Market Update

It's very difficult to get a market update out to you that is both timely and complete. For me a market update includes futures, the averages, what the trend among a watchlist of stocks is, Leading Indicators, any of the levers like Currency crosses/ carry trades, VIX levers, bonds, etc. I obviously can't get that all in at once, but I'm doing my best to keep track of all of it.

The AAPL triangle breakout was the gist of forward looking expectations for the week with a twist of F_E_D interference via trying to talk the $USD down through some unusually stronger than usual dovish language, for instance "QE4" or "delayed rate hikes", both of which Kocherlakota mentioned today. I must also say that all of this happening was prefaced with the prerequisite that the Friday Jobs report miss and miss pretty big.

There are admittedly a lot of moving parts here and I prefer K.I.S.S. (Keep it simple stupid!), but the market is what it is. I'll leave that for another time, but if you are wondering what I'm referring to, Dovish F_E_D statements to knock down the strong $USD, as the $USD comes down, $9 trillion in $USD carry trades go south forcing an unwind which is in all reality almost certainly underway. That means assets bought with carry proceeds are sold, I think you follow.

I can't do this update the justice of 6 timeframes for each of the 4 major averages as well as 4 or 5 for each of the 3-4 Index futures so I'll try to pick charts that represent the particular timeframe the best.

I think the most important thing you know about today's intraday action is that the short squeeze that lifted us yesterday early on which was followed by negative divergences has not only NOT seen follow through today, it has seen a continuation of the trend of negative divergences which is something I expected as I wrote yesterday (paraphrasing);

"If the negative divergences from yesterday were intraday only, they would have had a steering effect and sent the market lower intraday. Rather these are more of a trend of distribution which is what was expected in Thursday's forecast, although I didn't expect it to hapen so quickly".

Also as of yet, two F_E_D speakers who have been back to back and increasingly more dovish from yesterday to today are not having the intended effect on the $USD so far nor the (what I would consider a side-effect) on the broader market either. Rather it seems we are just caught in more lateral chop which has really defined the year if you look at some longer term charts, the change in trend from up to lateral becomes obvious as does the 2015 chop. Again, I'll leave that for later, for now the intraday update.

It looks like deterioration is real, it also looks like this may be a short break/consolidation if I include AAPL, the increasing probability of stronger dovish F_E_D language if the $USD doesn't start to weakness could be what pushed the market back off today's mediocre performance, but if you follow the events I laid out (in brief) above, then I think the AAPL example will make sense.

The NYSE TICK Index is quite mellow,

Yesterday's early morning saw TICK / Short Squeeze extremes (on one of the strongest open/close or candlestick body days in about 5 months since the December Yellen lows). Since it deteriorated in to the afternoon yesterday and is lateral in a mellow area of about -600 to +750 which wouldn't be a surprising reading to see if the market closed with something like a Star candle on the daily chart, maybe even a Doji. In other words, there just isn't much if anything in the way of positive intraday breadth.

As for the divergences in the averages...

Remember as of the Forecast (near term) from last Thursday, IMPORTANT: AAPL Set-up & Market Movement, it was the 15 min charts that were the so called, "Gas in the tank" and negative divergences would have to migrate until they started turning those charts negative. The exception has been the IWM which has had much weaker looking 10-15 min charts, while having slightly better intraday performance until today (of the last 2 days- Mon/Tues).

 QQQ intraday is a good example of "You need higher prices to sell in to" or you could replace "higher prices" with "demand".

Today's negative divegrence is clear and worse, but not as intense as yesterday's nor is the upside move.

 DIA 1 min is showing a worsening chart, this is what was expected moving forward until we break the 15 min "gas in the tank" charts, but today's move here looks especially sharp considering. It's still within reason with the concept above about needing demand/higher prices to sell in to.

The IWM which has not had the stronger intermediate 10-15 min charts of last week, has had better local 1-5 min relative performance (I suspect on a short squeeze yesterday), that fell off sharply today and at a very specific time.

 Carrying on with the "Migration concept since this is the first day of stronger IWM downside in 3C, we see it has migrated to the next longest chart as well and forms a cleaner trend. At this point 3C is leading negative below last week's levels.

SPY 5 min is leading negative, a lot from yesterday with very little additional upside today.

