Market Update

Based on what I'm seeing and experience, if I had to take a guess at what we are looking at, at least in very near term trade (and this is the reason I haven't been active in any trades today-I want the trade to come to me as a high probability set up), this is what I would guess and why.

 5 days ago when price first dropped below the support line of the SPX's / SPY's bear flag, I said (paraphrased),

  "To confound the most traders, a move back in to the bear flag short term would be what I'd choose if I were running the market and trying to knock traders out of positions".


That's exactly what happened 3 days later and on strong volume so it is believable. Today we are not seeing what you might call a "strong follow through day", in fact right now the daily SPY candle is a Doji which in its current position, sets up a downside reversal pattern. Even if the market rallied a bit, it would still likely close with something close to if not a candlestick reversal pattern. The most common confirmation of a reversal of a set up like this is in red and would represent tomorrow, a gap up with a close down, at least below today's real body (open to close), the deeper the better. This could then bring us below the bear flag where shorts would jump in, fulfill the short term trend expectation and set up the resumption of the sub-intermediate uptrend (the second trend expectation we have been working with). The moves would be almost perfect head fake moves, however I'm not so arrogant to think I can call the market that closely, however the signals we are seeing today seem to support at least the first half of that scenario, and the first half of that scenario makes the second half more likely.

 SPY 1 min intraday positive divergence, this looks like a short term intraday, maybe gap up tomorrow is being set up.

 Here's a closer look at today's 1 min chart.

 The 2 min chart continues to be in a bad place so the positive divergence looks like short term noise, not anything more than what it is.

 The 3 min chart tends to agree.

 The bad leading negative of the 5 min chart also makes  move down look highest probability near term.

 The QQQ 5 min also joined in the very negative leading divergence today.

As did the 15 min

Th DIA 15 min was already very negative, it just added to that today.

So the less influential short term charts look like a very short term move up, the more influential longer term charts have deteriorated pretty badly today, it looks like the highest probability will be a move down. Therefore I want to look for price strength and look to sell short in to that strength, this is why I haven't been too busy with trades today, the probabilities just haven't been there thus far.

We'll see what we get and if it plays in to our hands shortly.