Financials

Financials are the one place we haven't opened a short trade (Energy, Oil,  QQQ, IWM, SPX, Volatility-long, AAPL, etc.) but Financials just haven't given us the signal the last few weeks and good thing too.

However, BEFORE last night's Mayan-like apocalypse in the S&P Futures (as well as others) Financials were just starting to go through the process of giving us that signal-they weren't all the way there (except very big picture), but progress was finally being made.

I'll show you the charts, whether I'd choose to open a Financial short her or not would depend on how Financials continue to develop as well as the broad market. Ideally Financials at least fill the gap today to give us a better entry, however I think if you look at the bigger picture a couple of percentage point won't be a deterrent.

Not too surprisingly, the signals started developing as soon as Financials crossed above 2012 resistance Tuesday of this week. If you think about that for a minute, underlying trade turns negative as price crosses a major resistance level, I think you might understand why these things happen, what their true bullish/bearish nature is and how you can use the information to your advantage.

 We have a positive divergence from last Friday on this 5 min chart (remember divergences that are getting stronger will migrate from shorter timeframes to longer ones-the shortest timeframes will be the sharpest) and then a negative divergence STARTS Tuesday as Financials cross above resistance. Think about what happens when major resistance is broken, think about how traders react, how price and volume reacts and think about how Wall St. could use that against those normal reactions because Smart Money doesn't make money trading with you, they make it trading against you-It's a Zero-Sum game.

 The 10 min chart was going negative too (don't even look at anything before today).

 And the longer 15 min chart was moving to a relative negative divergence, as you can see the 5 min is the worst, the 10 min not as sharp and the 15 min even less sharp, but as the divergence gets stronger, these charts will look worse and migrate to longer timeframes like 30 min.

 The 30 min has a small negative divergence (I tried to isolate trade before today because that's what we are looking at).

The long term big picture on the 4 hour is horrible for Financials and the market, a lot of people don't understand how the market can move higher and look this bad, it's simple really, Smart money is using price strength to sell their positions in t, this is why they can't open or close a full position all at once or they would send price way against them, they have to do it in to a favorable market and a little at a time so they don't push price against them.

In any case, I'll keep an eye on financials and see if there's a high probability area that develops despite today.