Market Update

Here's the situation and the judgement call that I would have to make now, I'm not about making judgement calls, I'm about having overwhelming evidence that the odds are stacked in our favor.

Therefore, I prefer to wait than rush in to something because I'm afraid to miss the move, that's called "GREED". However, now you know why I have been focussed on building short positions a bit at a time at favorable areas for each individual asset, I have sufficient short coverage on my long term positions that are meant for that and because they are not leveraged, they do not suffer bad drawdown. In Fact the Equities Tracking Portfolio that is building short positions in to strength is ranked #45 of 1000 and the market hasn't even moved in our favor yet.

Here's what's going on, currencies threaten to send the market higher, if they do, then I'll be more inclined to look at short positions as long as the negative divergences that are in place continue to grow larger.

Should the market pullback before currencies fire off, then I'll likely enter new call positions.

 The Euro has moved to a new low for the week, sending the market higher intraday which is quite strange, usually it would be the opposite, the only thing I can think of is the Yen which has been increasingly more influential on the market saw a sharp drop pre-market and there may have been some arbitrage going on or perhaps this has something to do with the weekly op-ex tomorrow although both are poor reasons.

The $USD has a stronger negative divergence threatening a move to the downside, very market positive, you may be wondering why I closed the calls, it is about momentum and the fact that the market can get to extreme readings with the kind of volatility and unpredictability I warned of.

I'd rather take those strong 5 hour gains than lose them.

The EUR/USD also has a significant positive divergence threatening to move higher even as it makes a new low on the week, this would be market supportive.


The SPY as an example...

 1 min SPY looks to be largely in line with a small negative divergence, this alone would suggest a consolidation, but add the 2 min and you have a pullback/correction.

 This is the same 1 min chart zoomed out to proper scale, it is deeply leading negative.

The 2 min chart has a negative divergence and very little accumulation for this move, I'd say it's all well used up by now. The main point is with a 1 and 2 min chart negative, we should get a pullback rather than a consolidation, we see that 90% of the time, the only time we don't is when the market gets extreme like it is now.

 3 min in line intraday, but both the 2 and 3 min look like the 1 min when zoomed out, deep leading negative position, note no accumulation here on the reversal to the upside.

The 3 min in scale.

The 5 min is about the first chart that is in line in scale and it has no negative divergence so I have a LOT more analysis to do to get a grip on this market which is acting quite extreme and seems to CLEARLY be trying for SPX $1600 as discussed earlier, a nice centennial number and new high to make its rounds through weekend press as the last 2 SPX new highs did.

Additionally as far as my actions closing calls...

The SPY Arbitrage is a quick way for me to asses our leading indicators screen without spending the 20 minutes or so.

You can see early support has fallen off, my initial thought is, whatever small amount could be accumulated yesterday and I showed you charts of the IWM suggesting that was happening most of the day, I'd think a high probability is support has been removed to bring prices lower and allow accumulation to a larger degree to sell in to if we are going for $1600, I know I'd like to load up again for another Call run.

The other fact is for the longer term, final push down, as I illustrated last night, some leading indicators like credit, need deeper negative divergences, they can only get those with price staying flat or moving up, so I'm not as concerned that this is the final top and time/place to back up the truck, at least not until all of the Leading indicators are screaming. "divergence".