EOD Wrap

My opinion as expressed in the market updates today hasn't changed much, as I warned before the move to the upside got started, we would see days where nothing happens, days where we lose ground, but the trend should be up and that's the short term trend worth playing right now.

I and many of you closed out some leveraged long ETFs today that were bought for this bounce higher, the reason is simple, we have good evidence for a pullback, although the market has been consolidating nicely and laterally, still a pullback is the highest probability which should allow us to re-open those leveraged longs and make money on them again.

The bottom line and we talked about this before there was ANY sign of AAPL moving higher, is that a volatility shakeout of the AAPL shorts was high probability and that move has started.

AAPL could have fallen from the break of the neck line, according to Technical Analysis, AAPL should have broken lower in one of the most reliable price patterns in Technical Analysis, but we knew the odds were AAPL would move higher to shakeout new shorts that chased the breakdown and we knew that before AAPL gave a hint that it would move higher.

So why not just turn back now? The mission isn't accomplished, in fact, where AAPL is today makes for a great Technical Analysis short set up, that's why if it is worth doing, they do it right and should launch AAPL up higher until they scare the shorts out, take their positions and let AAPL fall.

The bottom line argument for the strength of a move up is as simple as this and we watched this build over the last week plus...

Since the negative divergence early in the month and the decline from that, we have seen a positive divergence building and the SPY has now moved above the accumulation levels and still maintains a positive position that should have no problem lifting the market even more, but in the very near term...

The shorter term charts are showing some negative divergences along the lines of a pullback, that gives us a new opportunity to get long and make some more money on another leg higher.

In fact, the probability of more upside (other than the job in AAPL isn't done yet) can be found on this 30 min chart that shows no hint of a real downside reversal yet.

This should easily propel the SPY/Market higher, however we already have and have had signs that this move up isn't going to last forever, but long enough for us to take profits on longs and set up short positions.

When we look at the longer term (more reliable, longer term trend) charts, they'r pretty simple, long term probabilities are very bearish.

This is the worst negative divergence on a 4 hour chart I can find in 5000 bars, essentially a very long time.

So the plan has been (and it will change if the data gives us good reason) to get in on some longs on a short term pullback, several were closed today for a profit. This move just got started, so those longs should work well.

When we see the market giving us distribution signals, we take our long profits, enter short positions and get ready for the next leg down which should be a very serious one, much more serious than the first 2012 decline (and even then, most of the core shorts made well over 20% with no leverage-imagine what a primary downtrend can do).

In the meantime, we'll keep looking for the opportunities that are showing up in sector rotation, both long and short.

As of now, the signals look pretty clean and the trends seem fairly obvious.