Early Update

I know we have some new members and welcome, but for most of you I think by now you're pretty much aware of my disdain for a.m. trade (most professional traders & including myself would rarely trade the market before 11 a.m. as there's just too much game playing, running of limit orders and stops, etc. Did you know the NYSE listed stocks don't open according to supply and demand, but what the specialist considers to be a reasonable open based on their view of the depth of the book and they don't have to open their stock they make a market in at 9:30? That's right, I saw big profits in SKF melt away as the specialist didn't open the market until 10:30 one day for SKF.

In any case, point being it's not the best time to try to gather analysis as a lot of the things going on are just trying to trigger and knock out orders from the 9 to 5-ers that place orders Sunday night or in the morning before heading off to work. We did use to play the a.m. range a lot, but that's largely disappeared.

In any case, I'll try to give you an overall feel for the market right now as almost all charts look exactly the same in each of these timeframes so I used one of each of the averages for the timeframes and some I back out and show you where they are in the longer trend.

First CONTEXT and SPY Arbitrage since CONTEXT for SPX E-mini futures was kind of funky last night, but not surprisingly so.

 Although about 30 mins. delayed, the positive model differential is down to 4.5 ES points, Es is rising, CONTEXT is falling. In a bit after the markets have warmed up we'll take a look at Leading Indicators to see what's going on in the manipulation front or the negative divergences that need to fill in short term.

The SPY Arbitrage shows there's a tiny bit of possible positive manipulation, although it's so small it's really hard to say, it could just be some inefficiencies as the positive differential is only about SPY $.10

The 1 min SPY overall I'd say is clearly negative up here, but intraday it looks like it wants to move higher, at least early on and perhaps the updated SPY Arb. will reflect that with a larger positive differential, Leading Indicators will tell us too, but for the time they take, I'd rather let those markets get out of a.m. trade.

 Because we have the gap in the SPY chart above you can't see how close 3C has really been to "inline" with the SPY, if I zoom in just a bit to get rid of the gap you can see there have been very minor adjustments intraday to the SPY, we're a little negative intraday in this area, but that (3C) can certainly move higher, it hasn't locked in that last negative divergence by heading down.

The 2 min chart is of the DIA, again, the same thing, accumulation to gap the markets up, but small accumulation and overall distribution in to higher prices, exactly what we expected so nothing new there.

This is the same DIA timeframe zoomed out so you can see where the chart above falls within the trend. Clearly this gap up is being sold in to, that's the entire idea, sell in to price strength or short it, this is why they need the volume I mentioned. We can sell even 100 share lots and have no problems, they are moving 10 million share positions easily and you can't do that with 1 order, so they need sustained demand to sell that position and then add to it short or just add to it short, already having sold it.

 QQQ  3 mins continues to confirm the distribution in to strength, note there's no positive divergence on this chart, that means it wasn't strong enough for anything other than to move the market short term, it's not accumulation, it's just enough to move the market which makes sense, you don't want to buy more to move the market than you can sell in to the move, think about motivations.

And the 10 min IWM on a longer timeframe, we are going back to the start of the rally at the 11/16/2012 lows, there's a huge positive divergence there, but as soon as price starts moving up they are immediately selling in to strength, you get some idea of how large the accumulated position was by how long this move up has lasted, most of it selling accumulated shares in to strength, after that reversing and putting together short positions, which is still selling so they still need upside demand, but look at 3C, leading negative at a new low, today or the last few days' action negative in to the gap up.

That's about the gist of where we are, what's going on. strategically it's pretty easy to see what's going on, tactically this is the most difficult area because when they reverse this they don't want any retail riding their coat tails, they want retail on the other side of the boat. What decline will fall faster? One in which there's a thick short presence that will cover, adding demand and slowing the decline or one in which almost all of retail is ling and the further down it drops, the more they sell adding to supply and pushing the market down faster?

I guess I answered that by mistake, sorry.