Market Update

Believe me, I'd rather be feeding you trades, but most of you take the updates and make your own trades. I just think most traders have stock picking completely in reverse, they find a stock they like with no consideration for the overall market and industry group.

Before yo can even decide whether to look for a long or short position, much less the individual stock, you have to understand what the market is most likely to do and make plans around that. How many times has understanding the different trends lead us right to trades that fell right in our laps, that came to us with tiny risk, huge probabilities, all because we understood what the market was doing and how to play it from there.

I'll keep this to the SPX and NDX in the interest of time as they represent enough of the market for our purposes.

Lets get to it...

First, here's when I mentioned the market reversal coming and moved out of leveraged longs, I don't think you can ask for much more than that as far as timing.

 SPY intraday 1 min

QQQ intraday 1  min

Now for the charts, remember the leading indicators, but we will follow this wherever it leads us.

QQQ

 First the 1 min intraday chart gave a clear signal that an intraday pullback was coming, I was concerned about this yesterday and said so, "I had hoped prices would have stayed flat and let the divergences correct themselves", but the market didn't allow that, it wasn't in the cards however rigged the deck.

 The 2 min chart on the Q's with a smaller negative divergence today

 The 3 min QQQ divergence

 And just to show you, this now reaches out to a 10 min chart so this appears to suggest a decent pullback of which we have already seen some aggressive intraday downside momentum. If things stay on plan, then this will give us a great opportunity to add again to the long positions and make more money on another leg up. What is interesting here is how small the negative divergence at the start of October was compared to the size of the positive divergence now, that would suggest a move higher of some importance and this is why I don't mind trading around the positions.

 The same can be sen on the QQQ 15 min with a small negative that sent the market lower for nearly 2 weeks and a much larger leading positive that seems to be just getting started, it appears there's much more fuel in the tank for an upside move and any pullback here is more likely to be a psychological trap for the Twitter-vertse that is bearish now, this gives them what they need to have confidence to short the market. If we are indeed going higher as expected, they'll be extra fuel to the fire.

 It's still very difficult to ignore the big picture 4 hour chart with a much worse leading negative divergence than at April of 2012 at the downside reversal, plus prices are higher making the negative divergence that much worse. This looks to me to be large enough for a primary downtrend,

So to put it together, we started our upside reversal, it looks like a decent pullback is coming in that reversal to the upside which is fine, we'll have another chance to add longs and make more money on a move that should be MUCH higher and that move should lead us to longer term short positions for what could be a primary trend down or a bear market.


SPY

 The 1 min SPY intraday signal

 The 5 min SPY, even here, the positive divergence is larger than the negative that sent us down for nearly 2 weeks. The current negative/pullback divergence can also be seen.

 At the SPY 15 min chart it is interesting because it goes negative right at the 14th, the day after QE3 is announced and we see what "could" be a much larger positive divergence, although I have trouble accepting it as anything more than coincidental at this point, however the more recent one is not and it is hitting new leading positive highs, then look at the negative divergence that sent us down the last few weeks and how small it is compared to the current positive. It is VERY hard to believe we will see anything more than a pullback before moving higher.

 The 30 min chart has the same possible coincidence for a larger positive, but even without it, the leading positive is so strong, I can't imagine the market doesn't move higher, so I'm still very much in the camp that we see a pullback, but a much stronger move higher.

 The 60 min SPY chart is very negative like the QQQ 4 hour above, it's hard to argue against the biggest picture not being very bearish.

The same with the 4 hour, look at the size of that negative divergence now!

 ES 30 min shows the negative sending us down and the positive that has formed, again, much bigger.

NASDAQ 30 min futures show the same, I'm not even sure this is a negative divergence right now as it could be just the normal pullback in 3C like we saw a few days back.

In any case, I'll be looking for an area to add leveraged longs again, after that it seems entering shorts for a bigger trend is the most probable outcome and largest trend and theme in the market right now.