Closing Update

First of I appologize for having cut out early, my family physician said he wouldn't treat my wife unless she went to the emergency room and was admitted, suspecting she has Pneumonia.  Some of you may remember I had to leave after the market close a little over a week ago to take her to an emergency walk in clinic, the answer we got was Bronchitis, but her breathing is worse, to the point she sometimes can't finish a sentence, but there are other times she seems pretty normal, the doctor just happened to see her at her worst and her being nervous just made her breathing worse. He ran no X-rays (the X-ray from the last doctor was clear) so I don't know how he can make such a diagnosis.

The big problem is her insurance from work (PNRA) only covers $2000 a year! I didn't forget any zeros, 2 thousand dollars! She just got this insurance so I had not seen it until last week, I've never seen such a thing.

Because of her immigration situation, she can't have any outstanding public debts and she is coming up for her 2 year interview in a few months. My brother was in the hospital for 2 days and had a $22k bill! That leaves us with 1 option, she'd have to go back to Hungary were she'd have full health care coverage.

Needless to say we are getting a second opinion tomorrow morning. Thank you again for all of the letters of support and prayers, I can't imagine the feeling of not being able to breath-governemnts use that as torture. It's very hard to see my wife like this and be helpless.

Any way, looking at the closing charts, there's still ambiguity in the major averages although they are on the right track for the accumulation/pullback/accumulation/last price pop. However there's more than one interpretation of what was seen today, for instance, accumulation for simple gap fills.

One chart did standout today as being quite bullish looking and it just so happens to be the final component of my expectations that is yet to be met, AAPL.

I'll take you through the good, bad and ugly, just keep in mind we are really looking for any possible extra tactical advantage we may get from the market on a final blow-off move. Strategically, I've been building my short positions for some time in the model portfolio for equities and nearly all are at a gain, a few are just below break-even, but we haven't even seen the break yet.

Lets start with the averages...

 First the DIA and SPY intraday charts were the worst looking yesterday, today the DIA 1 min is one of the better looking charts, leading positive above the Tuesday rally 3C highs and the DIA didn't even fill the gap today.

 DIA 3 min shows some tailing off of 3C strength toward the end of the day, since the 1 min chart is strong, it must have started earlier in the day and the actual 3C readings would have been more bullish in to the close with the 1 min chart at the day's highs.

 The 5 min chart saw that same falling off after having been in line with price.  The scenario I mentioned lat night, if there is to be one final bullish move, would require the market to pullback from these levels and toward the lows where a small base could be formed in to 3C accumulation, so a downside price reversal (as long as it doesn't blow through today's lows) would actually be part of the plan.

The DIA 15 min chart is more bearish today than yesterday, even though intraday it followed the market, this is the exception though.

 IWM 1 min shows some impressive early strength and that trailed off to just about in line with price.

 The 3 min chart is nearly exactly the same description

And here's another 15 min chart that is stronger than it should be, a relative positive divergence on the open and a leading positive in to the close.

 QQQ short term intraday charts were pretty weak today.

 Here's an example of some initial early strength and the afternoon trailing off of the 3C strength-the Q's did fill the gap and that's when and where 3C started moving in to the negative.

 QQQ 5 min shows some of that earlier trailing off I mentioned in the DIA charts with some late day attempt at strength.

 Interestingly, the Q's 15 min chart wasn't only in a relative positive divergence at the lows today, 3C was higher than Tuesday's rally highs at the close. If there were distribution today, it would show up here and if they aren't distributing, they are supporting the market for another push in my opinion.

 SPY was in line most of the day with the afternoon trailing off and an attempt at some late day strength.

 The 5 min chart looks pretty much like the rest.

And once again the 15 min chart is stronger than it should be with a 3C close above Tuesday's rally 3C highs and the SPY did not fill the gap.

Although the market charts still leave some guess work to be done, the one thing that stands out is the positive 15 min charts, I was ver surprised to see that and I think it lends some credibility to the idea of one more strong blow-off move.

As for the 3 main sectors, Energy, Financials and Technology...

XLE Energy

 Yesterday I mentioned how Energy rallied completely against its FX correlation, as a result of that (which is manipulation that is unsustainable), the negative divergence and my thought that Energy was ready to rotate out, Energy saw on of the bigger moves down, but it was working on a positive divergence today.

