I say initial because there are other asset classes I want to look at, as mentioned yesterday, with the intraday positive divergences that were building in the averages and then started falling apart, there was no confirmation in volatility, industry groups, treasuries, and others that often provide good confirmation, so it was a strange move yesterday, it remains somewhat strange today. I will say it is a smaller divergence as far as the big picture is concerned and that is why I would be looking to short any price strength that may or may not develop from this. As I uncover more evidence, I'll give you my take, but this definitely isn't something I am worried about as far as the big picture goes, if anything, it could be a volatility move just to shake things up, hit stops, keep people confused as to what is really happening in the market and in that sense we can take advantage of anything that may come from it.
As you know on Tuesday I had a "Gut Feeling" that I posted that we would see a shakeout move to the upside, the thinking is this, the VIX is showing massive complacency, so the "Buy the Dip" crowd is still active and they will buy the dip, but Wall St. needs to throw them a bone as they like to buy and add on price confirmation, I said this during Tuesday's weakness and we saw elements of that developing yesterday, so I wouldn't be surprised, but this is more psychological than it is even technical. The idea is to get as many longs as possible committed and keep them in place until the door is shut hard in their face, as you will see, we've already established several head fake zones on several timeframes that are good for bull traps, but they have to keep them long.
DIA 3 min, as you can see by the timeframe alone, 3 min, this isn't a major threat to the downside, in the yellow box a perfect example of a head fake move/bull trap on this timeframe that sent prices lower (consider the size of the trap and the scale of the move). Yesterday's positive divergences in white, but they started to fall apart quickly, very odd. I would have expected a divergence of this size to move the DIA to the green arrow area at least, right now we have a minor positive divergence today intraday.
The 1 min chart is where all divergences start so even with the 3 min in place as positive, if there were any changes to that, it would start on the 1 min and make its way to the longer timeframes, this is the DIA 1 min, you can see the obvious deterioration of yesterday's 3 min positive divergence, the 1 min is pretty much in line as of this capture several minutes ago.
The trend of the 1 min is also important on the DIA, clearly negative at the head fake area, that means on the breakout, retail as buying, smart money was selling, you can see hints of the positive divergence yesterday, but on the 1 min chart, it's over, we'll have to see if it migrates to the longer charts and confirms on other averages.
The IWM was the definitive outlier yesterday, way stronger divergences than the other averages, here's a 1 min that is leading positive today with a bearish triangle, this is a perfect head fake set up for a move to the upside as the price pattern suggests a move to the downside so it would catch traders off guard and stop out some shorts who entered on the bearish triangle this morning, AGAIN, this is a 1 min timeframe, not a strong divergence, but a good intraday signal.
IWM 1 min trend shows 3C deteriorating badly above the yellow trendline, that's the larger head fake area that smart money is selling in to or was as retail bought the breakout, then we have the same smaller scale head fake in the yellow box, we have a relative and leading positive divergence today, but within the context of a leading negative position, so again, an intraday move up looks good to short/sell in to strength as the longer more important timeframe/picture is more bearish than this divergence is bullish.
IWM 10 min scale with a clear negative divergence at the had fake, smart money selling in to the breakout or shorting it, this chart is leading negative and much more important than the short term intraday charts.
QQQ 2 min with the neg. divergence at the yellow head fake area again, yesterday's positive and a leading positive today, I'd guess we will see intraday upside, you know what I think about it, it's a gift to sell short in to.
The same 2 min QQQ trend, note the resistance at the yellow trendline and what happens to the character of 3C above that level where retail are buyers.
QQQ 1 min chart going negative yesterday afternoon, a gap down this a.m. and right now the chart is in line with price.
SPY 2 min with yesterday's positive divergence, you can see late day deterioration, the green arrow is where I would have expected price to move to on a divergence of that size, this morning there's a weaker relative positive divergence, still it looks like intraday upside is likely.
The trend of the 2 min, remember the market wide Aug 2nd accumulation, then a resistance area right above it, look again at the change in character of the 3C trend as retail buys the breakout above resistance, it looks like smart money is selling or shorting in to retail's buying.
More coming...
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