Market Update

 Without taking the unnecessary time to load up my own credit models, I will simply refer to the CONTEXT model which shows clearly that despite the market's need to stage a counter trend bounce, the RISK basket continues to leak lower, diverging with ES/S&P-500 market action, now hitting the worst levels of the day as the market looks to bounce intraday.

 The model in green and ES in red.

 Meanwhile on a longer term scale, the daily chart of the QQQ on my custom crossover screen, that uses 3 different indications including 1 custom indicator in the middle window to avoid false/whipsaw crossovers that plague crossover systems, is now giving all 3 sell/short signals on the QQQ, the S&P, Dow and R2k aren't far behind. Typically after the initial move and signal, we often see (at least in individual stocks), an attempt to retrace price back to the yellow 10-day moving average in the top window, whether that happens here or not depends on how badly the market has actually broken. Before a serious break, like the 2008 break, the market will typically retrace, however once we have hit the point of no return, this is less likely to happen and as in 2007 and 2008, it took the market about 16 months to lose over 54% which ended up being 10% lower then where the 2003 rally started. 16 months to erase all gains and then some, where the market took 4.5 years to build those gains.

When the market hit the point of no return in 2008 after the 2007 Head and Shoulders pattern broke (note the 2011 head and shoulders pattern has been broken just this July) it took precisely 7 months for 47% of that 54% loss to be realized. The point being, markets fall much faster then they rise and even when a top develops and breaks, there is a point of no return in which the losses and the pace of the losses are accelerated. Furthermore, typically the market beta is around 1.5% for stocks on average, meaning a 50+% decline in the S&P-500 translates in to a decline of over 75% for a majority of stocks themselves and that is not using any leveraged ETFs like the SPXU (S&P bear ETF 3x leveraged).

 Here's today's intraday pattern, a narrow inverse Head and Shoulders bottom, that has already broken out at the white box on a slight increase in volume. The pattern implied target in around the green trendline near $120, however news and momentum traders could alter that target.

 Here is the very useful 10 min Bollinger Band which went from exceptional volatility to a pinch at the green box, which implies a highly directional move from that flat volatility zone.

As a barometer of the market, the 50 ema (exponential moving average) on a 60 min chart has held the October rally very well and a break below this average is what we have been waiting for as a sign that the October rally top has broken, here you can see price has made a significant break below the average and it only took a few days.