Market Update-A Look at the Inner Workings

After I laid out my market theory last night, I told you what I'd need to be on the look out for to help confirm it, so far we have the evidence I hoped we would see for the theory to hold water.

I want to show you so you understand because it can be of tactical use and it can just be useful in understanding what is likely happening.

Again since the SPY had some of the stronger signals yesterday and ES, we'll use those.

 The 1 min ES chart is seeing some intraday deterioration, this s good, but just a very small start to the wider theory and signals needed.

 The 5 min chart is more important because it was really the giveaway, the fact we see a negative divergence today in to a move higher implies that there was distribution in to the move higher, that doesn't mean it can't go higher from here because the accumulation period (white) before hand was much larger than the negative divergence, but on any strength in the SPX futures, it would be good to see these continued negative divergences, this would help our theory that they will send the market lower after this shakeout or bull trap, whatever it is.

 The 15 min ES chart is even showing a negative divergence in to price strength, so far the ES signals are on the right track.

SPY

 The 1 min SPY is quite negative here intraday, this is why I said day traders may make some money short in a previous post. Again, it's a start.

 The 2 min is also showing a negative divergence, what is important here is that the divergence migrate through the short and then longer timeframes. So far, so good, but still early.

 Here's the 3 min SPY, this is the one we want to see move to a negative divergence next along the route of migration of the divergence, this will help give us higher probabilities on out theory and how we use it.

Ultimately this 5 min will have to turn negative, right now it's leading positive, yesterday it hinted at this, today it fulfilled it.

The longer charts in the SPY like 30/60 min are already solidly negative, it's this near term trade (strangeness) that we are really dealing with.