Near a transition

Market cycles are like waves, when you actually look at a 30 or 60 min chart, you can see this, they round over or under and create the next cycle. I've surfed for many, many years and you get a sense of whether or not you should waste you precious energy (after paddling hard through the shore break to make it out to the line up) paddling in to the next wave. It takes time to see these waves, but when you finally develop the eye for them, you can see your wave maybe 3 or 4 waves back and you position your self so you'll be in the right spot when it crests and the energy you expend paddling into that wave is all worthwhile. However, there are many, many more moments when you just sit peacefully watching wave after wave roll under you, it's peaceful, it's exhilarating and it's about patience.

Market cycles aren't much different. A member wrote to me that he had jumped in on this move up but exited too soon due to other responsibilities in life, I think he did the right thing. This wasn't his wave, there were too many other distractions to pay close attention to it, but that's fine because another cycle or wave is coming.

I exited all of my longs today and started a short and bought some gold ETFs, I'm positioning for the next wave, but not yet paddling hard for it. 3C has shown this cycle up to be in a pretty good spot to be on the lookout for the next cycle down. It may be a day or two before it's time, or we may find that we need to act more quickly. I didn't see the kind of distribution  hoped to see today in financials. Perhaps we need that head fake move in financials.

Look at this chart, every move up or down started with a head fake (at the red arrows) so perhaps we get a head fake up tomorrow in financials, it could still end the day lower and be effective.

The short sellers are for the most part, not capitulating and it seems the market doesn't want them to. Our Price /Volume relationship today wasn't very dominant, but it was Price up/Volume down which is the most bearish of the 4 configurations and implies two things, one that traders are backing away from higher prices and two that we are in a low volume short squeeze environment, still the shorts are at a 2+ year record number and the market has given them a perfect set up to hold on tight. Sometimes I think Technical Analysis books do more harm then good and this is one of those situations.

The market/SPY has set up a juicy bear flag, one that has not gone unnoticed. It has the typical 5 points of contact and the last swing up didn't reach the upper trendline, a break down from here s a classic Technical Analysis strong bear flag, hinting at a huge leg down, but it may very well be a set up and a horrendous bear trap. We may even see new lows below the August lows, locking in more short sellers. We'll see how much distribution we get over the coming days and we can better gauge the intensity of this wave down.

Lets look at the accumulation compared to the trends that followed.

 The white boxes show accumulation periods, the arrows show the proceeding trend, the DIA seems like it could go a bit further comparatively.

 The QQQ seem to have way overshot, with the divergence making a new low in depth at the red line. I think this may be our worst performer in the next cycle.

And the SPY seems just about right. It appears that we have reached that moment we should be on the lookout for the entry.

As for the 15 min charts, they parallel the above charts with great similarity.

 The DIA is not yet in that bad of shape, perhaps tomorrow

 The Q's look horrible, they have been n a leading negative divergence the entire time.

And the SPY looks just about right with some damage being done today.

I'm sure we'll do fine on this next wave as we have the last several ones.

As for the Miners signal tonight, both systems are long NUGT which makes some sense after seeing positive divergences in GLD.

Look at the correlation.

Green is NUGT, red is GLD and we saw positive divergences in GLD which would also suggest a move down in the market on a flight to safety trade.

That's it for now, it's time to wait patiently for the next wave.