This is an example of the IWM 10 min that is out of character with the rest of the market which had strength in the 1-0-15 min charts, although only for a short period of time. It has also had strange character divergences vs the rest of the averages in other indications like the Dominant P/V relationship.

And IWM 15 min is pretty far from a supportive leading positive chart, unlike the other averages.

SPY 10 min, as suspected yesterday when I said, "I think tomorrow we will be seeing 10 min negative divergences at the rate things are moving today" is now showing that initial break in the gas tank at the 10 min chart, next stop is the 15 min chart and then we are close to taking action.

The SPY 15 min chart which I showed Thursday as I made the near term case/forecast, is still largely undamaged as we are just hitting the 10 min chart today, but in 2 days that's a lot of negative migration.

The DIA 15 min chart does show damage already starting. Past divergences have shown to be effective as you can see at the F_O_M_C knee jerk and highs just after, then all F_O_M_C knee jerk gains were retraced and then some.

The current point though is damage already at the 15 min chart.

QQQ 15 min (in yellow I'm just pointing out a short term (fractal) head fake move and how they happen just before a reversal, a concept that can be used on any time frames in any asset in either direction.

So far the 15 min chart is holding here, but showing initial signs of some damage migrating out to the longer chart and we have only had less than 2 days so far.

As for VIX futures (and related ETFs), strangely Thursday, the day in which you'd think a 3-day weekend alone would crate demand for protection, not even to mention Greek Default fears and most importantly the Payrolls data on a day in which the market is closed (which should tell you something about the market and leaks), is now confirming (as it was yesterday), the market averages as it moves opposite the averages in price, but the divegrence is...

 Leading in actual Index futures for the second day in a row, even more so today.

VXX/Short term VIX futures are also leading positive on the 3 min chart for the 2nd day in a row.

The 2x long VXX, UVXY is shown for confirmation as its 5 min chart is also positive over the last 2 days as it failed to see any bid Thursday strangely.

And the 10 min XIV which is the inverse of VXX and moves with the market rather than opposite it, is confirming on a 10 min chart with a negative divegrence, essentially the same signal as any of the market averages showing a negative divegrence in the same timeframe.

 Since starting to capture the charts and put together the post, the TICK Index has broken to a more extreme low reading of  more than -1000.

 Looking at AAPL, one thing I consider to be a high probability is a pullback toward the apex of the triangle, this is old school technical analysis, probably what most TA traders would expect, a test of former resistance which should act as support.

AAPL is giving some signals that would tend to confirm, thus we "should" be able to get additional upside a originally anticipated and see those 15 min charts crack, opening up the "Come to us on our terms" trade we have been looking for during this choppy/triangle forming area.

 In support of the AAPL pullback/support theory above, a weak, but effective steering divegrence of 1 min intraday that is positive in to its pullback today.

However that doesn't change the broader damage that has been done that has now migrated out to a 15 min chart above. We need continued demand to see those 15 min charts crack, whether it comes from a more Dovish F_E_D statement if the dollar doesn't break or just the market, it should come as forecasted last week.

 This is AAPL's 15 min positive divergence which shows it forming in to AAPL's apex of its triangle (yellow arrow represents the triangle), this is where we'd expect it and was a big part of the AAPL market proxy example for this week.

However as pointed out Thursday, any upside move or directional increase in volatility that the triangle alone represents as it hits its apex has the highest probability of failure as the 4 hour chart has been leading negative through this area, which I explained made sense from what we know of Q4 2014 sales of AAPL among some of the best known/highest paid hedge fund managers that are outside the hedge fund herd.

This is still the bottom line and is very much in line with the patient waiting we have been engaged in to find the right spot to enter additional or new positions at the best entry and lowest risk, something the market chop/triangle range has prevented and 3C charts have told us to stay out of the way during that period.

I'd still say, Patience is the best course. We are on track, perhaps a bit more zealous in distribution than originally expected, but seeing the F_E_D dovish Qe4/no rate hikes until 2016 comments have thus far failed to do what we expected in moving the market higher, it seems another tact is being taken, which doesn't rule out the wildly dovish comments I still expect. You really have to keep your eye on the catalyst/ball which is the $USD, it's the key to just about everything at this point.