Sunday Night Open

Thus far the markets tonight are fairly flat from Friday's 4 p.m. NY close.

 ES opening this week to the right with the light blue background. As you can see most of Friday ES was in line, there was a small intraday negative divergence and we lost some ground in the late afternoon and a positive divergence at the reaction low. ES opened this week at a marginal local high, but 3C has been fairly flat as many important  markets are not yet open including Europe.

 Here's the EUR/USD since last week's open and this week's open of FX trading, remember the GS "FREE" long Euro call Thursday-also recall their last 4 calls have been dead wrong, it's very likely GS was selling EUR/USD Friday as we saw a lot of intraday negative divergences market wide Friday.


Here's this week's FX open in the EUR/USD, it's also pretty flat right now since Friday's close.

Interestingly, news is out that GS bought all of Knight Capital's open positions, remember them, they had that little algo problem last week? The timing is a little too coincidental for me with GS issuing their long Euro call Friday after both the F_E_D and ECB disappointed, at first I assumed they just had some positions they needed demand for, but perhaps they also needed the market ramped up a bit to sell some recently acquired positions.

Whatever the situation was, it looked pretty clear the market was seeing very short term accumulation (in the VERY short end) Thursday near the lows, sending the market higher Friday when we saw what looked like even stronger distribution.

Here's a SPY example of both days, also both in very short timeframes, the kind in which we most often see short term manipulation of the market.

 SPY 3C 2 min chart with a leading positive divergence at the lows on Thursday...

SPY 3C 3 min chart with a stronger leading negative divergence on Friday, also note the flat trading range, even had I not seen 3C at all, this is the kind of price action we often see distribution in to.

As for the Euro/SPX connection Friday (again despite 2 central banks disappointing), the correlation was pretty much right on to Goldman's advantage after Thursday's Free Euro long call they graciously sent out to all of us.

SPY vs. FXE (Euro) last week/Friday

SPX green/Euro red

While we are looking at the Euro/USD...

Remember the FX analysis and I assumed the longer term more important charts were right and we just skipped over the short term charts, late last week you may recall that I posted that I now believe those charts were right on.

 The Euro on Friday in a leading negative short term divergence, it looks very much like price strength was sold in to Friday, interesting given the timing of the GS long Euro call.

 The much more important 30 min chart shows the Euro also in a leading negative divergence as of Friday with a small accumulation period on the 23rd/24th.

 As for the $USD, I assumed the short term charts calling for a pullback were wrong after the F_E_D/ECB and the $USD holding up, but it appears the short term charts were right, however look at that leading positive divergence in the $USD on Friday, not bad confirmation given the Euro signals for Friday.

Longer term, the more important trend on the 15 min chart shows a very strong leading positive divergence in the $USD at the Friday pullback, very impressive.

As for the longer term SPX position (and almost all charts look the same-recall the multiple QQQ timeframes posted Friday)...

At the right edge note the 15 min leading negative divergence in the SPY at the Friday highs, that's the sharpest negative divergence on the chart and on an important timeframe.

All in all, I feel pretty good about opening the UVXY long calls on Friday.

 Here's the short term tactical chart for Friday, not a bad leading divergence most of the day, but I especially like the leading positive divergence at the end of day.

Longer term or the strategic view...

Distribution at the far left and 2 very nice leading positive divergences right where you'd expect them, with the short term chart coming in, the timing signal is looking pretty good for the bigger strategic move and as you know, VXX and UVXY move in the opposite direction as the market (SPX, etc) and given those charts as well as the FX charts and knowing their correlations, I wouldn't be surprised at all to see a downside move in the market early this week (I don't think it will just be a run of the mill pullback either).

We'll see what the EU sewing circle has for us this week, but it seems Draghi's cheerleading was discounted by the market, it doesn't seem like his lack of follow through or chance to back up words with action has been discounted yet. That taken with some of the macro US economic data this week, it's looking more and more like hope for a September QE announcement will be pushed off in to next year after the elections and this market has almost exclusively been held up by QE hoped (bad economic data has been good new for the QE crowd-just look at commodities performance relative to the SPX last week).

We'll see what happens on the European open, the market has seen a lot of wide ranging intraday volatility recently, it should be interesting and hopefully bring some trades right in to our laps.

Have a great week, see you in the a.m.