Intermediate Market Update

After years and years of looking at charts every single day, all day, you kind of get a feel for how big a base has to be to support how big of a move and how long a reversal process should be or how much it takes because there's VERY, VERY rarely just a "V" shaped u-turn in stocks. I was looking at some of the Asian investment banks and the Assets Under Management (AUM) and you'd think it would take them nearly a year just to move out of one position considering their size and the volume that even liquid assets trade at.

In any case, you get kind of a third sense, which is what I was picking up on Tuesday the 10th when we closed Put positions expiring on the 20th in AAPL and QQQ and this was BEFORE we had solid charts to give evidence which came the next day or later that day.

In any case, beyond non-confirmation in transports this entire year and the total destruction of them today as we have been on to them for quite some time now...

 The long term trend in Transports has been strong distribution, they have not confirmed this year as pointed out Friday and they are among my favorite core short/trend positions.

 This is the daily chart, not good considering the indecision candles across the rest of the averages. Note the indecision candles Thursday/Friday for transports in what I would and did consider a natural, normal counter trend bounce or as I said earlier with the EUR/USd which has had very high correlation with the market, a "DEAD CAT BOUNCE".

This is a horrible looking chart, we have entered a couple of times in Transports as we phased in a position. I still think they are in a great longer term trend position or area for a short, but I wouldn't want to chase them on a day like today.

I'll run through some timeframes and you should be able to see in some of the shorter ones the 4 stage process of base/accumulation, mark up with 3C confirmation, top/distribution and decline.

Also pay attention to the size of previous tops/bottoms and the shape (rounding or "W") and what the market looks like here. I can look at the price action alone and have a good idea of what I'm going to see in 3C.

This 1 min SPY shows distribution in to the F_O_M_C knee jerk move and since which has gotten worse.

 This SPY 2 min shows the confirmation of stage 2 mark up of the bounce and then stage 3 distribution/top starting strongly at the F_O_M_C and continuing.

The Daily SPY has an obvious resistance zone where the upper wicks of the candles keep getting pushed back while the real body of the candles get smaller everyday despite enormous volatility of a day up and a day down for 8 consecutive days. That change in volatility isn't a meaningless occurrence, there's value in identifying that change in character.

 At 15 min we have less detail, more trend and this is coming off the February cycle at stage 4 to the left as the SPX retraced all of the head fake move above the range and then some inside the range, a natural and reasonable area to expect a bounce.

Since, you can see a clear divergence and it sees the bulk of the strength on a strong timeframe at the F_O_M_C knee jerk reaction and since. Don't forget about the warnings about F_E_D knee jerk reactions, you'll see over a period of years this is more spot on than off to a degree that skews probabilities and teaches you something about the deceptive nature of short term price moves, sometimes even longer ones.

The white area is the base/accumulation, the same days as EUR/USd and a number of other assets that are loosely correlated.

 This was the bottom of the 2015 range (white), and the top and our prediction that the market would not ignore such an obvious range and the top would have to be broken before any significant move lower.

More importantly is how the top was broken and what the signals look like as it happened so you can see what the price move or head fake move was used for and how much worse off things have progressed right in to this bounce from the 11th.

 QQQ 1 min with a small accumulation area on the 18th before the F_O_M_C and clear distribution in to and after the F_O_M_C.

The 5 min chart shows the 4 cycles and the 3C signals that you'd expect to see at the base (accumulation), MArk-Up (confirmation) top (distribution) and shortly confirmation or leading negative at DECLINE.

 The Daily QQQ chart and note the Star candle which is also an inside day (not quite a bullish harami, but same concept) and note the increasing volume making that base and reversal candle about 3-4 times more probable to work. At the last 3 days of indecision or loss of momentum candles, note volume as well.

While easier to see on a 60 min chart, you can see the rhythm of the market or proportionality as if they were waves forming in the distance. After a while you just get use to seeing the ones that are going to be big and the ones that aren't worth the effort (for a surfer or an old surfer like me)

 QQQ 15 min which is a trend timeframe and a strong one with the accumulation areas (2) and the clear distribution area in to the F_O_M_C which is becoming a theme and there's a reason for that.

 The more important longer term trend at 30 mins is not about tactics, it's strategic, but it's telling us something about tactics. This isn't an area I'm VERY interested in short term trading, this is an area I want to have my trend trades set up so they can work and not have to be managed every day. The chart is screaming in this instance.

IWM 2 min also shows stage 1 accumulation of the bounce, stage 2 confirmation, stage 3 distribution again in to the F_O_M_C and the leading negative divegrence that continues as the candles get smaller and the upper wicks taller.

 The 10 min chart had some of the clearest signals early for the accumulation/base phase and in to the F_O_M_C with distribution, but it hasn't slowed down which lends credibility to the F_E_D based Knee jerk reaction warnings.

 The 15 min IWM has less detail, but it cuts the noise and reveals more trend.

And the longer term picture of what this move above the 2015 range was used for. Once again, from a strategic point of view, I want to be largely all set up and ready to let my positions work.

I'll have an intraday update out in a few minutes.