"the SPY provides a good model (the other averages are very similar) to how I think this goes down, which is really just a part of the reversal process of the next leg in the market which we have been expecting to the downside".
Actually the short note and example charts (4) were more accurate than I remember. The SPY intraday charts,
- should be enough to take the market higher, specifically I'm thinking about the IWM triangle as the IWM is the average everyone is focussed on and that triangle was no coincidence.
The 3-15 min. charts...
-Leaves me pretty certain any breakout move is a false breakout, but we could have guessed that by market behavior, mass psychology and price action in the IWM alone.
There's only 1 way to confirm a false breakout (which is still a breakout) and ultimately that is the failure of that move rather than leading to a new leg up. However we can get a lot of information that tells us what the probabilities are, often to the point that reversal positions can be taken in the area of the false breakout. Finally the one part above that is very important as I talk about this all of the time,
""the SPY provides a good model (the other averages are very similar) to how I think this goes down, which is really just a part of the reversal process of the next leg in the market"
When I say process, I mean that literally, if you've been around more than a couple of months you know how often I talk about "V" vs "U" or "W" and how a "V" is an "Event" and the "U & W" are a "Process". It's very rare to get a "V" reversal.
For the second day in a row, the gains in the market were made during the overnight session in thin volume (speaking of which market and ES volume has been very thin, yesterday SPX futures saw about half the volume of Friday!) which is obviously easier to move; you can see this either by looking at the rather flat intraday action or what I find to be more interesting, the daily chart.
I identified the currency cross that was driving overnight markets earlier at the open, it was the AUD/JPY, but if you superimpose the pair over ES you can see the two never really separated the entire day. I can post a bunch of charts, but it really doesn't matter much, however after looking at the individual $AUD and JPY charts, it looks fairly clear that the $AUD is going to come down in the near term and the Yen rise which does in that pair and the market "IF" it stayed correlated to that pair which we can't know and thus doesn't really matter. Longer term as in the 60 min charts, the opposite seems to be true.
As I was saying, the way to determine whether the probabilities are on the side of a head fake move (false breakout) or a real move are numerous, however confirmation or distribution is a good place to start.
Index futures traded largely as expected, the only thing I'd add is they're doing more damage to the 30 min charts, which had been trading perfectly in line with price.
I could keep going on, but it's just as easy to tell you. HYG Credit not only displayed 3C negative divergences, but instead of a 1.38% move up like yesterday, today was red most of the day right up until the close where it launched a large 5 min candle that was nearly as big as it's entire daily range to allow it to close at +0.05% (*Remember this end of day move, it will be important later) , Junk Credit which trades almost identical to HYG didn't put in any such closing move and closed @ 0%.
Short term VIX Futures traded better than their correlation and were rising where they should have been falling. Yields created a wider spread between them and the SPX, remember they are below the SPX and tend to act like a magnet until there's reversion to the mean.
I'd be lying if I told you I didn't think the market will likely make a move higher on the open (likely overnight futures again), there are several reasons I say this and this is also a large part of why I said,
"Other than positions already in place, I'd like to wait to tomorrow before looking at entering any new positions... I am not going to rush in to positions, there's no need for it, there's a bus every 30 minutes."
At the time I was thinking more about the "Process" and there being an abundance of good signals, but that's not our edge, our edge is great signals. There are several other reasons, the SPY and IWM 1 min charts, just like Friday and yesterday, have a signal that is in line and as I said Sunday night, that "should" keep the market in that direction, since then however the charts beyond 1 min have seen a lot of deterioration.
After looking at the closing charts, this makes quite a bit of sense, most of all for the SPX, then the Dow and the NASDAQ last.
What market maker or specialist wouldn't push for that, it's worth it just for the volume rebates or the spread.
This is why I said remember the last minute move in HYG at the close, after struggling all day and seeing stronger/deeper negative divergences, HYG is an arbitrage asset, "Pulling the levers", so HYG wasn't so much about a green close or the 0.05% gain after really underperforming from yesterday's +1.38%, I believe it's more about trying to act as a lever, no one can look at the intraday trade and tell me this isn't a market that would need help going in to overhead resistance zones, however all that is needed is the limit orders triggered and the volume that comes with them. In fact the signals on the Index futures are pretty darn ugly, NASDAQ , S&P and Russell 2000 futures all not only have negative divergenceS right now, THEY ARE ALL WORKING ON LOWER HIGHS, FOR SPX AND NDX FUTURES THAT WOULD BE THE FIRST LOWER HIGH SINCE BEFORE THE OPEN.
Thus, no need to rush in to positions today at the end of the day as trade in many ways started to deteriorate.
If anything interesting pops up in futures later tonight, I'll post it, right now the lower high is interesting. Nikkei futures don't look great.
The 30 min chart did the same and it's been leading negative to new lows not seen in 11 days. This is looking like the Nikkei is not going to have a good night.
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