Weekly TimeCycles, OptionFlows:We are gettin to a critical juncture in early March

King Dollar or his twin brother the Euro experience a nice move that could end next week....

 ...as could the Gold move...in $

 ...and in EUR....

 ...as could the SPYDER....

 ...as could the Banks....

 ...now that the broader Index has reached an Exhaustion level...

 ...as nicely portrayed by the extremes in the ultimate alpha dog.....APPLE...

 ....let's see how far Gold can run from here...

 ....or OIL that went vertical ...

 ...in the end it all comes down to MoneyFlows and AAPL should give you some perspective here.

BOTTOM LINE:
Next week could be critical !!

Safehaven dynamics revisited

We revisited our Safehaven correlation analysis where we compare GOLD with 10yr Treasury (this time we took the yield for techn. reasons). Last time we observed the peak and expected some correction which occurred in Gold.

We see that once a correlation extreme has been reached that the extreme tend to correct for a couple of months as marked in the 2nd graph.

raw chart 

 time windows marked where extreme correlation corrects

What does it mean ?

• We will see some phase of positive correlation where Gold moves with the 10yr Interest Rates.

1. Rates go further down and Gold will follow down as well: LIQUIDATION of the RISK TRADE
2. Gold explodes upwards in a rising rates environment: INFLATION expectations go up 

Which case materializes is uncertain, but we do know that rates and gold will go hand in hand :)

Liquidity Pattern: no imminent Top ...yet

When looking at the Liquidity Pattern we can observe that Bottoms seem to follow a 1-2 Pattern (Price Low first followed by a Liq. Index Low) whereby Tops see more protracted Patterns or better Zones that take time to pass through.

Looking at the current picture we have to wonder whether we are just entering a Topping Zone, meaning that the process could take some more time like 4-12 weeks or longer. This would mean Mr. Market could surprise on the upside and suck in more short covering in like seen in the Euro or in the Prec. Metals.

Liquidity Index Institutional Money

Liquidity Index Tech Large Cap 

VIX is insanely cheap...in a binary Markets

This is the point in time where we will see a binary outcome soon. Normally Mr. Market should correct, but we have to stay open after the recent breakouts in Silver, Gold, Euro that Mr. Market (or better Mr. Draghi with his 2nd LTRO tranche)  has one more ace up his sleeves.......

Euro Break Out

A day after Gold on the heels of Platinum we now see Silver and the Euro breaking out. Some quick move into the high 1.35 seems possible.

This all is in line with our time projection into the month end.

Gold Breakout !!

1. Let's see whether the Breakout sticks or whether it fails
2. If it hold then we should expect a retest of the all time highs!!

compare with our post from last weekend:
http://reflections-of-reality.blogspot.com/2012/02/very-bullish-structure-in-gld-options.html

Weekly TimeCycles, OptionFlows: Is the TOP in ?

The Dollar wants to retest the 78.50 by the end of Feb before taking off to new heights.

 The Euro seems to mirror that view. Bear in mind that a strong Dollar could pull the entire risktrade with it.

 The ultimate ALPHA dog AAPL seems to be in the final stages of a topping pattern. The top could be in or should come in within the nearterm future.

A similar picture we get from the Spyder OPEN INTEREST analysis of outstanding options. We are clearly oversold but could have have some strength left for one more retest (or new top) maybe within the next 2-4 weeks after some brief correction.....

 ....which by the way would exactly jive with our Bradley chart.

Very bullish Structure in GLD Options

In Q1, 2011 was the last time we had a similar bullish set up in Gold then we have right here. Same as in 2011 we had a reasonable correction that has convinced over-proportionately many market participants that this could be the beginning of the end of the Gold-Bull.

The TimeCycles hint at some unfinished work on the upside....

 ...as does the OPTIONS OPEN INTEREST analysis

Let's see whether history rhymes again ......and we see some flushing out of the bears.

How High Frequency Trading spams the tape

Observe yourself how the sharks are eating the long only mutual funds, retail investors and others. These predatory machines spam the tape and fish with big nets all 'normal' open orders in the market and take people simply out of their positions.

The picture compares 2008 to today and shows how the market has changed since then.

h/t to THE BIG PICTURE

What's the LEVERAGED HOT MONEY doing...

Leveraged Bear funds ('SDS' ,'TWM','DXD','FXP','EEV','QID') have been worn out with now only trading $1bn a day. The bottom is shaping up but not in, let alone confirmed. We need Reversals (Crossovers) in Price & MoneyFlow MOMO for that. 

The leveraged Bulls  ('SSO','FXI' ,'DDM','QLD') are enjoying the sun with an avg. trading Volume of 13+bn.
The Picture looks that same. We are close but not there yet.
Also look at the timeframe (Orange fat bars) a top needs to consume in order to exhaust itsself. That all could mean we need another 2-4 weeks.

Weekly TimeCycles, OptionFlows & Exhaustion highlights: SPIKE or No SPIKE...?

Relative Strength and Breadth Indicators are all showing a fading chararcter where less and less stocks participate. Even though we saw a good amount of catch up last week (...now that we have an 'all clear' signal from the US Employment market...if you believe the seasonal adjustments...), the overall picture is still week, driven by hot money and quick trades.

Last week we stressed that we needed more upside action to see a sufficient upside exhaustion. We have come much closer to that stage......

 Institutional hot/ 'must have' holdings show in aggregate that the hot money is getting tired and trigger happy in a way that it will not need much of a rollover to trigger the stops.

 A look at the Banks Optionflows also show how the hot money has been playing and that the Bnaks are starting to look heavy.

 Gold got hit hard on Friday or better the Hot Money took profits. This could be the beginning of a serious correction or not!
When a market should correct and doesn't - like most markets over the last weeks -  then we expect more upside which shows in the development of negative divergences in the Indicators. We see this in Gold, Prec. Metals, Institutional Money, Small Caps .......

Last week we observed all these FibTime clusters around the beginning of Feb. We experienced some power surges but no top yet which proves our theme of 'a market that does NOT want to correct' yet.

This week the next timing target seems to be around mid Feb.

Let's see if Mr Market ignores those clusters as well or whether we see some weakness.

All all is completely aligned with King Dollar which in itsself  is spooky and shows how liquidity driven these markets are.

King Dollar

King Dollar is taking a break which is quite normal in $USD bull campaigns. When we look at comparable corrections in bull phases we see (see on the chart) 3 target areas for the corrects  which are not too far away from where we are right now. 

And when we look how long it took in the past from a bullish Indicator reversal to the final intermediate top we see that we have some more time to go to reach the TOP in the $USD.

Conclusion:
We should see some more $USD weakness (<=> Risk On trade will get more time to exhaust), followed by the opposite. The ideal timewindow for the $USD Top could be btw. April and October (!!).

A Top in the making

Large Cap Breadth indicates that we are in the middle of a topping pattern that should correct in the neartern future. 

Our Sentiment Indicators are expressing exactly the same.

Don't forget that the final stages of topping formations are usually the most explosive !! Only once we have reached that final Exhaustion can we expect the TOP.