There's a strange narrative from overnight I'm trying to follow, but there are a few things not adding up.

First the gap up this morning is not that big of a surprise considering how 3C finished the day late yesterday with positive divergences largely in the IWM & QQQ or at least strongest there as well as the other averages...

IWM leading positive in to the close so with the concept of 3C/market action picking up where it left off, the gap up isn't that strange, especially with such a benign Dominant Price/Volume Relationship which essentially doesn't provide any resistance or push stocks in any direction unlike the other 3 of the 4 relationships.

Remember though, these divergences are on the 1-3 min charts, but still have some work to do on 5 min charts so a pullback to finish that work wouldn't surprise me and I wouldn't be a buyer of any long assets unless those charts were very strong looking, otherwise I just can't trust the move.

The narrative is overnight China had disappointing economic data including missed Retail Sales and Industrial Production. Skip over to Europe and June Industrial Production missed printing at -0.3% vs consensus of a gain of +0.4%, a big miss. Taken with yesterday's German ZEW Survey which was horrible, it looks likely that tomorrow's European GDP print for the Eurozone may come in uglier than expected although Italy's recent return to another (triple dip) recession, the 4rd since Lehman may have lowered the expectations bar. Apparently this is the bad news that is good news sending USD/JPY and Index futures higher according to the narrative...

 As you can see, USD/JPY did take off right at the European open, however bt 5:30 a.m. there was a solid 3C negative divegrence which must have set up enough underlying weakness that the pair collapsed on this morning's 8:30 US Retail Sales which missed across the board despite the expectations of a rebound from the Q1 weather. Interestingly, every month of Retail Sales for Q1 beat, every month for Q2 missed, this is the 3rd consecutive miss , SO! So much for the "Weather" narrative as things should be on the rebound, but they're not,

As you can see, ES (purple) vs USD/JPY held up better at this morning's US Retail Sales miss, but did drop as did the $USD with bonds up and gold up.

This is ES overnight and through the open...Again, this isn't that surprising for a short term a.m. move considering the way we closed yesterday with fast moving positive divergences migrating to 3 min charts in little more than 2 hours after nearly 2 days.

This is the reminder of how we closed yesterday with strong leading positive divergences in the averages.

 However, getting back to our narrative, well before the US Retail Sales print (green), the $USD was already showing distribution, a leak perhaps? I'm not sure.

As for the Euro where the narrative is "Strength vs. the $USD on repatriation of Euros"...

There's that interesting divegrence from about the European open to an initial move higher at 5:30 a.m. so this wasn't all about US REtail Sales missing.

What I find interesting is bonds which popped on the US retail sales miss as part of that story's narrative, however looking at the 5, 10 and 30 year treasury futures I saw this...

From the European open until 5:30 a.m. all 3 Treasury futures has leading positive divergences with the first move higher not at the retail sales miss, but right at 5:30 a.m. as well.

Looking at the EUR/USD, it looks the way you'd expect. On Euro repatriation? I'm not sure, however again there was a positive divegrence around the European open to 5:30 a.m. and the initial move higher at 5:30 and a pop on missed Retail Sales.

I'm just not so sure the narrative is exactly what was causing all of this 3 hours before hand unless there was some sort of leak.

As for the market, as I said, the way we closed with leading 3C divergences and no Dominant Price/Volume Relationship to pressure the market, the gap up is not surprising, whether it holds is a different story as the 5 min charts do have some work to complete, but if yesterday is any indication of how quickly that work can be completed as divergences migrated from 1 to 3 minute charts in 2 hours, then we can and should be on our way up on the expected bounce today, whether it is stable and strong enough for me to want to take a whack at it remains to be seen, otherwise I'll just be patient until the next pivot set up which has always been the real trade, this long idea is a piggy back to get there.

So far the QQQ 1 min is in line, the IWM and SPY both have some minor negative divergences forming, there would have to be a pullback intraday (gap fill maybe) to finish the work started late yesterday and get the 5 min chart squared away before I'd trust this move, I'd say it's a decent probability, but if it doesn't happen, I'm not risking capital on a sub-par trade set-up when I know there's an excellent set-up right around the corner.