US Markets to Fully Re-open Tomorrow

And thank the lord, I don't think I could have taken another day of this.

There have been some interesting observations over the last 2 days, especially the defense of ES $1400 and EUR/USD $1.29.

 5 times the Euro has tested the waters below $1.29, each time it pops right back up (remember the Euro has a positive correlation to the market, the $USD has an inverse relation to the market).

The range area from last week, even with a head fake move below the range, now stands (as of the overnight ES close at 9:15 a.m.) near the top of the range. Again, $1400 is defended.

Despite a lot of bad news from a US disaster named Sandy, to AAPL's bad news to Greek bad news, the Canadian TSX is seeing a risk on mode, around noon time, the TSX's correlation transferred to the SPX futures would equal roughly $1425 and S&P cash $1430!

When ES opens for overnight trade at 6 p.m. tonight, it should be very interesting.

As you probably recall, we were looking for a range/consolidation before the market heads higher (which we positioned for last week), ultimately allowing us to sell in to strength.

My experience has been that Wall Street sets up these smaller cycles by accumulating or distributing and this is why I say reversals are a process, not an event as it takes time for them to re-position these large positions they put on or take off.

Last week we saw the range we were looking for, we even saw the head fake move that precedes the reversal more than 4 of 5 times we often look for as a timing cue.

Again, in my experience, once these cycles are put in place, they tend to be run, how Sandy will effect a planned cycle I can't say, I imagine some adjustments were made late last week, however one of the more interesting things we've been able to see where there's little to see is the defense of key levels and money flowing to the TSX.

Here's the 3C charts for ES and the NASDAQ futures over last week.

 ES 15 min 3C chart from mid last week in to this week with a positive divergence.

 ES 60 min from the week before and the mid-week reversal we saw coming, the loss of downward momentum and the range with a leading positive divergence.

NQ/NASDAQ Futures with the same time frame and leading positive divergence.

"If" the TSX is telegraphing the US Equity markets in some way (and we'll know more when ES opens tonight and through the night), the US markets may make up for lost time with a big gap up, one that would catch a lot of late last week's shorts way off-guard and feeling more than a little squeezed.

As a reminder, the $USD which is seeing some weakness this week in FX trade, was telegraphing that weakness to come this week with negative divergences late last week.

 After the $USD (UUP for intraday) gapped up last week it stayed in a range with a 10 min leading negative divergence building, note the positive divergence just before it gapped up.

 The intraday charts too, which are good for timing, were showing the same, above is the 2 min in a leading negative 3C divergence in that range, and below a 1 min chart also leading negative.

1 min $USD (UUP).

On the flip side of that, the Euro was telegraphing positive divergences last week (positive for the market near term) and we've seen how these ETF divergences will wait to play out until the actual equity market is open!

 Euro (FXE) 30 min leading negative at mid week the week before last as we saw and the range we expected last week with a leading positive 30 min divergence in the Euro. Even though the Euro has held its own this week thus far in defending $1.29, the divergence seen here has not been fulfilled with a solid move higher.

 Euro 10 min with a strong leading positive divergence last Friday, after we got the potential/probable head fake move below the range.

 The 5 min chart showing the same reversal to the downside on a negative divergence, a range or loss of downside momentum to a consolidation with a leading positive 3C divergence.

And interestingly, for timing a 2 min very strong leading positive divergence last Friday.

The averages had already put their positive divergences in place by last week...

 DIA 15 min leading positive divergence

 QQQ leading 30 min. positive divergence

SPY 15 min leading positive divergence.

And most of all we were looking for this to happen in a range, it didn't have to be perfect and as I said before it started, you probably wouldn't recognize it until it's through.

Finally I can't finish this post without mentioning the leading indicators we use, while some (and probably VERY few) may have changed a bit since last week, the trends were very strong and in positive divergences with the SPX; these have served us well in the past as leading indicators.

We may very well have a very interesting market tomorrow, we'll take it one bridge at a time though and see what ES looks like in a bit.