The SPY is REALLY Struggling

Back to the game plan.... Remember this post, "What Can We Can Expect After Op-Ex Today?"

After looking at a similar model and market conditions during the May-Op-Ex and what happened next, I made some projections based on what 3C looked like at the time, based on how the market operates and based on a historical model. I think it's important to revisit those initial expectations because we are in a position now that s almost exactly like what was predicted on July 15th.

You can read the complete post above, or this brief synopsis.

Here's the May Op-Ex Model

 Op-Ex friday is in white. The next Monday was a down day, which was accumulated for a run up, the point of the run up was to get good short sale positioning because during op-ex week, the market had to be held relatively flat to pin the options. After the down day on Monday, the market started a move higher, it was a 5 day period, but only 4 days contributed to the move higher, after that, we saw a reversal and a trend down. The final day of the bounce, did make a slight new high.

Here's July's Op-Ex. Based on that model and 3C readings at the time, in the post above I predicted a down day on Monday which happened in red, which would be accumulated, which also happened, followed by a bounce, which also happened. Thus far the bounce has been 4 days, 3 contributing to the move higher. The SPY, DIA and IWM DID NOT make that new high that I've been looking for, the QQQ did. Back n May, the SPY and Q's did make the move higher, the DIA did not.

The condition of the SPY right now...

 Intraday we have a bearish looking flag, without much 3C support, this obviously could change today, we still have plenty of time.

 The 5 min chart is in a leading negative divergence.

 The 15 min chart did exactly what we expected, accumulation on Monday the 18th, followed by a bounce that would see distribution. Currently the 15 min chart is in a leading negative divergence.

Even the 30 min chart reflects our expectations from July 15th.

Overall, I think the planning, the signals and what occurred has been an incredible success, but we can't or I can't stay hung up on an expectation of the SPY and DIA to break to new ground, while the Q's have already done so. I find myself sticking to a line of thought that is rapidly deteriorating. The call on the 15th was a success, the market has done largely everything expected, but right now the deterioration suggests that the reversal may be upon us.

I hope you used the opportunity to short in to strength or you use it now. For risk management's sake, I would plan on initial wide stops JUST IN CASE, we do see the move in the SPY and or DIA to breakout highs, it's the responsible thing to do. However at the same time, you don't want to miss the opportunity the market has given us. All in all, I think July 15th, "What to expect" was a good call. Don't let it slip away from you.