ES / Context Update

Here's an update of ES (the S&P E-mini futures) and the CONTEXT model for ES, both suggest the same thing, a pullback.

 This is ES from midnight to present, the 9:30 US open has the darker blue shaded background on the chart. There's a negative divergence at the highs around 4:30 a.m. (about 1.5 hours after Europe opened); you can see these charts in this morning's first post, "Overnight and Into the open". There are several more negative divergences in ES before the US open at 9:30 EDT and then a positive divergence in Es around 10:30-ish, that was about it for positive divergences today, but it was enough to send ES up off its intraday a.m. lows. There's price/3C trend confirmation at the green arrow and a relative negative divergence currently to the far right at the red arrow; this isn't huge, but it is a holiday week so volume is bound to be lighter.

 The CONTEXT model of ES went negative around the European open (3 a.m. EDT) and has diverged worse since then. CONTEXT is an amalgamation of risk assets that are put together in one model to give you an idea of what fair value for ES is and as we see it now, the model in green is well below ES, suggesting many of the underlying conditions and markets that make up the model are also arguing for a pullback; the histogram below shows how the difference between ES and the model have deteriorated as we have moved foward throughout the day.

If we look at the approximate time that the ES CONTEXT model went negative on the Es 3C chart, it is approximately at the green arrow. As you can see, ES opened Sunday with a 3C negative divergence within an hour and Es fell from there, as it travelled in a range sideways a 3C positive divergence formed and this as the underlying markets in the CONTEXT model were deteriorating. It looks like the pros sent ES up one more time to new highs and then sold in to them as you can see the negative divergence at the new highs.

We'll need to take a look at our own more detailed version of CONTEXT, "the Risk Asset Layout", which gives us some good information about the entire financial market, not just stocks. This is all part of putting the pieces of the puzzle together and figuring out when and where we want to be active in the market and whether our expectations are holding water.