Some Short Squeeze action

AAPL looked specifically like it got a little help to get a short squeeze underway. Think about it from a scalper's perspective or a middle man who's making money on volume rebates, if you see a bunch os orders all lined up at a level not too far away, that can be a pretty big pay day just by hitting that level.

A few of the market averages saw some short squeeze action, but it looks more like patterns that traders have been conditioned to react to were broken to the upside and sentiment which is overwhelmingly bearish, created a bit of a short squeeze. We talked a little in some of the market updates below about where some key intraday levels would be and what it would take to get traders to react.

Lets take a look at the averages...

 The first level of resistance for the DIA would have been yesterday's close and then the intraday highs from mid-June.

 That level was hit early this morning and quickly gave up the level within the next 30 mins. Note there's no look of a short squeeze in the DIA toward the close because there was no important technical pattern of level breached. The red arrow shows where th bid/ask is in after hours which as you can see is off the closing levels.

There was no interference in the DIA/3C as 3C traded almost perfectly in line with price through the afternoon.

 The IWM did see a short squeeze in to the close; Friday's high is seen at $79.73, but the level in which the IWM was squeezed was $.10 higher as it was reacting to an intraday pattern and resistance.

 The intraday triangle would have been more obvious to traders than the DIA which had no real technical price pattern, the resistance level of $79.83 intraday in the afternoon just happened to be the same level as the breakout from the triangle and after that you can see the tell-tale signs of a short squeeze.
 A close look at what a short squeeze looks like, typically there's almost no pullbacks, just a diagonal line up. Note volume picking up as price moves higher, this is a mini version of the snowball effect created by short squeezes and head fake moves.

 The IWM had a leading positive divergence around 12:45, but there was no obvious positive divergence before the squeeze, this seems to be all about technical traders reacting to a price pattern.

 The QQQ's first resistance was at Friday;s closing highs.

 Although not as strong as the IWM's, the QQQ also saw a short squeeze as it broke out of the intraday triangle.

 As for 3C action, again there's no obvious push to effect a short squeeze like there was in AAPL, it just looks to be more price pattern based and that's the predictability of technical traders. This could indeed set up a nice head fake move for a reversal in to a pullback, with the same caveat I mentioned on Friday- once we hit a short squeeze, small pullback divergences can be run right over by the snow-ball effect momentum of a short squeeze and ultimately the short squeeze is the last part of our expectations going all the way back to mid-May, especially at the June 4th lows.

 The SPY had resistance from Friday and the next level at the red arrow.

 At the white arrow is an area I believe I mentioned as an area of interest that would have to be broken to see traders jump back in the market, on this 1 min chart volume surged at the white arrow just as that high was crossed. The green arrow is the daily resistance on the chart above (at the red arrow). The SPY is trading down in AH.

And again while 3C 1 min stayed constructive and in line, there was no obvious interference from smart money to push prices through particular levels, if there was interference, it came by way of working the bid/ask higher and not any actual accumulation to soak up supply and send prices higher.

Keep an eye on these obvious levels, traders reaction to them is unbelievably predictable.

As for the chart of the XLF I posted with several major head fake moves, here they are...

 First a bearish ascending triangle. Traders expect the ascending triangle to break down and retrace its base around $12 as it reaches the apex, instead as we saw dozens of times during this time period, XLF broke out to the upside. Shorts would have had to cover, but to make things worse, technical analysis teaches. "If a price pattern fails, reverse your position", which means technical traders would have gone long XLF after having to cover shorts, of course that didn't work out either as XLF finally broke down. This is the kind of head fake move I love to take advantage of.

 Next a bear flag/pennant former, this is a consolidation/continuation pattern that traders expect to break to the downside and create a second leg down roughly equal to the first. We saw a Crazy Ivan shakeout, first an upside breakout that failed, this may have stopped out some early eager shorts, but as it failed it would have given shorts confidence in that the breakout couldn't hold. Next there was the break to the downside that technical traders expected, often they'll wait for price confirmation like this and short the break, several days later they were caught in a bear trap and would have been at a loss; this is exactly why I don't like chasing price, but more importantly, our tools told us this was a bear trap way before it even broke to the downside so it became an excellent buy point as this pattern was pretty much market wide (see the SPX).

Lastly, traders could and probably would have interpreted this as a bear flag, expecting it to break down and would have shorted the break at point "B", again, another bear trap as prices went up and above the resistance level of the flag.

Take a look at 3C during these moves and keep in mind I'm only using 1 timeframe to illustrate the head fakes, we typically use 6.

 The ascending wedge was a bearish pattern, 3C shows that clearly, but it's an obvious pattern that is likely to be manipulated. At the white arrow the breakout is coming, we know it's not going to immediately break down, at the second red arrow we know that's the area to short XLF.

 As for the bear flag/pennant, the pennant formed in to a leading positive divergence, the break below it in yellow shows while retail was shorting it, smart money was accumulating, using the supply from retail's shorts to accumulate on a strong leading positive divergence.

The final chart of the bear flag could have been traded, the 15 min chart showed us it was going to break down, but as it broke, again it was accumulated at the white arrow and leading positive divergence, time to cover and take the profits.