Remember Volatility?

If you recall the posts that talked about the stages of a market or stock's cycle, accumulation, mark-up, distribution and decline (stages 1-4), you've probably heard or seen the examples of how volatility precedes the transition from 1 stage to another, often in surprising ways that are what I call "seemingly" bullish or bearish, but all the while the main concept is "Price is deceptive".

It's true that price is king, but that doesn't make it any less deceptive at times. I don't have any argument with someone that sees an AAPL update and wants to try to catch the bounce up, as long as they understand the risk and see the underlying trade, that's a personal choice that 1 trader may be better suited for than another due to time constraints, account size, risk tolerance, etc. I'd rather be buying something that is showing accumulation personally. However for most people, they don't see what we see, underlying trade, therefore the "Price is kins" meme can often and according to studies, often sees people lose all bull market gains when the market turns to a bear market for a number of reasons that are too long to go in to for this post, but suffice it to say that when you have a good experience with something, you develop cognitive biases.

The actual point was volatility and the surprising "seemingly" this or that price moves before a trend change from 1 stage to the next. From a stage 1 base to stage 2 mark-up, it's very common to see a new low made and run all of the stops before a big move to the upside. Before stage 2 rally/Mark-up turns to the lateral stage 3, it often peels away from long term trendlines in a "Seemingly" bullish parabolic move (look at Gold/GLD 2011).

One of the things I have warned of and am watching for is the typical topping "Igloo with Chimney" head fake short squeeze we often see whether on an intraday chart or a 5-day weekly chart, right now that would be the SPX daily trendline from March...

While not the "Igloo / Chimney" price pattern, the chimney is a head fake move on a rounding top just before a downside reversal, a breakout above a well know resistance line in the most watched Index in the US, maybe the world, would perform the same conceptual function.

The end of stage 4 decline or a bear market tends to end with a BANG, a big gap down on huge volume known as capitulation, however price tends to drift lower more slowly after that for a bit before starting a stage 1 base again, but the point is the RISING VOLATILITY WHICH IS ONE OF THE MOST IMPORTANT THINGS I HAVE BEEN LOOKING FOR RECENTLY IN THE MARKET'S PRIMARY TREND FOR A TRUE BREAK OF WHAT I BELIEVE IS A LARGE BROADENING TOP FOR THE SPX.

I'm trying to get us as close to the right edge of that cliff without getting stuck in this...

 This is the DIA 10 min chart with huge volatility, but not going anywhere as the Dow was RED TYD as of Friday and is up +1.19% YTD today. It's this chop and more specifically the chop within moves and pinching volatility as of the start of April, that has made short term trading very difficult unless you have been in and out and watching exceptionally close. I don't know how many times I've posted, "The market is green for the year" and then "The market is red for the year" through 2015, THAT'S A CHANGE IN CHARACTER ALONE THAT SHOULD TELL YOU SOMETHING ABOUT THE BROAD MARKET IN TERMS OF THE PRIMARY TREND SINCE 2009.

That's fine, it's the increase in volatility I'm most interested in as a signal.

 Looking at the Dow daily chart, this looks like a swing traders dream and we have called just about every swing this year, but take a closer look at the day to day candles and imagine not knowing what happens, what's on the right side of the chart tomorrow? Look at the approximate swings/Volatility day to day for the Dow alone marked by arrows of approximate size of each days swing and whether up or down....

 Things are a lot easier to see once they've happened, but at the right edge of the chart, it's not so easy, especially with swings with that much intraday or day to day volatility.

Still, remember the 15 min charts which were 1 of 3 indications I've been watching to find the pivot in this market on a primary trend (in my view)?

That's the DIA 15 min chart, the chart that was positive when the April 2nd forecast was made, the chart I've been watching to turn negative.

As for ES, it's hard not to just jump all in right now,,,

60 min ES/SPX E-mini futures. The positive divergence in to early April is clear as is the leading negative divegrence now, an even stronger signal than the DIA 15 min above.

So as you can see, I'm doing the best I can to keep us out of that choppy mess, but not miss the pivot because there are very clear large signals that I believe likely represent the primary trend (as in since 2009) and a very likely trend change in that primary trend.

The increased volatility whether up or down is a good signal for us and remember that the "seemingly" strong price move is often the reddest of flags,