Remember the Steering Divergences?

Earlier this week I showed you what were clearly steering divergences, I assumed they were being used to keep the market close to VWAP where positions can be either unloaded or loaded up (selling longs or likely putting together short positions, either way, they'll want VWAP or better), I assumed this is what was going on, but today's second day in a row early market move caused by a USD/JPY test that we have not seen at any other time during the entire 24 hour period certainly grabbed my attention and as soon as I saw the SPY triangle developing, things started to fall in to place and make more sense. I don't think those steering divergences were just about VWAP, although that would be a consequence of crating a lateral consolidation price pattern like a symmetrical triangle, I think we have pretty good evidence that the steering divergences are to form this triangle, take a look...

 Looking at the 3 min chart it would make sense for the triangle to become more obvious by heading to the lower support area, there just happens to be a 3 min negative divergence, what I'd call a steering divergence.

The 2 min chart has the exact same divergence in the same place, that would send price down to the lower trend line and make the triangle very obvious if it isn't already.

And the 1 min has the same divergence, again, a steering divegrence as these timeframes are not large enough to depict true accumulation or distribution.

So what would happen in this scenario and why do I think this is the highest probability?

Just like we had a head fake move which was predicted before it materialized and members were told what to expect before it materialized, these moves are run for good reason. For any members who have not read the two articles I wrote on the subject, they should answer all of your questions, they are always linked at the top right side of the member's site and called, "Understanding the Head Fake Move" and here they are for reading if you have time... Part 1 and Part 2

 There are two scenarios, a normal straight head fake and a Crazy Ivan , "B" would be the normal head fake move which is a broad and general term, the specific head fake created here would be a bull trap just as the one that proceeded this monster rally was a bear trap which I will show you.

"A" is a variation on the head fake move called a Crazy Ivan shakeout which gives the head fake on the upside a little more momentum by running stops below the triangle and engaging some shorts before moving up and forcing the shorts to cover and those who were stopped out to buy back in creating stronger upside momentum, but the entire point is "C", to get above the triangle where retail will buy on "Breakout confirmation" or chasing.

Stops will usually be placed just inside the triangle, at the apex (point) of the triangle or just below or below the lower trendline of the triangle. As price rolls over and engages those stops it creates downside momentum the same way a bear trap creates upside momentum through a short squeeze, at some point on the way down shorts enter creating more momentum just as in the last move up longs enter creating more momentum, it's the EXACT SAME CONCEPT, JUST IN REVERSE.

Here's the last head fake move that we called long in advance, even what it was for and what trend would folow it (a down trend to at least the SPX's 200-day m.a.

The first accumulation was in the range "A" which started on a Monday morning, but we had made the call Friday that a range would develop early the following week which is one of the hardest trends to call, it lasted the entire week and that Friday we called for a head fake move below the range and the next Monday we got a strong move down of -2.25% at "B" and then finished with more accumulation confirming the head fake move.

"C" is engaging the bear trap as they are forced to cover their shorts entered on the move down at "B". This is what creates the enormous momentum we saw on this run up.

HOW DID WE KNOW THERE WOULD BE A HEAD FAKE MOVE BEFORE IT MATERIALIZED?

 First we had the price formation that was very obvious, second we had the accumulation on a 30 min chart as seen above and the head fake was confirmed in the area of "B" as that divergence grew stronger.

WHAT DO WE HAVE NOW THAT SUGGESTS THIS WOULD BE A HEAD FAKE MOVE TOO?

This is a wider view of a 60 min chart, price is just as high and sometimes higher than the last leading negative divergence, but this time the leading negative divegrence is much lower and sharper, if the move were going to stick on the upside we'd expect to see strong accumulation so they can make money on the upside move, but with strong distribution like we have, it suggests even stronger than the last head fake move that this will be used for short positions moving down as fear is even stronger than greed.

We'll see soon enough, but the head fake move is just about the best entry you  can get.

There is one more thing to consider, in Technical Analysis, a breakout of a triangle that is 2/3rds complete (hasn't reached a full apex) is considered to be a stronger breakout than a full length triangle and then breakout.