Market Update

So far I am liking what I see on that break of $1120.

For most of you, you know why we see a head fake, and most of the time it happens right before a reversal. A head fake is most effective when it creates a lot of volume, in a case like this, it does two things, 1) gets shorts in to the market-which for practical purposes is selling and longs stop out as they always put stops at obvious levels and most with their broker so Wall Street can see exactly where the gold strike is.

So as part of 1), it usually creates good volume and while accumulation is usually smaller units a little at a time as to not arouse suspicions and drive prices against them, an event like a break of major support allows them to accumulate larger in the wide open and raise no suspicions because they are simply making a market and taking the other side of the trade, which is to say, buy.

Reason #2) We tend to see these so often is because it creates (in this situation) a short squeeze when the rally starts as shorts cover at a loss and longs start piling in, chasing as they always do.

So this is why I'm happy so far with the move down.

 DIA 1 min

 QQQ 1 min

SPY 1 min

All in leading positive divergences, not in confirmation of the move down, it seems like the move is for all the right reasons outlined above, don't forget BernieK speaks tomorrow.