging and cycles sound like arbitrary malarkey, do you remember what I said in last Friday's The Week Ahead forecast? 

"I'm fine carrying some downside positions in to next week, including Trade Ideas from this week including FAZ (3x short Financials), SRTY (3x short Russell 2000), UVXY (32x long Short Term VIX futures), SQQQ (3x Short QQQ), QQQ 8/21 $112 Puts, BIS (2x short NASDAQ Bio-Techs).

The EUR/USD which as a carry cross has sponsored this week's bounce along with HYG, some VIX smack-downs, is clearly looking to make a downside reversal."

I say this often because I mean it, "You have to know where you are to know where you are going" and staging a cycle, especially when we know what the underlying trend is well before is the easiest way to not only know both of those things, but to use price to your advantage. For instance I asked numerous times during this bounce from July 10th after showing the short term and long term 3C charts, "How would you trade this?". The answer from the charts alone was simple, sell/short in to price strength.

 After enough time you see the little hints such as HYG being activated, VIX dumps, or even just price trend itself such as the choppy lateral range at #1 proceeding a decline, it's likely to be a stage 1 base for a bounce. In this case we knew well before the bounce started that it would be used to sell in to by 3C charts , breadth charts and numerous other indications. 

Stage 2 mark-up has decent confirmation (3C) and stage 3 top/distribution goes negative and puts in the tell-tale Igloo/Chimney head fake (yellow) that we see before 80% or trend reversals in any asset and any time frame, it just needs to be confirmed and the negative divergence on this 15 min chart confirms, although more detailed charts did it earlier.

Stage 4 comes nest, that's decline, that's what we knew at last week's The Week Aheadthat the week ahead (last week) was due to move to stage 4 decline and has now erased the entire bounce.

Also not the long 100-period Stochastics I use not as an overbought indication, but as a trend strength indication; it dumps right at the head fake (the best entry we can ask for and exactly where we opened QQQ puts). 

A more detailed 5 min chart shows the previous bounce off the SPX's 150 dma as well as the small accumulation at stage 1 which was not strong enough to show up on a 5 min chart telling us this bounce was doomed to fail before it even started, so how do you trade that? The same way smart money set up the bounce to be traded, tom sell or short in to price strength. These cycles are all pre-determined, they are not random.

As for the market strength, look at point "A" and point "B" which have nearly the same price level in the SPY, yet look at how much lower 3C is at point "B" as it sees continued distribution as the primary trend.

So any bounce we may get early this week should see what in to price strength?

Speaking of which, earlier today I was showing you the Daily Candles and where I thought they'd close to set up a bounce. Remember I wanted to see price come back down intraday toward the a.m. lows (Intraday Update and Possible Trade Plan/Idea)? This helps set up a stronger base that can support a bounce, although I clearly don't expect anything of much significance, but the retail crowd have already flipped sentiment from "Buy the Dip" Friday to bearish today. The market seems to do a great job of making the largest number of people WRONG at any given time.

From the link just above this morning:


"Since capturing the charts above, the NYSE TICK (intraday) looks like it will break the channel to the downside, that could lead to the conditions I'd be looking for to add to the Trade Idea: VERY SPECULATIVE IWM call partial/speculative position from Friday. Usually right around the European close we get a change in character in intraday prices so it may be a point of interest in any short term speculative long positions."

This gave us the exact closing candles I had posted earlier in the day that I hoped we'd see on the close...



 DIA 3 mi chart positive divergence with lateral trade intraday today.
 QQQ 3 min intraday positive on lateral trade as well.
 IWM which is my favorite for a bounce has a positive divergence, although small, out to the 10 min chart.
 And the SPY has a similar chart to the DIA/QQQ 3 min leading positive and lateral trade.
 This gave us those closing reversal candlesticks that make a bounce more likely such as the DIA's Morning Star candle on increased volume which makes the candlestick reversal 3 to 4x more effective or probable.
The IWM was just a bit wide in the body for a star, but there it is right at last ditch local support.
The QQQ daily shows the head fake above the multi-month resistance range to have been a head fake as we called it with out entry in QQQ puts at the very top on the 20th of July.

