Midnight Update

Once again, I'll keep tonight short. From the sentiment reports I've heard, now the bulls have turned bearish, which means the market in my view is looking to shakeout the bears on this, what I believe will be the last bounce before the market cracks and moves far enough away that it won't make sense to try to engage the bulls with more bounces.

Today the market held its ground pretty well considering the dollar strength acting as a headwind. As I showed in later in the day market updates, it looks like Wall Street had to ante up some more positive divergences to hold the market in place against the dollar headwinds. A most curious event took place in ES.

As I have explained before, ES is excellent with 3C for intraday divergences, the only time I have seen it stay negative is through the last two bounces and it started that way last night. However today, there was a positive divergence in ES as well as it slipped a bit worse then the market, now it is back on track and rising and the persistent negative divergence (this lasted 2 days in the last 2 bounces) is back in effect, in my view, this is good news, ES can rise in to this negative divergence, but what it has told us in the past is "all strength is being sold"

 ES overnight moving toward the day session's highs.

I think the most likely scenario is a strong gap and a strong move up in the market tomorrow, we should see negative divergences start to take over ad I do not believe today's gains were anywhere near the extent of what Wall Street had planned with the divergences of Monday.

Also, since the close, the dollar has weakened and that is helpful for a market bounce.

If recent history is out guide, I'm thinking an early and strong gap, some late morning consolidation and a move higher after the EU markets close after noon time.

As has been the plan since Monday, I'll be looking to sell / Short in to strength. I didn't put any model portfolio trades on today, I'm trying to be patient, because I do not feel we are near the Wall Street bounce target zone and because 3C was not showing the negative divergences I expect to see in to strength. Today looked more like a fight to keep the market from sliding against the strong dollar and the QE-negative Beige Book.

I am very excited at the prospect of getting excellent positioning on a stronger bounce and 3C distribution. I feel this is about the last bounce that can be squeezed out of the market. Remember, the margin interest and investor net worth are at very bearish extremes, when the market cracks like it did Monday (but I believe much worse the next time), margin calls will come rolling in and the snowball effect that can be seen in many high profile stocks completing recent head fake moves should add to the fun.