 The 5 min chart confirms this

 This is one of the few charts covered thus far that has a 15 min chart worse than the day before.

XLF-Financials

 Financials were in line and showed the same afternoon falling out with a very late attempt to recover.

 The 2 min chart is quite strong here, surprisingly strong.

 As is the 5 min chart.

 Even the 15 was more positive today than yesterday.

XLK-Technology

 The 3C trend in XLK is very positive, perhaps Tech will rotate back in and finish this off.

The 15 min trend is perfectly in line, which is an improvement over the negative divergence that I should suspect to see.

Risk Assets...

 Commodities vs. SPX which held up better on Monday and much better than they should have on Today considering the $USD's position, saw a lot of downside today to bring them reasonably close to the short term FX arbitrage mean.

 When comparing commodities to the Euro in green, commodities were stronger than the correlation implies later Monday, they continued much stronger on Tuesday and today not only reverted back to the FX implied mean, but overshot it. There are 2 market concepts, "Reversion to the mean" which is what these risk asset charts are all about and "overshooting" or the pendulum effect I have mentioned many times. Once momentum gets some wind behind its back, the market often swings in wild moves overshooting reasonable expectations.

 This range in High Yield Credit is slightly positive for the market, Credit should be diverging badly to the negative when the bounce is complete and although longer term trends are horribly divergent, these shorter term trends should lad the market.

 Yields were relatively positive on the open and more or less supportive of the market here as they too will diverge on the short term charts badly before the big reversal, at least that has been our experience to this point.

 Here's an example of the same chart, but looking at the longer term trend, it is very negatively divergence, but the intraday charts need to do the same, if the SPX were to move higher as I drew in with a green arrow and the short term diverged on that move, the resulting negative divergence on this chart would be far worse than any other failed bounces we have seen this year.

 The $AUD is a god leading indicator for the most part, I have to say this divergence between the $AUD and SPX is very ugly for the market, even as $AUD tried to move with the market intraday.

 The Euro vs the SPX, in a normal risk on move, the Euro rallies with the market. To the left, the Euro was more supportive of the market and the rally in the SPX continued, at the Tuesday rally, the Euro was very divergent and you see what happened on that parabolic curve back down. Today the divergence is pretty bearish although the Euro did move with the market most of the day, only  in the afternoon did the Euro start to drop, this may be what caused 3C to drop in the afternoon on the market charts. Equity trades keep a close eye on the currency markets.

 This is another one of the more bullish charts, High Yield Corp. Credit which almost always leads the market as a leading indicator, was supportive of higher prices Monday, was slightly negative at higher prices on Tuesday and today is again supportive of higher prices.

 As for the 3 major industry groups and their momentum relative to the SPX, Energy had been leading the market Monday/Tuesday and was severely lagging the market today. I mentioned in last night's report that I thought Energy would rotate out.

 Financials have been in near perfect momentum correlation with the SPX, there was a slight dip at the end of day today.

Here's where it gets interesting, Technology is supportive of higher prices Monday, we get higher prices Tuesday, Tech fails to maintain momentum and is hinting at lower prices during Tuesday's bounce and today Tech is showing better relative momentum than the SPX.

Finally, this to me is the most telling risk asset as to near term market direction, AAPL.

 AAPL right at support, after Mon/Tues Tweezer bottom.

 Interestingly, AAPL puts in a bearish descending triangle right at support after a trend down, traders take this to be a continuation of the downtrend. Look at the triangle's support, it's the same as major AAPL support.

 About that triangle, while Technical Analysis tells us its bearish and a continuation pattern and to expect the next leg lower, 3C is in a huge positive divergence today.

Even on the 15 min chart, AAPL put in a stunningly strong leading positive divergence. Shorts may have already entered AAPL on the bearish price pattern alone. One thing to watch for is a short term break below the triangle's support and see if volume is huge on stops and shorts coming in to play, that would give AAPL extra upside momentum to breakout of the triangle to the upside.

This is probably the only chart I really needed to show you tonight, but I wanted you to see how the market closed as I wasn't here.

So I'm ready for a break in the market, but I'm still leaning toward one final blow off top with AAPL leading the way.

I have an 8:30 appointment with my wife to see a specialist and hopefully get this taken care of, I hope to be back before the open, but if I'm not, I will be shortly thereafter.

If I have time, I'll be sticking up a few more posts tonight.