Note the head fake below the Ascending Triangle that drew in new shorts and created short squeeze momentum once they started covering as price moved back in to the triangle with another head fake above it as we saw distribution up there. This also gives us a Crazy Ivan shakeout on both sides of the triangle which is too large for a normal consolidation/continuation price pattern in the first place with volume completely wrong.
And the SPY putting in a bullish reversal Morning Star right at the 200-day, the only thing that would have made it more probable would have been an increase in volume over Friday's.

Remember this morning's sell off as depicted by the NYSE TICK with an extreme of -1819, Opening Indications?

That was a pretty extreme reading for TICK even during the stage 4 decline, something about weekends and traders who have a 9 to 5 putting in their orders to fill at the cash open. In any case, at the same time market support came in the form of yields, take a look...

 30 year yield in red vs the SPX as the TICK hit an extreme of over -1800, it seems yields ad their magnetic quality lifted the market right out of the pits early on.

As a reminder of yields' ability to act as a magnetic leading indicator and what this market looks like beyond an intraday stick save, here's a longer view of the 30 year yields...
First they led the market to the upside at stage 1 and the start of stage 2, then they negatively diverged in to stage 3 and were leading lower by the time the SPX made its head fake and are still leading lower bigger picture.

Leading Indicators were pretty subtle today, but they were either in line or slightly positive, not leading negative as they have been the last 1-2 weeks.

 Our custom SPX:RUT indicator went flat on the day vs the SPX (green).
Pro Sentiment turned lateral with the SPX.
And HY Credit which had been leading to the downside made a right hand turn lateral. However this is intraday and I don't want to make a bigger deal of a probable bounce than it is so for some context...
HY Credit in to the last bounce cycle starting 7/10 vs the SPX (green).
And the longer term HY Credit vs the SPX leading negative with only 1 positive divergence right at stage 1 /base of the mid-July bounce.

I wouldn't say the market is screaming for a bounce, but I do think it will get one. This wouldn't change any trend positions whatsoever, other than to maybe open a few new ones if we get a decent enough move to make them worthwhile, otherwise  I've just been letting positions work.

As for futures tonight...

The Yen and Euro Futures look to come down short term...
 Yen 3 min Futures negative
Euro futures 5 min negative,

Both would suggest the $USD benefit and thus the USD/JPY benefit which has been pretty ewell correlated to ES/SPX futures which are now just about in line...
USD/JPY in candlesticks and Es/SPX futures in purple have reverted to their mean near term so any weakness in the Yen or Euro would benefit the USD/JPY and help support the market, but these are all VERY near term, along the lines of the probable bounce.

Beyond that, I expect the USD to head lower...
 60 min $USDX large negative divergence.
Daily $USDX should head lower later in the week.

As for Index futures, VERY near term the 1min Russell 200 futures look the best going in to the overnight session, but this is intraday 1 min charts ONLY!
 TF 1 min positive divergence going in to the post market session.
However at the 5 min chart which is the minimum signal for any position not considered absolutely speculative, 3C is in line with price which indicates confirmation of the downtrend. This would need to have a positive divergence to consider any trades that weren't speculative on the long side, otherwise it's a great indication for letting current shorts continue to work for you.
The more important 10 min chart is also confirming the downside, although not leading like last week, this still points to lower prices this week and when we talk about a bounce, we are talking about something at this point that is so minor, it's nearly noise. We have 1 speculative position out, but even at a total loss on that position it would hardly put a dent in the gains of core shorts we have opened over the past week/s, months.

I really don't see much sticking out other than what I showed you intraday and with the daily bullish candlestick reversal signals, but those don't have any target, they could be a 1-day reversal and then back down and only about half had the increasing volume.

As usual I'll take a look at futures before I turn in and if anything stands out I'll post it. Otherwise tomorrow I expect a bit more of the same, we should have a better grasp on the probabilities for a bounce and if so, where to, but the theme for the week looks to be lower and once the SPX 200-day is broken, sentiment is going to change fast and for the worse.

Have a great night.

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.



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