Daily Wrap

I posted the bigger picture this afternoon because although we are usually focussed on what is going on, that is because it helps us position ourselves tactically; we never want to get lost in the trees and miss the forest so that was a little reminder of what the bigger picture, the next trend and where the highest probabilities are.

As for today, I'm going to cover the averages, the 3 Pillars (the 3 Industry groups that tend to be the most influential with the broader market) and some confirming assets.

Today was a bunch of small signals, I think the underlying short term trade was choppy because the EUR was choppy, but by the end of the day it cleared up for the most part. Here are the averages...

DIA responding exactly as it should to the 2 min negative divergence and now a positive divergence that has migrated to the 3 min chart.

 DIA late day positive divergence on the 3 min chart, this is fairly high probability of a move higher tomorrow.

 The DIA even migrated as far as the 5 min chart today, overall this is pointing to that move up, but very weak, this doesn't mean the price percentage gain can't be impressive, the more impressive the more effective it is as a bull trap, but it won't hold which just further confirms our expectations.

 The IWM and QQQ were the worst looking, they seem to have rotated as they put in stronger positives like this 5 min yesterday, today it was a negative bias.


 The same is true of the QQQ 10 min, but this is still a 10 min positive so even with the negative bias today, it's about on par with the DIA and SPY's shorter timeframe positive divergences today.

 SPY 1 min finally a clean and clear positive divergence after a number of smaller positives and negative that more or less followed or preceded trade today. I wonder if anyone played the downside day trade mentioned earlier in the day?

 SPY 2 min migration, also clean and clear positive, but not a strong one. These are usually enough to get a move started, if a break of resistance occurs, then retail usually helps with momentum as stops and limit orders are git.

 SPY 3 min positive

 Even the TICK chart looked the best at the end of day as it moved in to the +1250 zone.

 Financials, you may remember FAS (3x long Financials) earlier today mentioned as a very quick long trade, this 1 min XLF chart seems to confirm that trade and the short nature of it as we continue.


 The FAS 3 min positive added some more today

 FAZ is the 3x short Financials so the 1 min negative here after a positive that brought FAZ off the lows is actually confirmation of everything we have seen above so far.

 However, looking at the big picture, the Financial Short trade is the trade we really are trying to get to, this 15 min leading positive divergence shows a larger, longer, stronger trade that should see Financials see some significant downside. A lot of traders are going to be whipsawed like crazy out of this market.

 Tech/XLK 5 min moving in an overall positive divergence at a new leading high, hopefully this will make the AAPL calls work, after that AAPL short may be a trade worth considering.

 The big picture in Tech on this 10 min XLK chart, from 3C confirmation to a huge leading negative divergence, it looks like a lot of money has gone short or fled Tech here and they specifically waited for the Trend #1 pop to the upside before they really started distributing in earnest.

 Energy is the 3rd Pillar, the 15 min chart is leading negative so I assume we are going to see a lot of downside there as well, which suggests the dollar moves up and the Euro down pretty significantly for any of our FX traders. I'd expect short term the gap to be filled and maybe then some.

 1 min Energy in a leading positive divergence, this is enough to fill that gap.

 Treasuries-the Flight to safety trade have a large 30 min positive divergence, a position is in place long TLT already, but near term...

 We went from a positive divergence lifting TLT off the lows to a negative leading divergence the last 2 days, this also confirms everything seen above.

 The daily VIX, this has a huge positive divergence and this is one of the strongest timeframes you can look at, the recent lows have seen an even stronger positive divergence so someone is taking advantage of the discount to fill out a position, expecting the VIX/Volatility to shoot higher, the market lower.

 Near term on the 2 min chart, the short term volatility futures (VXX) went negative today, again confirming everything above, even the positive in the a.m. and negative in the pm, confirms the SPY/DIA divergences on the same timeframe. It's interesting to see how even short term traders push money in and out of risk assets and safe assets.

Big picture the VXX 10 min leading positive divergence is huge, it's also tight where the drop from trend #1 took place, there's a 15 min leading positive too.

Every chart above confirms every other chart. The only other interesting data tonight thus far other than futures is the dominant Price/Volume relationship, it was dominant again in all 4 major averages, except this time it was the most bearish relationship, Close Up/ Volume Down. I know that doesn't make sense with the way the averages moved today, but remember, this is not the averages, it is all the component stocks of each average.

Finally as for futures, there was one thing I was looking for in ES (S&P futures) was for the 15 min chart to go negative, it didn't once last week or really for the last several weeks, this week it started and is just getting worse.

So be sharp, be ready to take any short term market correlated profits and be ready to get those shorts filled out. I don't have proof that this will happen, but I suspect that because we've already had a head fake on the 11/16 cycle (trend #1 served as a head fake as it brought the Russell 2000 to all time new highs) that we really don't need another for anything other than a little better positioning and to act as a sort of primer to the bigger fuse. In any case, my gut feeling has been that we'd see a 1 day reversal, a daily candle that perhaps gaps up, has a long upper wick as higher prices are ultimately rejected and a long dark body with a close lower that cuts in to trend #1's range, maybe even below it. That would be an amazing head fake move.

If anything pops up overnightI'll let you know, everything is moving as we expected it to as far as the steps go, as far as the time goes, that's always something we just have to watch the message of the market to nail down, but many of the events that precede a reversal that we have predicted have already happened so I believe we are so close that it could be any hour from this point.