A Choppy Week Ahead

Tomorrow the major averages close at 1 p.m. for a Christmas Eve. early close, Tuesday the market is closed; Wednesday we are back to business although I suspect most of Wall Street is in the Hamptons already until the New Year so light volume, window dressing, more HFTs and algos than usual all sounds like some very volatile trade. If I have it figured correctly with the T+3 Settlement rule, this Thursday should be the last day institutional money can make any trades if they want them settled before the end of the year so they reflect on next year's portfolio and prospectuses, so with a day and a half out, there's only 2 days this week they can achieve that.

Last week the market showed us a couple of things when the Republican party led by Boehner couldn't get enough votes in the House that they control to pass their own, "Plan B" bill, which was symbolic as the Senate would have never passed it, but what it showed the market with regard to the Fiscal Cliff is that even if Obama and Boehner can come to an agreement, it looks unlikely Boehner can deliver the votes, so under the best of circumstances (Obama and the Republican leader agree to a deal), it looks like Boehner is a lamer duck than Obama and won't be able to muster up the votes needed for anything he might agree to!

This is what really spooked the market and if you saw the last post and where 3C is on a daily chart, it's in a very delicate place so any bad news gets an over-reaction like that, sending S&P futures limit down (halts trading) on a 50 or so point plunge which is huge.

I don't expect much to happen this week that will be truly meaningful to analysis and positions, I'll watch, but it looks more like just a time for melee.

Here's how ES and NQ (A7p and NASDAQ Futures) opened tonight... A Hint, they moved pretty close to Friday's lows early.

 ES gapped down a bit tonight as Futures open for the new week, this was from a 1 min negative divergence in closing trade Friday, there's a slight positive divergence forming now, but this is very insignificant considering the timeframe and how much time until the NY open tomorrow.

 NASDAQ/NQ futures look similar and also gapped down a bit on the open tonight with a slight leading positive 1 min divergence.

 This is the EUR/USD currency pair, they also gapped lower on the new week's open, a positive divergence can be seen around noon Friday and a negative divergence from 2:30 through the close on Friday. Currently no significant signal.

 Although the algo's were tasked with holding the market in position Friday, in the last Market Update I showed several charts in the 5 min time range that were showing some positive divergences so a move in to the gap wouldn't surprise me, the QQQ 2 min with a leading positive from Friday above...


 However bigger picture on a 60 min chart you can see how small the divergences that turned the Q's down and up were compared to the size of the leading negative divergence in place now, so this is ominous bigger picture.

 SPY 2 min intraday from Friday with a leading positive divergence

 5 min chart as well... Remember I closed out some of the AAPL Call (long)

 Again the 60 min in leading negative in a bad way.

 This is Friday's closing SKEW, the CBOE indicator that shows increased probabilities of a Black Swan market crash as it moves higher, you can see where it was and is now over the last 3 days, moving up quickly which is typically not a good thing.

 As pointed out last week before SKEW even reached the dangerous levels it is hitting now, the Rate of Change in blue is pretty sharp, showing increased ROC right now, meaning someone is taking precautions to protect against a Black Swan event.

Although there are some indications on the market average charts for a move in to the gap, Friday was also heavily manipulated by algos and I'm going to try not to assume anything and just let the data come in and tell us what's going on, there was just too much muddiness and manipulation on Quadruple Witching, the biggest Options Expiration event possible.

We'll look to see if any new trends develop (as I suspect a lot of Friday's signals were noise meant just to hold the market in place Friday) as well as any new opportunities, I do have the feeling a I said before that volatility will rule the week, but I wouldn't take any of the price action too serious as there are a lot of cross currents and agendas playing out the last week of the year from funds trying to lift the market to retain clients to tax selling to the Art of Looking Smart-Window Dressing.

If anything develops in futures while I'm awake tonight, I'll bring it to you, otherwise, have a good night, a great holiday week ahead and look forward to a fantastic, profitable New Year!