SPY Update

If you have been following the 3C updates, then today is no surprise, the moves up on news seem to be manipulations of the market causing a lot of overnight volatility. Yesterday's SPY/SPX update showed though how bad the situation is and why I consider the rally since December to be a bear market rally. In fact, during September I posted my expectations for a new low yo be put in (that happened at the start of October), that new low would launch a strong rally and we would make a new low (below the October low) after that.  This rally has done what a bear market rally should do and is designed to do, get investors confident and back in the market before Wall Street dumps the market and leaves them holding the bag. Every thing we have seen has suggested this is what is happening, from my posts on market breadth, ATR, Credit and Risk Assets dislocations with the SPX, Dow Theory divergence between the major averages and the NASDAQ 100, the CATS and DOGS rally which we see at the end of a bull move and many, many more indications.

Here's a SPY update, I'll try to get the other averages out soon as well as the Credit/Risk asset layout.

 The 1 min chart showed us some accumulation late day, I suspect the EU "Samaras rumor" was a plant. Since, today we have seen a negative divergence (distribution) in to the SPY's intraday highs, it is now leading negative which is the strongest divergence type.

 The 2 min chart shows the exact same, again the positive divergence before yesterday's closing run up suggest Wall Street knew about the "Samaras story", remember where Papademos comes from, he is Goldman Sachs Alumni, just like Cramer. Specifically when oil crashed in 2008, I posted that week that oil was set for a crash, the same week Cramer told his audience that if we get a negative EIA petroleum report, they should buy oil as a "CONTRARIAN TRADE!!!" How can millions of viewers all doing the same thing possibly be considered contrarian? Furthermore, after they bought on the EIA report, oil crashed a few days later. Ironic timing huh? Goldman would need a lot of demand to sell/short in to higher prices, Cramer gave it to them as an ex- Goldmanite. You can come to your own opinion as whether it was coincidence.

 Longer term SPY 2 min chart has shown a pattern of distribution and many divergences fall right at intraday or gap up highs. The 2 min is now leading for more then 8 days locally, when put in context of the trend, it has been leading negative  further back then I have chart history available which is to at least January 10 2012.

 The 5 min chart locally shows a strong relative divergence between last Thursday's highs and today's higher highs. We can also see the small positive divergence late Friday afternoon.

 The 15 min chart shows a pattern of not only negative divergences losing momentum in the SPY (+.23% net change over the last 9 days, almost 2 trading weeks!), but an accelerated drop in 3C. Remember yesterday's custom indicator showing the declining rate of change in the major averages. The only thing that gets the market to move are rumors that have a half life of 12 hours at the most and often 1-3 hours.

This is but 1 major reason I have felt we have been witnessing a bear market rally, the 30 min chart (daily as well) are some of the most important timeframes and this trend in 3C suggests not only has Wall Street been selling in to price strength, but setting up large short positions. In the size in which they trade, they cannot set up large short positions in a day, they would crash the market and hurt their own position, they need price stability or strength to sell short in to as their large orders are broken up in to smaller pieces as to not drive price against their position before it is filled.