Technical Picture - Mixed

Markets gapped up and extended into late morning on good earnings from ORCL and much better than expected durable orders. But the mid-afternoon FOMC announcement disappointed and the markets sold off, ending with a 38% retracement into the close.

As we can see from the chart above the morning rally stalled at the downsloping trendline. The long upper shadow is bearish. Volume was light. Looking ahead to tomorrow morning, there are important economic releases - at 8:30 AM EST, initial claims are scheduled to be released with current expectations at 600k and the final first quarter GDP number will be released, expected to remain at -5.7%. Those numbers could give direction.

The $USD got a lift from the FOMC and gold went the other way, but still managed to hold on to some of the day's gains.

Technical Picture - Narrow Range Chop Ahead of FOMC

As expected, and after a mixed start, the markets took out yesterday's lows amid choppy trade following weak data. The afternoon provided no relief, in fact it just got tighter and choppier.

At the EOD we have a spinning top type candlestick which foreshadows the end of the near-term move.

Tomorrow's FED meeting might give us a reason to trade, but it could be quiet leading into the announcement at 2:15 EST.

The markets have priced in no interest rate changes. The $USD which had formed a bullish base, has now backed off. Gold which breached its trendline, looks like it will attempt to regain it from an oversold level.

Few trade opps today, but ABX and several large cap gold plays, set up early ambush trades as they failed at the 62% Fib. retracement of the PDH/L. After breaching yesterday's low, ABX reversed and set up a long.

Technical Picture - Bears Step Up

Last weekend I wrote in the chart notes of the weekly chart, that I wasn't optimistic that we could hold the January highs and declare a new bull market. Since then we've pulled back, and judging from today's action, the bears are finally stepping up their game.

So, just to be clear, the rally off of the March lows was a bear market rally. The criteria for a new bull market was to clear the January reaction highs. That was tested and failed. Now, assuming the lows have been made, we now need to clear the June highs. The June highs mark the beginning of the RS, if in fact that pattern proves itself. For the time being we'll assume it will and target a retracement back to the ambush zone - 50-62% Fibonacci retracement of the March-June rally.

What's the point of all this? The key is not to get of ahead of ourselves. In order to have a new new bull market, we have to form a proper base and break out. That has not happened., which leaves the door open for a retest of the March lows. For the time being, I'm still betting on an inverse H&S bottom until the price action confirms, or proves otherwise.

FOMC on Wednesday afternoon will be interesting.

On the daily chart I'm drawing in a new down sloping trendline, and now we look to short rallies. Today's aggressive selling and late day slide keep the door open to additional short term downticks with next support at 890/888 followed by the May trading range floor at 880/878.

The NAZ looks to be forming a H&S top which will take weeks to confirm. We closed below the neckline and should see a further decline to the shoulder line soon, before the RS begins. Typically, we should see light volume on the RS to confirm the pattern.

Short-term we are approaching oversold.

Today's trades - short SPY and CME. The entries are key because we don't want to get in too soon. The SPY couldn't catch a bid at support and CME filled a bullish gap and consolidated in the low end of the range with NRBs. Both trades were executed on the 5 minute timeframe.

Need some help with short selling? Try this post by John Lee - a good primer on bearish patterns.

Friday's Trades - Research In Motion Limited (USA) (Public, NASDAQ:RIMM)

On Thursday we said the trade idea for Friday was RIMM, which had carved out a C&H pattern in after hours trade. The bullish pattern did not follow through the next day. RIMM opened weak and couldn't hold $76.00 so I started scaling in short. I added to my position after a series of NRIBs. The obvious target is $73.00. Why $73.00? Because that is the pivot where it formed a base and rallied in after hours trade the night before. That's not to say it can't go lower, but buyers will step in at $73.00, so it will pause or reverse. Knowing that, we want to book some profit. I closed my position because the trade was orderly but slow. The smaller bars as price approached the target are spinning tops, foreshadowing the end of the move.

FUQI continued its ascent in early trade, pulled back for an ambush setup. Price couldn't hold R2 (whole $ level) so I exit and decided to short. Price eventually retraced and found support at the rising 50 MA on the 5 minute timeframe.

Technical Picture - Consolidation

A quiet, choppy session ahead of OPEX tomorrow. Better than expected economic data gave us a lift in the morning but little follow through developed after that. Strongest sectors were healthcare related and financials.

Morning star reversal pattern on the S&P foreshadows upside, but it's tricky because price is below 20 EMA.

POT - A tale of two charts - the first chart is POT from the NYSE, and the lower chart is POT from the TSX. The Canadian chart is clearly broken from yesterday's trendline breach. The U.S. chart has a few points to go before it tags the trendline in the area of the $90.00 baseline. Both charts, however, have bearish gap resistance from yesterday. That gap is wide with high volume.

I'm inclined to trust the U.S. chart over the Canadian by virtue of volume. Higher volume generally makes for a more orderly chart. That said, and notwithstanding any further bad news, we could see a tradable bounce as price approaches the base and trendline support.

The trade idea for tomorrow is RIMM. Price swooned on the earnings release and retraced fully on the conference call, forming a cup & handle. Watch to see if analysts weigh in with target/ratings changes in pre-market.

Day Trades - AMGN, WLP, FUQI

AMGN pulled back to support from yesterday and the rising 50 period SMA in early trade. As soon as it started to print green, I jumped in for a day trade (separate account from swing trade). Shortly after taking out resistance, it came back in, but it's all good - I like the way it closed.

WLP from Briefing.com comment at 9:38 EST. A quick look at the daily and I see a B&B setup, so I jump in. Only noted, after the fact, that this was a Cramer pick. It took all day, but finally managed a point.
Stewie nailed the holy grail setup on FUQI in his blog post last night. NRIB at the base of the whole $ level and it was good for a fast move to the next resistance level.

Sector Rotation - Long Biotechs - Amgen, Inc. (Public, NASDAQ:AMGN) ; Celgene Corporation (Public, NASDAQ:CELG)

Sector rotation as the markets correct, biotechs a defensive sector is starting to gain momentum.

Last night we said we wanted to swing AMGN on a BO of the base at $52.00. This morning it popped on the open out of yesterday's C&H pattern. It paused at $52.00 and carved out NRIBs on 5 minute timeframe before extending the full measured move (100%) of C&H pattern. I locked in half and holding the balance with a stop at $51.00.

Next level of resistance on daily is 200 SMA, followed by $56.00.


On the CELG daily chart above, I was looking for an ambush setup after the late May - early June thrust. CELG retraced 50%, printed some NRBs, so I was able to see an entry at the base from the blue line segment.

As you can see from the 5 minute timeframe below, the CELG trade is much wider than AMGN. It was about 30 cents shy of retesting the upper fib. line, so I expect it needs to consolidate a bit before breaking out to the next level.

N.B. - The POT trade we talked about last night was foiled when Germany's largest potash producer reported disappointing earnings and guided lower for the year. The whole Agchem sector went into a black hole on the open and POT barely got a bounce at key support - $97.50 -$97.00.