Market Update

For some of you who haven't seen a lot of 3C charts and had experience with them, this post may be a little difficult to follow, I'll try to make it as easy to understand as I can.

ES updated chart-still moving higher. Although this is just an intraday signal, accumulation is a bunch of intraday signals like this all accumulated together. Institutional money's orders are so large if they placed them all at once they'd drive price against their position. (buying for instance, if they placed a 10 mn share order at once, it would drive prices way higher as everyone front runs that order, but if they break them up in to 10k share orders no one knows the difference, 3C tracks that trend). Then there's the fact there's even a positive divergence on such a horrible NFP print, most people wold think the underlying action would be all selling.

DIA 1 min-yesterday there were very few signals as mentioned yesterday and today, I suppose it makes sense with the whisper number and the day before the NFP print that smart money wasn't extremely active. However the 1 min chart is the fastest, it can move with price nearly in real time, the fact the DIA 1 min chart is above yesterday's readings rather then confirming price with a move deeply below is an interesting divergence.

I's very difficult to see, but the bear pennant (pennant portion of the pattern) starts around May 18, the upside head fake move that broke out of the pennant was on the 29th where you see a negative divergence in to higher prices-confirming that was a head fake/shakeout move. What is interesting is the position currently of the 2 min chart, confirmation alone would see the indicator below the lowest readings on May 23rd, a leading negative divergence would see it even lower, but the indicator hasn't moved down at all. This would of course be read as a strong positive divergence.

DIA 5 min from the 18th on (the pennant), remember red are negative divergences, green is price confirmation, the yellow arrow is the breakout (head fake) from the pennant which saw distribution, meaning that breakout was sold in to to knock it back down as it was a head fake move. Again by this time in the day the 5 min chart would be caught up to price, there's no downside confirmation and the DIA has been one of the more erratic charts of the majors. The red trendline just shows price lows and where 3C was relative to those lows, price is much lower than the 23rd, yet 3C is much higher, again that's a relative positive divergence (relative between 2 points).

The 15 min DIA clearly shows the head fake move at the yellow arrow and the negative divergence in to that move, as price dropped, 3C went in to a leading positive position as the pennant matured. Again 3C in confirmation (no divergences, just confirming the price move) would be at new lows, the fact it isn't seems to indicate there's institutional activity right now.

Cleaning up all of the noise of individual smaller divergences that are intraday or day to day, the 60 min chart reveals the trend. Look at the size of the negative divergence at the May 1 highs, not very big, although at the time it seemed pretty decent size. Compare to the current divergence, also note there aren't many divergences that reached the 60 min chart, the top on May 1, most of the rest of the time 3C was in confirmation with price, and now the current one. The longer the timeframe, the more important or larger the divergence is. Usually a 15 min chart can turn prices, when we reach 60 mins, we are usually talking about large trends, for instance just look at how far the DIA has fallen just from the May 1 negative divergence.

The IWM 1 min chart this morning is not only not confirming downside, it's headed in the opposite direction in a large leading positive divergence.

Here's the 2 min IWM with a positive divergence at yesterday's morning lows sending price higher, the divergence in the 2 min is being fed by the 1 min chart, it too is in a leading positive position. Confirmation alone would see the indicator much lower, at least where the blue arrow ends.

IWM 15 min chart is very interesting, the IWM is a barometer of a market rally's strength, the IWM / R2K should lead a rally, even Bernie in Congressional testimony pointed out the "wealth Effect" of QE and didn't use the benchmark S&P, he used the Russell 2000, so you know what the F_E_D is watching, probably because of the R2K's diversity. The green arrows are my attempt to draw in the pennant portion of the bear pennant. Note how the leading positive divergence has grown stronger as it moved closer to the apex of the pennant.

QQQ 1 min with the positive divergence at yesterday's a.m. lows sending the Q' higher, for most of the afternoon price/3C was in confirmation (green arrow), right now 3C is in a leading positive position as it did not move down to what should have been new lows on this chart just for confirmation, distribution would see it even lower.

QQQ 1 min longer view-the yellow box is the head fake breakout day, you can see the distribution or selling in to the head fake move to send it lower and as price moves lower, positive divergences form (buy low-simple principle). This also gives you some idea of the current positioning and how important it is when comparing where 3C was at the head fake move and where it is this a.m. Again red arrow=negative divergence/distribution, white=positive / accumulation and green=price/trend confirmation.

QQQ 3 min prices are continually knocked down at the top of the pennant and see positive divergences at the bottom (buy low), market makers/specialists have the ability, it is their job to push the market around when trying to fill an order, it is not uncommon for them to move the bid/ask and feed out shares to moves prices down when they have moved too far away from the target zone which is usually identified using a VWAP., again the current position today is much higher than it should be.

QQQ 15 min pennant, at the yellow arrow is the head fake break out move and distribution, note the increase in positive 3C activity as it is in leading positive position near the end of the apex of the pennant.

Like all the others, SPY 1 min is leading positive this a.m.

SPY 3 min showing the head fake move in yellow and the leading positive position the last several days including today, the orange arrows represent where 3C should be on simple price confirmation and lower on a negative divergence/distribution.

The 15 min chart is impressive, note the May 1 top and negative divergence,  the entire bear pennant is in a leading positive position.

With the size and length of these divergences, if we don't see a super strong move before the F_O_M_C meeting, I'll have to re-consider whether QE 3 may have been leaked. I hope that isn't the situation as it would be very unpredictable and we have enough market manipulation w/o the F_E_D involved, but I have to be realistic.