Quick Market Update

It looks like the p;lay is already being set up and laid out.

Whatever longs were not sufficiently brainwashed by the Pavlovian Greed motto of "Buy the Dip", this morning taught them better. Any shorts (which retail short sentiment is almost non-existient) which may have jumped on the downside momentum, still believe after this a.m. this is still a BTD market and/or that the F_E_D won't let the market fall. If you read the minutes from the F_O_M_C's April meeting, it's very clear they fear the asset bubble they have created in the market; Japan's Nikkei over the last several days is just a sneak peak at what the collapse in a liquidity induced 4 year rally will look like, that has the F_E_D really on edge, which is strange because Bernie himself bragged about it in Congressional testimony, specifically the Russell 2000's gains and how that creates, "The Wealth Effect", which is laughable as the real Unemployment/Underemployment rate in the U.S. is close to 20% conservatively speaking so the only people being effected by this wealth are the people who were already wealthy.

My sense is based on a simple concept we push here every week, sometimes every day, Reversals are a process, not an event", even a reversal down from a 1-day move like this.

I see the Yen is warning that it will move higher as we have expected since the insane QE from the BOJ this Spring, the $USD/JPY is warning it will move lower-if $100 on the pair is broken and Japanese JGB futures keep going "limit down" and halting, it will be clear as I argued in the two part, "Currency Crisis" (linked at the top right of the member's site) that the BOJ and Abenomics (Japan's P.M, Abe)will have failed spectacularly. You can only imagine what a failed QE program that is the largest in the world (Japan's) combined with the F_E_D backing out of QE would do to worldwide markets.

In the near term, you'll see Yen strength building and SPY strength failing, but this is still typically a process unless the herd stampedes, then its free fall.

The basic play for us is the market will have to pullback to accumulate a bit or suck in the Bulls to make another run higher which I think we probably get by this afternoon, the Yen will keep building its base meanwhile as it dips a bit lower. I want to use intraday strength to sell the rest of the calls (that are appropriate) that are open, MAYBE enter some intraday (day trade) calls "if" the 3C charts say it is safe enough as we are really getting in to speculative territory now.

More importantly, for the larger, longer term core positions (mostly equity shorts), I want to use the same strength I'd like to sell the remaining calls in to, to also set up new or fill out existing short positions in stocks-not options-these are the longer term trending trades being set up.

 Let me go to the charts...

 This is the single currency Yen futures, note the first positive divergence sending the Yen a bit higher before moving lower and a current positive divergence, that is what is setting up the market soft spot we are seeing now.

Essentially this is the start of the reversal process for the yen, if we look at a 5 min chart...

Yen 5 min 3C already shows the rounding base and this is already higher than the larger rounding base/bottom reversal we called the last  couple of weeks. Remember, just like the last Yen rounding bottom that recently broke out and like almost all reversals we see-"LOOK FOR THE HEAD FAKE MOVE", last time in the Yen that was the last thing that happened before the upside reversal as it typically is with all assets in all timeframes.



The SPY

 You can't argue with the intraday 1 min SPY chart's leading negative divergence, this is part of the process, we rarely (2% of the time) see a "V" reversal, they are "U" shaped, a process rather than event. So I expect we'll see some choppiness, with increasing volatility.

 SPY 2 min chart shows the divergence sending the SPY higher had barely any, if any institutional support, these were algos and computers as I pointed out so many times Friday setting this market up.

When the SPY finishes with this bull trap/head fake, it should easily return to the trend to the downside if not worse.

This is why we want to sell / short in to strength.

SPY 10 min chart with the area in yellow acting as the head fake move out of the previous Friday's triangle breakout after the failed attempt the day before.


AMZN

This shows where it was best to cash in the calls, at the green arrow we always want to try to sell calls/puts in to momentum, by the time the ROC slows at the yellow arrow, profits are actually starting to disappear even though prices are higher because of volatility, remember options are priced according to a model, not just how high or low they are like stocks, there are many criteria that go in to pricing them.

AMZN is also showing an intraday negative divergence starting, as it builds, I'd like to add to the AMZN equity short position-/Users/brandthackney/Desktop/yen 2.pngthis goes for many of the equity short positions which I prefer use no or very little leverage as longer term trades.


AAPL

 AAPL filled the gap, it is showing a positive divergence intraday starting, this is why I held the calls, I'll wait for AAPL to make a momentum move up and may not only sell the calls there, but add to the AAPL short position, although I'm having some doubts about going too big with this one. Really what is important here is the concept

 GLD made a head fake move lower, it took out the stops as you can see with volume because they are so predictable, you know EXACTLY where their stops will be, why wouldn't you take those shares on the cheap?

*****Actually looking right now, GLD just took off as soon as it hit those stops-AS SOON AS IT MADE ITS HEAD FAKE MOVE!!!!

Intraday GLD building, this is why I held the calls even though they were falling, Now we know why-the stops were accumulated as I always talk about.

HYG is needed to hold up the SPY for a later in the day move-if things hold up so I think HYG will also make a run higher where those calls will be sold, you can see the reason for entering Friday and the same leading positive now.

I'll let you know if anything changed, but remember this post and captures are probably 20 minutes old by now.