Market Update

We have a lot of members using 3C and trying to understand the indicator, so in this update as it's a little quiet in the market I'm going to try to show you some concepts that will help you. Because of what I learned in reading probably 70 Technical Analysis books, attending multiple conventions, etc, it took me quite a long time to understand 3C. I started with daily divergences and those are very strong, the longer the timeframe the stronger the divergence, but when I moved to intraday, there was a lot of de-programming I had to do and that was only possible because I had seen years of 3C working and how it works. What Technical Analysis teaches about market accumulation and distribution is very limited and often wrong, this is why there was such a steep learning curve. The real powerful signals are often found on intraday charts, but every market trend acts differently so you have to put in the hours to understand as you go through different market environments. Understand that 3C's numerical value is totally useless, it is a divergence indicator, 3C's level compared to price is also unimportant unless you anchor it by comparing to a relative price level in the past. Whether 3C is above or below price isn't what is important unless it is in the context of a relative comparison of 2 (or more) points in time including the present. Leading divergences are always stronger than relative divergences unless the relative divergence is just absolutely huge. Finally don't try to squeeze signals out of 3C, institutional money is not always active or especially active which is where we find our edge. If it doesn't jump off the chart, ignore it. The premise is 3C is comparing how much money flow there is at several relative points. If price is significantly lower than a month ago and 3C is significantly higher, it is telling you there is a lot more money flow in the stock currently and that is a valuable signal. If price is higher now than a point in the past, but 3C is significantly lower than you know money has been flowing out of the stock, smart money has sold in to strength or shorted.

The size of the divergence also plays a role, during the March-May top a quick 5 or 15 min divergence could turn prices, but in the current situation when 3C has been positive for a long period of time, this means there's something much bigger going on and once a positive divergence is established on a long chart like 15, 30 or 60 mins, you often have to come back to the short charts 1, 2, 3, 5 min to look for strong divergences that give you a hint that a move is about to start.

You also have to have a general understanding of how Wall Street manipulated Technical patterns as technical traders started really using TA around 2000, Wall St. knows what they are looking for, often gives it to them (getting their confidence up) and then traps them. An understanding of what Technical traders look for is also an essential part of putting together the pieces and that is what 3C is all about, putting together the pieces. The name 3C stands for something that jumped out at me in one of Don Worden's books, I believe, "Street Smart Charting", 3C= "Compare, Compare, Compare". If you have used TA all of your trading career, what Don says in that book will stun you, you won't like it, but he'd been on Wall Street for 50 some odd years designing their indicators and systems, he understands how the market works, we have taken it a step further as the market has changed since he published those books about 10 years ago. Each timeframe has a different look back period so they won't look exactly the same, but it is the trend of 3C that is important in confirming through timeframes.

I forgot to add the DIA to the update, but it is leading positive today on the 1, 2, 3, and 5 min timeframes so it looks good.

 IWM 2 min longer view. What is important on this longer view is that price has made lower lows, but 3C has not, it has made higher lows, there's more money in the stock now than there was at the 31st. There's also a leading positive divergence today which is another important signal that should be looked at intraday (closer).

 The same chart zoomed to today, as prices touched the intraday lows, 3C which hasn't made a lower low all day went very positive at the last low and is now leading positive as it is higher than the open when prices were near the intraday highs, this would suggest lower prices have been accumulated all day, but especially at the last dip. I find these leading positive divergences, especially quickly formed and on longer timeframes are usually worth trading, GLD was an excellent example last week as a 30 min chart was leading positive at the lows of the day, GLD made the biggest 1 day jump since Jan. of 2009 Friday. Those are signals I don't ignore and often will trade.

 IWM 3 min longer term trend, I didn't mark every small divergence, the important information is 3C much higher than the 23rd when prices were much higher than present, this i a large relative divergence because we are comparing between 2 relative points (both price and 3C).

 The 3 min chart is leading positive at the same place as the 2 min chart before-confirmation and a new high for the day, thus leading positive, which shows increased institutional activity. Although the timeframes are close-only 1 min between them, they are comparing totally different look back periods, so there is a trend in place in underlying 3C activity.

 IWM 5 min is trying to hit a leading positive divergence by making a new high on the day as price is near the bottom of the range. Strong signals on shorter charts eventually bleed to longer term charts, giving you an all around stronger signal.

 QQQ 1 min long term view shows the trend, the distribution at the May 29th head fake/false breakout of the pennant, which is what TA traders wanted to see (a failure of a test of resistance, they are taught to short these failures). The trend since is clear and that is the most important aspect here.

 Close up (intraday) 1 min chart shows 3C has made no new lows with price and the same area seen in the IWM as leading positive is the same in the QQQ, these are two completely different averages , yet they have the same signal at the same time, this gives you stronger confirmation.

 QQQ 2 min shows a positive relative divergence at the first long arrow, then increased strength in the divergence at the second arrow at what appears to be some intraday support, the last touch of the same area sees a stronger leading positive divergence, again more confirmation at the same time. Normally the 1 min chart would look stronger, but the look back period catches different moments of their activity, plus you have to consider the 1 min chart's trend which is very strong.

 QQQ 3 in confirms at the same area, no new lows in 3C, instead higher lows in to a leading positive divergence, also note the flat area in price, often where smart money operates as traders lose interest and aren't paying attention to a dull market.

 QQQ 5 min is making a new leading positive for the day as it passes the levels at which price was at the intraday highs, the shorter charts have passed on strength to the longer chart.

 SPY 15 min overall trend, you can see distribution during MArch, especially strong at the 2nd, then even stronger as 3C is much lower at May 1 which also shows a relative negative divergence at the red arrow, there's the positive divergence mentioned last night starting May 7th which is seen in all of the averages and many industry groups/stocks. The overall 3C position at the pennant is higher than it was when prices were near the top's high, a leading positive divergence in the longer term trend, compare the two relative points at the yellow trend line.

 SPY 1 min trend-keep in mind this positive trend is at a likely head fake move below the 200 ma and the bear pennant, this tells us it is a likely bear trap.

 SPY 1 min intraday making the same new leading positive highs at the same time as the other averages.

 The 2 min chart intraday shows the same activity in the afternoon and is now leading positive, increased institutional activity. Think about supply and demand and ask yourself why there would be increased positive activity here?

 The 3 min trend in the bear pennant, the important signal is today's stronger leading positive, again compare two relative points at the white boxes on price.

 SPY 3 min is making it's way to a stronger leading positive divergence, note the strength of the relative divergence at the large white arrow and compare to the other averages at the same time showing the same strength.

Finally the SPY 5 min trend is leading positive, again as the afternoon wears on the divergences in all of the averages become stronger.