Quick Market Update

I'll use the Q's as an example, the Yen looks to be making a head fake move right now higher, it has had a strong uptrend overnight, it doesn't matter the timeframe, the reason for head fake moves is the same and it applies to all timeframes.

Here's the other side of the view from the market, you saw the Yen, now I'll use the Q's as an example, this is short term trade only...

"A" Yesterday's negative in the QQQ was reason enough to close the AAPL calls and take a small gain, but 5% for a few hours is still a nice gain.

"B" QQQ is seeing some intraday accumulation with a new leading positive divergence just starting, this fits with the intraday charts of the Yen and USD/JPY as seen in the last post.


The 5 min chart of the QQQ shows horrible damage done/distribution as the QQQ makes a head fake move higher on the minutes day a Bernie first says what the market wants to hear and then under questioning contradicts his opening statement. Don't think it was a head fake? Well not in the typical sense of clear resistance traders would buy, but in the momentum chasing sense with no positives to back it up and the NDX hitting 12.5 year intraday highs, traders will buy that.

You can see what happened next, , now we have a relative positive divergence on the Q's, remember the divergences usually start with a relative (weakest), then grow stronger, then move to leading positive and we typically see a head fake move (this would be to the downside, under obvious support, a price pattern or moving average that would be obvious to traders- then we should get a bounce.

I've been asked what will the bounce need to do, how far will it need to go to accomplish its goal, these are not corrective bounces, these have a specific reason and goal. At first I thought it would need to be very strong to shake out new shorts, but the market is overwhelmingly bullish still so it's not so much about shaking out shorts as it is justifying to longs they were right to "Buy the Dip", so maybe some strong momentum, I don't think it needs to be as psychologically impressive as the longs/bulls are already pre-disposed to believing in buying the dip, they don't need any extra convincing, so just enough to make them say, "Ah, see, I was right, Buy the Dip still works".

This will help lock bulls in to this mentality on ever increasingly larger downside moves, they'll look at it as, "Last time we had an ugly day down, I nought it and it worked, so this even uglier day down is an even bigger opportunity".

This will lock them in to buying lower lows until they realize they've lost a 50% retracement of the move from 2009 lows, then they panic and sell en masse, by then their assumptions that all things stay the same will have done them in.

Bottom Line- I think there needs to be a move strong enough to give them gratification, but since they already believe they are doing the right thing and it will work out, they don't need as much evidence as it would take to shake shorts loose, the fact is there just aren't that many shorts out there so the psychological warfare doesn't need to be as extreme when the opponent is already buying what you are selling-literally.