Market Update

I want to try to get this out quick as things change pretty fast intraday, but there's a lot that is "bigger picture" as well. I'll also get to the Futures Update, there are some interesting goings on there.

I've talked a lot about the "Bear Flag / Crazy Ivan Momentum, Sling Shot", I want to show you the process on the charts as I'm not sure I've shown it clearly so those charts are below and important given what the prevailing trend is in the Trade Candidate list, specifically I'm talking about what the trend was I saw Friday and used NFLX as a proxy for the watchlists as it captures the essence of that trend as I explained Friday afternoon here: Forward Market Forecast and more specifically here: NFLX Trade Idea Follow Up

First for the open, as I mentioned in the A.M Update, USD/JPY (after having been ramped overnight on low volume as China/Hong Kong markets are closed) was negative intraday in to the open.

 USD/JPY 1 min negative from pre-market.

This is ES in purple vs USD/JPY in candlesticks 1 min, ES has fallen off pretty bad on the open. However ES is still significantly dislocated from USD/JPY and has a LOT of catching down to do even with the overnight USD/JPY ramp.

This is ES 1 min in line, but the stronger underlying trend...

ES 5 min leading negative, note how much 3C dropped as the Most Shorted Index gave out on Friday, this was the purpose of the bear flag/Crazy Ivan sling shot, to trap bears and then squeeze them to get our head fake move above the multi-month range/top.

The reason or the way the market was lifted was using the bear flag as a short trap/short squeeze, so the fall off of the Most Shorted Index is significant.

This is the SPY vs the Most Shorted Index, you can see the MSI fell off badly Friday and has gotten worse thus far this morning.

 DIA 1 min negative in to the open with a leading negative divergence, this isn't the norm as most averages saw a small positive right at the Friday 2 p.m. removal of the op-ex pin as most contracts are closed out by 2 p.m.

DIA 1 min showing the negative divegrence as the short covering abated and the general trend of distribution through all of last week as prices for the SPX moved above the range (this is how we differentiate a breakout from a head fake move, a true breakout would show confirmation, not distribution.

This shows the entire concept of the move and how it was achieved, #1 the 2+ day bear flag, #2 shorts chasing the Crazy Ivan head fake move below the bear flag's support which created #3 a short squeeze as seen above in the trend of the Most Shorted Index, that short squeeze gave the market the momentum to break above the multi-month range on short covering/squeeze, the trend of distribution through all of last week is the exact area of the break above the range we had been expecting (head fake move).

 IWM 1 min, note the intraday positive divegrence in to 2 p.m. Friday as the Max Pain Options Expiration pin was removed.

However on a longer chart the trend of distribution is seen clearly on the IWM after the initial short squeeze moved the market far enough to break above the range (SPX).

QQQ 1 min, also showing a small 1 min intraday positive in to 2 p.m. at the removal of the op-ex pin.

And the larger underlying trend of distribution as the Most Shorted Index failed Friday.

QQQ as the MSI fell off, leading negative.

SPY 1 min 2 pm positive Friday at the op-ex pin removal.

Distribution in to the failure of the short squeeze Friday.

And the entire process of the bear flag (yellow) and the bear trap at the Crazy Ivan (yellow), the sling shot momentum created by shorts being trapped and forced to cover and distribution through all of last week as the SPX moved above the range as we had expected (both the move above the range and confirmation of that move as being a head fake). 

30 min trend.

More to follow...