Market Update

Friday I expected weakness today, here's what we look like thus far.... and I'll try to make this fit into the bigger picture.

 DIA 1 min showing some intraday improvement, we saw this twice last week in which 1 average showed a divergence and led the market while the others were late.

 The 5 min DIA chart is looking very bad, very negative here.

 And now the 15 min chart has gone negative in the DIA, specifically off the open or around the time the disappointing Case Shiller and more specifically the Chicago PMI which was horrendous.

 QQQ 5 min slight positive intraday divergence-the overall tone though is very bad with a huge negative divergence on the open.

 The 15 min chart is now in a leading negative divergence.

 The SPY 5 min has at least leveled off a bit and is slightly positive -most likely intraday, but again the opening divergence was very negative.

 And again, the 15 min chart quickly went to a very negative divergence, this is pretty big to be seen on a 15 min chart so quickly.

 IWM 5 min negative divergence on the open

Another leading negative 15 min divergence.

Remember, we are seeing the underlying action so even if the market manages to rally to close above the open, the negative divergences here are very strong.

The ideal set up for Wall Street on a downside reversal and this is what I've expected since before the plunge Monday of last week and why I've thought the market would not drop further in follow through selling last week, would be the following scenario...

Let me skip all the reasons, they are pretty clear between Europe and the economic data we've seen plus the end of QE2 and then some. Let just jump to the technical set up. The best case scenario for Wall Street is to force a false breakout above this triangle, today case close, I don't think close enough though. What we have today is a "kiss the channel/pattern good bye" which use to work very well as a short entry point. Increasingly over the last few years, reversals have been preceded by false breakouts, in this case we are looking for the macro downside reversal so the head fake would be an upside breakout from $135 up, the higher the better for Wall Street. Technicians on the retail side will buy a convincing breakout that seems to put this triangle into a null/void position, they think they are buying a new breakout and the start of a new move. This gives Wall Street the demand they need to sell short into, by now I'm pretty sure most of their actual position selling is done. When the SPY falls back below $135, all the longs are at a loss of a failed breakout, the lower the market goes, the bigger their loss, which creates the snowball effect and the market falls very fast, very hard. This is short of the opposite of a short squeeze ad you might call it a version of a bulltrap. While the distribution looks to be very heavy, remember that they (WS) distributes into higher prices, not on the fall. So a false b/o above $135 is the optimal situation for Wall Street and is still very much in reach,