Market Update / NEXT WEEK

As I have thought all week, I think the IWM has to bounce before anything else on the downside happens. The IWM is down -6.28% for the month and almost a straight line decline, a bounce here would not be anything out of the norm.

The SPT Arbitrage indicators seem to be on board, a lot of 33C charts including a lot of momentum stocks and crowd favorite as I just posted seem to be on board and the market is simply oversold with yesterday's volume event/short term capitulation. someone on the Wall St. side had to absorb a lot of supply at horrible prices and they'll want to get out of that inventory. Almost all of this was obvious yesterday and in last night's post. The increasing volatility is typical of a market getting ready to move from one stage to the next, consider the upside rate of change in an uptrend just before it turns to a stage 3 top.

The one thing that I think you have to be very careful with if you decide to trade anything on a long bounce is the fact the market is for the first time since 2009 (other than a few brief months when there was no QE or TWIST in effect), actually discounting news , fundamental and economic events, it's the fundamental/news events that are the most dangerous as Wall st. often has no way of gathering an inside track in advance such as the downing of yesterday's passenger plane,  this is another very significant change in character.

 The IWM 2 min chart would be where we'd pick up next week as that's what we see most often with 3C, thus a pullback early next week which would create a wider base than today's "V" shaped base,  the key will be accumulation in to a pullback.

Look how long the IWM has been in a downtrend, since the end of Q2 window dressing, if that's not ironic, certainly not a coincidence which gives you information about the market's health on its own.

As soon as no one is able to see anymore, they are selling. Which is what we've seen all this week in to the weak bounce culminating in yesterday's sell-off.

The IWM 5 min also pointing to a pullback,  I have considered that this is doing damage to the base that has been in place and perhaps we don't get the bounce scenario laid out above, but I think there are too many other watchlist stocks to make that theory plausible.

 QQQ 3 min leading negative so again 3C tends to pick up where it left off, even over 3-day weekends so Monday should see the pullback and that's really the first and most important data point for the rest of the bounce theory.

I don't have very good charts in SPY and QQQ so just like IWM showed weak relative performance as they bounced (as weak as it was), we may see the opposite with IWM bouncing and SPY/QQQ acting very weak.

And SPY intraday/

I'll get some breadth charts up as that gives a very different perspective, but again, a bounce here is very normal...

 The right shoulder of the IWM since July 1st with over a 6% loss and a loss of all YTD gains. This is the pullback/base I have in mind to the right and yellow arrows as price action.

It wouldn't be any different than the decline from the right side of the head. Sometimes we watch the market too closely, that trend is obviously a downtrend, but the 2 bounces at the yellow arrows are both 5-day / week long bounces which don't look like much on a daily chart as they should be viewed, but intraday it seems like the end of the world.