Daily Wrap

Tonight's post is gong to be pretty short.

We're going to look at the DIA

 Usually when we get a negative divergence on a 1 min chart it indicates an intraday move down, you can see here we had quite a few, but the market kept moving higher. The second way the 1 min chart works is on a running divergence, that's what we saw today, no confirmation, just a string of negative divergences. When this happens, it signifies distribution on a larger scale s taking place. Distribution has to start somewhere and that's on the shortest chart-the 1 min. When it fails to produce intraday moves down, then it's a running divergence and we look for the divergences to accumulate or bleed through to the longer, more important charts.

 This string of divergences ran pretty hot today and ended all the way to the 15 min chart, which is a rare event in one single day. It suggests the smaller individual divergences that didn't move the market down, were accruing on longer term charts, having more important and longer term repercussions. I held my shorts and added some at the end of the day seeing this 15 min chart negative.

The ongoing weakness in the dollar allowed the market to move up today as you can see on this chart of UUP/$USD.

The bottom line is that the shorter negative divergences I saw earlier and expected to move the market down, created a bigger monster that should have more dramatic downside, that's why I added and it seems Wall Street used that dollar strength to go ahead and distribute which can mean to sell or sell short.

If you go through today's posts, there are a lot of signs that seem to indicate this is the case, from accumulation in inverse ETFs to gold as well as the VXX. The only thing the market had going was a strong Euro, but tonight it looks like it met resistance thus far and is backing off which is equity negative.

So in short, it looks like the market owes us some downside and I don't think it will just be a dip, it could be something much more then we expected earlier today. Remember, new lows are NOT out of the question. We still remain in a base building environment, so upon any downside, we'll be watching for signs of continued base building.

Tomorrow Obama has a jobs proposal speech, it sounds like the Republicans are saying it's a DOA even before arrival, watch for some volatility around the speech.

As for today's price/volume relationship, it was Close Up/Volume Down-the most bearish of the 4 relations.

The DUST trade is still signaling a long.