The open thus far looks a lot like yesterday, like congestion. Remember we saw an afternoon positive divergence yesterday at lower prices intraday, that's where smart money would want to be buyers. We can't really look at the market without considering the earlier in the week, GS comments and their puppets in Europe's comments. We also cant' look at intraday action without looking at the larger picture.
From this SPY top we have a break through support and a bear pennant forming-same concept as a bear flag. Traders view this as a bearish consolidation/continuation pattern and will and have been going short the pattern because of its bearish implications, but as we have seen so often, these easily identifiable patterns in the averages are head faked and manipulated more often than not, much more often. The typical scenario would be a break below the flag to sucker in more shorts and than a break above the flag/pennant with a strong short squeeze rally, this fits well with the GS note and subsequent comments from EU leaders/former leaders who are also GS alumni .
The pennant portion of the bear flag/pennant on a 60 min chart. Typically these consolidations see 5 points of contact before breaking, in the current configuration, since the 5th point of contact didn't hit the lower trendline, a breakout at this point would likely have a lot of momentum to the upside, however the with Euro's positioning (unless that changes for the better soon), we can't rule out a move to the lower trendline which is where we'd typically see the first head fake below the pennant and then a larger head fake moving above the pennant, that is just what the market trend has been-to make as many traders wrong at any one point in time and this is a classic pattern that traders will respond to. We also have the concept we have seen so many times of major support being broken and then a strong short shake out, volatility ramp up, we have both concepts in play.
The SPY pennant vs the Euro (red line), the Euro is not giving the market the kind of support I think it would need to get away with a strong breakout right here. As you'll see below, the larger trend in intraday trade has been positive divergences near the day's lows and negative divergences when price is too high in the pennant. This would make sense as smart money isn't going to buy strength.
The 2 min DIA started today much like yesterday, some minor negatives, but overall a congestion pattern.
The 3 min showing yesterday's open and today. We see the congestion with a negative divergence yesterday in the a.m. , a fall as the Euro broke another level of support and then a positive divergence that sent the market up in the afternoon. Thus far today we have a similar pattern for the a.m. trade, although the negative divergence isn't as strong.
DIA 5 min shows the very strong positive divergence on Wednesday, this is when we were buying longs at the lows of the day, all of which are in the money right now, that was the strongest signal over the last 3 days, right now the DIA has a slight negative between yesterday's open and today's, but it looks more like they're holding the market back rather than distributing.
The local 15 min tend seems to show what's going on and it would support the bear flag/pennant being shaken out to the upside. There was a very strong positive at the 23rd, which again is where we were buying leveraged ETFs at the day's lows and right now 3C is in a leading positive position, it seems this pennant has been under accumulation rather than the distribution most traders would think being a bearish price pattern.
IWM 2 min showing yesterday's open and today's, again there's a weaker negative divergence on today's open.
IWM 3 min shows the strong positive divergence on Wednesday, prices being knocked down on the open yesterday and the positive divergence at yesterday's lows, right now the chart is in line this morning, again following the same trend in the other charts-this morning's action isn't as negative as yesterday's morning action.
IWM 15 min shows several string leading positive divergences, all at the lows of the day and an overall leading positive position.
QQQ 1 min this a.m., the same congestion and 1 min negatives as yesterday's opening morning trade.
The 2 min shows once again yesterday morning's trade was much more negative than today's as the 2 min chart is in line and not negative, whereas yesterday it was negative until the afternoon lows.
QQQ 3 min showing price highs in the consolidation area being knocked down, it was the very next day (Wednesday) we saw the strong positive divergences and bought long positions at the lows of the day. The current reading is in line for today, but overall in a leading positive position, just like every chart above.
The Q's have stayed in a leading positive position during the move down, note the strongest leading positive divergence was at the lowest lows of QQQ price action, also note the pennant like formation from the 21st on.
SPY with yesterday's afternoon positive divergence and this morning some very weak negative divergences with overall congestion in price much like yesterday.
The 3 min is pretty much in line, slightly positive as of this capture.
The 5 min from yesterday's open to today's, again, yesterday's action in early trade was much more negative than today's.
The 15 min, again, the strongest positive divergences have come off the dips or intraday lows in price.
There's a lot of confirmation of the trends among the 4 averages, they make sense when considering a Wall Street move to manipulate a bearish looking pattern, especially at a time when so many traders are bearish.
As for the action right now, much like yesterday-congestion.
We'll look at some sectors next, yesterday I thought financials would rotate in, they seem to have done that with several individual names looking pretty strong today.
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