Bottom line

The main take away from the market today was that economic weakness in the US is NOT transitory as the F_E_D would have us believe. I think Bernie is caught between a rock and a hard place as to easing, is there's QE3 gas and food prices which the F_E_D considers to be volatile and doesn't consider in inflation projections, would go through the roof with a bunch of money sloshing around in the market heading to all speculative assets, this isn't good in an election year. On the other side, QE is they seem to know and other than lifting the market, it has done nothing for the economy, the same is true of easing in Europe through the 2 LTRO programs, as of today there is a record amount of money from banks in the ECB's deposit facility, that money didn't make it in to the economy, it didn't support bond yields, it went to fill huge bank capital shortfalls.

In the meantime, this trend will progress in the US.

Citigroup Economic Surprise Index has moved down with economic reports surprising to the downside since we moved out of the seasonal adjustment period earlier in the year.

Egan Jones also, like the S&P last week, cut Spain's credit rating today for the second time this year (same as the S&P) from BBB- to BB+, nearly JUNK status and part of the headwinds pressuring the market today. As I have been warning, Spain is the domino that could topple the Euro-zone, but recently Portugal has stepped up as the next country that will likely follow in Greek footsteps with an additional bailout and likely needing the same debt restructuring, I'll talk later about the huge mistake the ECB made with Greece and how that will effect every probable sovereign default in the future.

It was touchy in the market today and for the 4th time in a week, it looks like Wall Street stepped in with some additional support, this is small change compared to what they will distribute on a market move higher. I have expected and continue to expect 1 move higher to trap bull for reason I have mentioned numerous times, it's all about the snow-ball effect.

As for ES toward the close and thus far after the close... the support appears to have paid off.

 ES with a positive divergence all day was enough to halt the early morning slide, again, note how the divergence grew stronger on the dip below the SPX's intraday triangle, which short sellers saw as a continuation pattern, expecting the market to make a second leg down today. Those shorts are now trapped ad as momentum/short term traders, they will likely cover, which is probably what gave ES the momentum it needed to make it back to the VWAP.

WS from being down to recovering its VWAP, this may not look like much on the chart, but it is a victory for Wall Street's short term plans, in fact ES has crossed above the typical resistance found at the VWAP where sellers should be thick.

The ES CONTEXT model below has improved all day with the model showing that the underlying credit, currency, etc conditions are supportive of further gains in ES as the model is higher than ES, this is further evidence that this market volatility bounce is not just quite done, but the market (looking beyond a week or so, is done and in very big trouble, ironically a lot of that trouble is due to the manipulation of prices higher via QE1/2 as stocks are not fairly priced and much higher than they should be, that mean they have a lot of potential downside.

I have my first board meeting since being elected last month to our association's board so I need to get ready for that, but I will follow up with more information on the internals of the market, some tactical ideas for our longer term strategic views and perhaps a few stock ideas as well as covering any changes in the Futures.

If you have email questions, I should be back by 8 pm EDT.

I think today was an excellent day to pick up on several market trends, concepts in trading, and an inside view to what was really going on today as most traders who look at price and not the underlying trade would have been expecting an afternoon sell-off based on the continuation triangle that was in effect all day today. We try to follow in the footsteps of Elephants, always aware that Elephants love eating peanuts.

Enjoy your night, see you soon.