The Bigger Picture

It was around October 20th that we started putting together the expectations for the start of the next cycle, the first expectation was a range bound market, that came. Whenever we have a clear range like we had or any clear resistance/support/price pattern or anything else that will move technical traders, we ALWAYS look for the head fake move and then whether we can verify it as being a had fake move.

In this case a head fake move is a move BELOW the range, we clearly got that, but we can never say for sure how long/far that will go, we only know from experience that this is usually the last thing that happens before a reversal. Market or Geo-political events can disturb the cycle, but it usually gets run; the head fake move is usually a matter of how far they need to take the market to get the majority of traders to buy it (not actually buy it, believe in it), that's when the most traders get caught in the trap.

We also know from experience that in most cases, the point in which the divergence first started in a cycle is usually the minimum target for the reversal and more times than not, that target is exceeded.

Intraday we have a number of small intraday divergences piling up as the market is losing momentum and as retail is out there in full force shorting this move, but we have to look at the whole picture. I'm not concerned about a pullback from these levels, in fact for some of you it may be an opportunity if you didn't have a chance to already get yourself set up.

I'll show you this rank, although I'm not opening positions for a rank and in options I would say lately I've been very conservative with only a few positions and most at very small, speculative size whereas some of these other people will put everything on one stock and rate #1.

This rank puts the options model portfolio in the top 1.4% of all portfolios, that's not what's important, what's important is that this options portfolio was pretty thin with only a few positions and very small at that, but still as the reversal came today, the portfolio performed better than 98.6% of all others that are much more aggressive in many cases, this tells me the bulk of traders are positioned short, chasing price as usual.

Lets look at the futures...

 ES 1 min has a negative intraday divergence, it's not that bad, but it's confirmed in other averages as well.

 The ES 15 min chart is infinitely more important and as I showed last week on Friday the surprising number of Futures positive divergences and in long timeframes, this 15 min is leading positive, this is where the bigger picture is no matter what intraday or day to day or even at some point a week long move does.

 This is an even more important ES 60 min chart, this is huge for ES, especially because of the confirmation not only in futures, but in all kinds of averages and risk assets. The probabilities for the bigger picture that started with this cycle in late October, look very bullish for the end of the year and it appears we are getting started now. However don't expect it to just be all 1 and 2% days up, the market doesn't want you tagging along because you are what feeds the market.

 The NASDAQ futures on the 1 min scale look like they could see a deep pullback or correction/consolidation, yet again...

 Go to a longer term chart like 15 min and we have a huge leading positive divergence, evidence of a head fake move and more.

 The QQQ 15 min chart from just about where the cycle started, price was around $66.60, that means that target should be easily surpassed, this is a large divergence over a large period of time with a lot of shorts in it.

The Q's have divergences that are positive even beyond 15 min, this is just the easiest to see the cycle and where events in the cycle took place.

 DIA 15 min looks very similar doesn't it...

The DIA even goes out to 60 mins, perhaps longer but I didn't need to look further than that.

So the point is, expect volatility, but I think it's important to go with the probabilities which are not found on 1 chart or timeframe or in 1 asset class, but everywhere as I have been trying to show you over the last several weeks, this appears to be an important reversal and how far it goes I can't even begin to guess. I still suspect it will set up some great shorts and at this point, I'm more worried about core shorts than long positions meant to hedge them and capitalize off a move up.

We'll watch for any and all opportunities and I'm sure there will be plenty. I'll be looking for the area i which I think a short squeeze is most likely because we aren't really anywhere near that today, but I have said since the start of this cycle, I think that is what this is about more than anything, shaking out a lot of shorts and they essentially become fuel to power the upside move.

I'l try to bring you more as I see it so you can better understand the situation and the probabilities and where the best opportunities I can find are.