Market Update

 As suspected, the 1 min divergence is getting stronger in this lateral area, ALWAYS after the EU close.

 The 2 min is starting to lead positive which is the first time today

 On a 60 min chart the top formation is much easier to see than a 1 day chart, so is the break. This is an important break. It has been our experience market wide that any break of important support almost always sees a strong volatility shakeout move. Technical traders will be expecting a test of former support, now resistance at the trendline. However our experience has been that rarely happens and the test will look like it failed as the market moves above resistance, this would keep the "Buy the dip" longs in the game as most people are pre-dispositioned to being long the market. With volatility increasing it would not surprise me to see a move above the trendline, it may take more then a day, but it wouldn't surprise me.

Think about the psychology of this, bulls feel like the top broke and the break was a failure, they feel safe to buy. The shorts ask themselves, "Why won't this market hold its losses? This must be a correction and not a top". This is exactly what Wall Street wants, to keep everyone guessing, to keep everyone moving in to trades as most traders chase the market and then see those same trades stopped out. This is all to Wall Street's advantage. So while I can't point to a strong enough positive divergence as of yet that would suggest such a move, that has been my experience. I have little doubt whatsoever we are witnessing a top breaking apart, however for the market to do what I mentioned above, volatility must increase. Over a week ago I said, "Watch out for increasing volatility".

This is why I let go of the AMZN Puts and took the profit, I haven't even looked at AMZN, I just made a quick choice based on the market as most stocks will move with the market. If what I laid out above happens, then I'll have the profit from the AMZN trade closed out and another shot to re-open the trade on any price strength.

Should the market fail at resistance, then this market is in much worse shape then even I think and I think it's in VERY bad shape. In that case, there will be plenty of downside and I won't have missed much.

Here's the SPY intraday moving laterally as expected because "V" reversals just aren't common. One potential trigger to look for is a break below support of this lateral consolidation, I say this because it would be a head fake move and we almost always see a head fake move before a reversal. The purpose is to draw shorts back in thinking another leg down is starting, then prices move back up and start their bounce forcing shorts to cover the new positions which adds demand and gives the bounce that extra kick.