From a psychological point of view, shorts are feeling emboldened by the market's pause and pullback at resistance, this would be taken as confirmation of resistance holding and an ideal spot to add to shorts, some of which may have been closed earlier on the market's aggressive early momentum. Additionally in the Q's intraday, a series of lower lows/lower highs would add to bearish confidence, as you can se though the Q's are flirting with moving above that channel.
The 1 min QQQ chart was the first to show any signs of a positive divergence in to the pullback, that timeframe has built on the initial, tentative looking divergence showed to you earlier. We'll have to see how this turns out to know for sure, but the negative divergence at resistance may have had very little to do with retail shorting and may have been more controlled by Wall Street in trying to trap more shorts. A move above the intraday highs would tend to confirm that theory and you would see yet another example of Wall Street's tactics.
The QQQ 2 min chart has seen the 1 min strength bleed over in to the 2 min which is also positive and pretty much at a new leading high on the day. Although it has largely been a gut feeling, my feeling has been since the bounce started at the April 10th lows (obviously not as clean of a bounce as the previous shorter ones-but again volatility, amplitude and unpredictability were all expected to increase), I have suspected the last sector to rotate in and lead the market lower wold be Tech. Last night JPM gave an initial confirmation of that theory, the market will have to prove the rest of it.
The SPY pulling back from resistance has been enough to get shorts entering the market, but it is nowhere near conclusive so the move below intraday support would add to their confidence and if you look VERY closely at the white arrow, you'll see volume tick up several hundred percent higher than nearby volume and you'll also see the 1 min candle just barely pierced the intraday support line. This is a fundamental flaw in Technical Analysis in thinking that support/resistance are EXACT levels, they are created by emotion and in no way can be exact unless you think every single trader has the exact same emotional response to market stimuli. However, traders in trying to be "too technical" still hold the view that support and resistance are exact levels, the volume surge on the slight break of intraday support is limit orders being triggered as they were set to trigger if intraday support was broken.
The SPY 1 min is just starting to show a positive divergence right around the brea of intraday support. If you look at a 1 min chart of the SPY the exact same concept happened again at $136.07, there was an intraday support area formed by a hammer at 1:48 today and as soon as that level was crossed at $136.06, volume surged again.
These are the VERY predictable responses from technical traders, doing the same thing they've been doing for nearly a century. Wall Street has adapted to TA and knows what will set off orders (if you place a limit/stop order with your broker as many do thinking it is good risk management, Wall Street and every trader with access to the book knows exactly where the bulk of orders are and they'll shake them out almost every time. This is why, even though I was never a large trader, I NEVER place orders the market can see, I use market orders when I'm ready to execute a trade.
The last stop limit order I used about 5 years ago was a protective stop as I was on vacation (I should have closed the position), the stop was hit, it was also the absolute low of the day and the stock took off from there. I haven't used a limit/stop order since.
Any way, as I have been going on, it looks like the market is moving.
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