Market Update

So after a week of divergences that were in place for 2-3 days, but none beyond 2-3 mins., today we transform from a slow signal environment to a suddenly increased signal environment in which we have many market averages with at least 5 min positives and some even with 10  min positives, yet I have not been running around crazy throwing positions out there... I did close a some that I felt were not going to gain any more or not much more that would make the risk I'd face a reasonable proposition.

So why not add long positions like 3x leveraged ETFs or Call options?

Remember the market is not controlled by supply and demand, they are a function of price discovery and in some instances they seem to rule price discovery, but what really moves the market are emotions, FEAR and GREED with fear being the stronger of the two.

It took me a long time to trust 3C and be able to buy in to a low, not because I'm trying to catch a falling knife, but because that's where 3C was telling me, "This looks like a great trade now". It took me the same time to learn how to overcome my fear and short a new or breakout high, again not just because it was a new high or seemed to move so much that it had to correct,  but because of objective data saying, "This is the place to enter". If Wall St. didn't play the games they did, I might be entering those positions in the middle rather than at the extremes, it is not the extremes that drives me to enter a trade, it's the objective data, it just so happens that Wall St. plays some games and for good reason.

So I conquered my fear in many ways, probably not all, but in many.

THE SECOND EMOTION IS GREED, while not as strong as fear, it can be a close second.

On a day like today with divergences building and some building to quite long timeframes, it's hard to keep your finger off the trigger, but just like I had to conquer fear, I've learned over the years, "IT'S OK IF YOU MISS A TRADE, THERE'S ANOTHER BUS COMING". 

If I don't feel that the situation is as favorable as I can get, sometimes I'd rather let go of greed, take a chance and possibly miss the trade, I think it's far better than taking what might be considered a sub-optimal trade.

Keeping in mind the respect we have to have for risk with 60 min charts and shorter looking as bad as they do, here's what I'm looking at and what I'm looking for to go ahead and maybe take on some positions beyond what we have so far this week.

 First look at the volatility in this choppy stage 3...

The daily SPY chart with a Harami reversal on Mon/Tues. that was run over Wednesday and today something close to a Morning Doji Star bullish reversal that looks interesting and volume is up on the candle, but is that enough?

 Remember the triangles (symmetrical) I mentioned in the averages, these derive their directionality not from the price pattern like most price patterns, but the preceding trend which is down which means traders expect a downside break and will likely short it.

You can see how a move like that would give us a better entry, possibly better divergences, less risk and a bigger foot print to launch a move from, a small move, but a move.

So you know what we'd need to see tomorrow to make the trade come to us, especially if you want to enter options. I think that is worth the wait considering we see this about 80+% of the time.

 SPY 5 min is beautiful for a day, but with a head fake it can be even better so was it worth entering today? I think the evidence shows what the most probable outcome is and that would mean waiting, putting greed aside or the fear you might miss the trade and doing what is sometimes the hardest thing in the market, be patient.

 QQQ 5 min positive, but such a small footprint. It doesn't matter how positive if it's such a small footprint.

IWM 5 min positive.

Point being, I think we have a good chance at making some extra $ on some really quick trades and I think if they come to us we have VERY little risk, a better entry, higher probabilities and we'll likely know the best place to deploy assets.

Today was a good day for us, for letting trades come to us and for our trend expectations in general because a pop up does what we need in the VIX futures. I think today may have been a better day for us in showing patience which is not easy, especially if you trade for a living, but as I said, greed has caused me a lot of trouble in the past, just as much as fear.