Market Update

While this probably wouldn't turn out to be a true Crazy Ivan as that is two individual HEAD FAKE (false moves) on either side of the price pattern or range, this does look a lot like a head fake move which on coming down, would not be considered a Crazy Ivan because it would likely not stop to move back up, rather continue lower. Everything seems to be moving in that direction, which would or should put us on track to end this choppy region this week as was posted in the The Week Ahead forecast,

"The Leading Indicators have a few hold outs, one HY Credit asset is leading negative, one is still positive, HYG is in line, but has shown severe deterioration this week so I'm getting the feeling that we are still not done, perhaps there's some fussing around the SPX 100-day and 200-day moving averages, but on the whole, the Index futures look quite negative, nearly a full house of negative divergences...."

I haven't found anything to contradict that today thus far, I still have some significant work to do on bond market analysis which I think is very important and will yield some very worthwhile clues.

As for the market update and the notion of the head fake move and a failure this week...

 With all of the major moving averages in the area for most of the major market averages, there are quite a few areas for technical traders to make moves, in addition, the descending triangle is coming to a point, the apex, so a price move is highly probable as we get to that point or just before.

Today's daily price candle is like a hammer, a bullish reversal (short term), it''s at support with a small shakeout below support, so in fact we do have the set up for a Crazy Ivan as the intraday low was the break or run on stops, it's the lowest intraday low of the triangle .

So the next move/head fake would be above the triangle like the last, when that is done, fails and leading indicators are giving strong signals with 3C, the next move should be to the downside below the triangle. The charts already assign high probabilities to this outcome before a move even gets started as you've already seen today and will see below.

 SPY 15 min chart assigns that strong probability of ANY upside move failing as the 3 stages are clear, the rounding top is clear as well as a Broadening top and the increased ROC on the leading negative divegrence in 3C is clear and is what gives us a very high probability of any upside move failing and knowing that in advance before it even begins.

 The intraday SPY 1 min shows positive divergences at the lows intraday this morning, the same time we had a VIX Term Structure buy signal, very small though and we are still leading positive right now.

 The 3 min chart shows an overall negative trend, but what you might call a counter trend move to the upside (on this timeframe) at the positive divegrence. Remember though that positive divegrence is not a large base, it's not a strong timeframe (3 min). In addition to the chart above this one, it's like the game, "Rock , Paper, Scissors", you don't have to draw to know that Rock beats Scissors and that's essentially what the 15 min chart is telling us vs a 3 min chart.


As for confirmation, we have almost exactly the same charts in the other averages, although as you know I thought the SPY would have better relative performance like the IWM last week.

 IWM 2 min relative and leading positive...

However nothing out on the 5 min chart except a negative and downside trend confirmation, that can't really compete with the 10 min and longer term divergences in IWM such as the one below...

 This is actually leading negative, but I scaled it so you could see specifically where the divergences in 3C sent the IWM lower.

QQQ, like SPY has a positive out to 3 min, but again it's within a downtrend that has been in confirmation, so this is like a mini counter trend rally, remember the concept though, counter trend rallies can be very strong, sharp moves. The only question with regard to that possibility is the aggressive selling we have seen all of January and even December.

 The 5 min QQQ is not positive, in fact it's at a new leading negative low, point being the divegrence (positive) didn't make it past the intraday 3 min charts, this is why I'm not too worried about probabilities of what happens next, again, "Rock, Paper, Scissors". Even this 5 min chart can be used to assign probabilities of any upside move failing, but moving to a 15 min chart or longer...

You can see clearly it's not just the size of the divergence, it's not just the timeframe, it's the trend.

I'll be working on bonds, I think this is probably something that is a key piece of information that we don't have a strong handle on yet that will tell us more about F_E_D intentions than anything else.