A Testament to the Real Danger of the Markets

For the last week or so you have heard me talking a lot about a bounce, a volatility shakeout, I just hope you remember why we want to see this move (which has been based on evidence in the charts), TO GET SHORT IN NEW POSITIONS AND FILL OUT EXISTING SHORT POSITIONS.

I have been making the argument for a while that this market is in real trouble punctuated by a few simple charts, here's one.

A daily SPY leading negative divergence with negative divergences, each worse then the last, at each top. This is a process and for a while the market has been breaking down, I have been warning for some time, but on a daily basis we don't see it, only when we step back do we see just how dangerous this market is.

After hours and overnight we saw something incredible...

 The red arrow is yesterday's close, the white is the AAPL earnings dive-bomb and then return to unchanged where it is now in pre-market trade, then a dive bomb in ES overnight in to the European open in green.

Then ES somehow rescued overnight with GDP at the orange arrow, you can see GDP helped, but the rescue started long before that.

In my experience, once Wall St. sets up a cycle, they see to it that it is run, that is why I think AAPL was brought back from the brink last night, AMZN too to a lesser degree and ES.

This is why we want to get short, why we want to use a bounce that the market has been indicating it is building to sell in to that strength.

This is all pretty amazing action to me that so far backs up my experience that once Wall Street sets a cycle in motion they finish it rather than take a loss.

We can say that bad economic numbers out of China were responsible for the ES decline, or the NY Times Story that essentially accused China's PM of hiding Billions in stolen state cash  or maybe Australia's Banksia starting what may be the Lehman of Australia.

That "might" explain the overnight crash in ES, but what explains the recovery? The only thing I can think of is my experience in Wall St. cycles. It wasn't GDP as that came out at 8:30.

So just remember what the big picture is, what we are trying to do.