We Are Again on the Right Side of Market Psychology

The recent debate has been the culmination of the October rally top which was a very obvious triangle, you know that I usually come down on the side of a head fake on such obvious price patterns, which according to all of the underlying 3C/credit data, would have suggested an upside breakout as a head fake, however because even that notion had become mainstream, my thoughts were the market in its bid to make the most people wrong at any one time, would do the exact opposite and let the triangle breakdown as it should, one again outsmarting technical traders, who this time thought they would outsmart the market.

 The Triangle breaks with 3 if not 4 solid days of confirmation and the character of the market once again changes for the worse.

 This morning's break is confirmed thus far, however a +2% loss this early will either end the day in a bloodbath or more likely will see signifiant intraday volatility up and down, it's too early and too big of a loss for the market to hold all day, unless it does hold or add to it and then once again, we have another change in character and this time, we are entering the stage 4 decline, the part that comes after the Lehman collapse and at that point, you want to be short and this is why I have not touched a single short position in a month, hopefully we'll get some short term strength to initiate and add to shorts in a better area.

 The Q's gave a hint that the triangle would break down with a false upside breakout.


 3C caught that move and showed it to be false and under distribution.

 The SPY break-volume is nearly perfect for this kind of break, increasing, but not so much as to make the move unstable and oversold.

 The longer term 3C has suggested that this would be the triangle's fate and the long term charts are the most important.

 As for ES, last night I told you it opened nearly 1% down, 3C caught that as well, I said the 3 am EDT opening of Europe would tell us whether the Spanish elections would provide a sugar high or whether the markets are more concerned with bonds, that was answered at the negative 3C divergence on ES at 3 am at the yellow arrow.

And every rally attempt has been met with distribution right up to the open.

I'll be bringing you events that matter and steer us toward understanding instead of volatility of dealing with such a volatile market, we may witness today yet another character change in the market, one which increases the downside catalyst.

Stand by for further updates as I am now loading the credit template.