"W"

Lots of things going on, I could write a huge post just on the macro-economics and certainly on the big picture, but right now everything in the immediate future can be summed up with a letter, "W".

Does this "W" base hold and make the move we expected and the move that would be a gift from the market spirits or does the increased volatility, unpredictability, fear and chance the herd stampedes starting with a big hedgie saying, "He who sells first, sells best" send this market DOWN?

 The SPY Trend Channel is very close to a change in character that changes trends.

 Like I said, "Changes in character lead to changes in trends".

This price pattern could be interpreted by technical traders as a bullish flag, a bullish pennant or something else, at this point the market will give you whatever you want to see, bullish or bearish, you can make your case. We try to do better than looking at the price pattern of 1 chart, but if this is anything, then it is...

 A "W" base that can support a emotional move to the upside, but it's very close to failing.

How can I say this is a "W" base, I can say that because I can prove the accumulation at the lows as a "W" base should do.

Lets look at the SPY 3C charts through a variety of timeframes, you can see two things, 1) there has been significant selling in to any bit of strength and the base has seen real damage the last couple of days, but there's also a bigger picture that can still pull this out of the jaws of the bear, if only for a week, the end of the story is already written, it's just how the final acts gets us there.

 SPY 1 min, a little price strength is sold hard. Will the sellers overwhelm those who put together the base? Remember, they didn't build a strong base which simply means they weren't willing to invest a lot here as things can easily go wrong.

2 min leading negative- same story

5 min chart shows the accumulation where it should be in the "W" base. Today saw a lot of damage as sellers took advantage of any price strength they could get to and these aren't retail traders.

 The SPY 30 min shows that even if the base holds and we get an emotional 5% 2-day gain which would scare even some of our traders who have a keen understanding of the market, this chart alone tells us that it really doesn't matter what happens on the upside as it is just emotional warfare, you put your money where your mouth is so to speak, and this clearly shows there's no faith left in this market.

Any bounce or rally is capped by this chart alone.

If we go to the 2 hour chart where huge flows of institutional money are tracked, we see a leading negative divergence that is exceptionally deep, this is like taking the importance of the 30 min chart above and multiplying it by 10, this is a really ugly chart, the bottom is going to fall out and soon, it's just how they write the last scenes leading to the climax.

 At 15 mins on the SPY, this "W" base and accumulation is still strong enough even with today's butt whipping to pull a rabbit out of the hat, this chart tells me that this is still the most likely ending for our story, it may or may not matter, but I understand the F_E_D releases the JUNE POMO schedule tomorrow after the close, that could tell us something before the June F_O_M_C meeting.

This is an old political trick, if you have ugly news you want to bury, you do it around 5 p.m. on Friday when no one is watching the news so this could be a real wild card.

 The 2 hour SPY chart, the trend and big picture doesn't get any clearer than this.

HYG intraday

High Yield Credit intraday. Both look like they were ready to participate in a short term move, the same as we are when we open call positions for short term trades.

FCT as a sentiment indicator.

FCT's bigger picture, this is one of dozens upon dozens of charts that all tell the same story at the same time. I said, "The back of the market is broken, but just like a snake with a broken back, this is when they are the most unpredictable and the most dangerous." 

As I always say, "Yields are a magnet for equity prices, the SHORT TERM has reverted to the mean.

A strange and uglier than usual day for another group of risk assets, commodities.

 Commods had no excuse today for such poor performance, but things in the market are often the opposite of what they appear.

 This is what I said about the set up in the VIX last night in the daily wrap, it looks like I was about as close as you can possibly get...

"And the VIX, this is really interesting because it just barely closed outside the Bollinger Bands today, a close inside the bands tomorrow sets up a VIX sell as we can see in the past, which would make sense with the pop higher in the market off the "W" base, but this is such an ambiguous signal in the VIX, I read it as being enough short term for the bounce, but not enough to halt the downside slide."

 The USD/JPY needs to move up to save this "W" base, the $USD looks ready too, not only the 3C chart's position, but look at that range, that smells of accumulation without even looking at 3C.

The Yen is the other half of that equation, the USD/JPY, for the base to be saved, the Yen needs to fall and while its longer term is setting up for a big move higher that takes the stock market lower, this chart suggests the $USD and JPY cooperate to save the "W".

I told you, "Wall St. isn't going to make this easy". Just imagine how difficult it is for those who are looking at price and MACE only, trying to buy dips and so forth.

We'll know more tomorrow- remember the market is free to start moving after about 2 p.m. as most options are closed by then.

As hard as this is to call at this point, it's really a pretty simple situation, it's "A" or "B". In my experience, once Wall St. sets up a plan, they rarely let it fail, the only thing that would do that at this point is a stampede.