Final Market Update -"Myopic?"

OK, this is basically a pretty good example of what we have going on for the most part.

First AAPL was the first indication that the market would see an intraday bounce based entirely on market psychology or how Wall St. uses Technical Analysis against traders who are expecting one thing because a hundred books have told them that is what is suppose to happen and Wall St. knowing it.

Then market breadth by way of the NYSE TICK Index was showing an intraday reversal was likely.

Then some of the arbitrage assets (HYG, VXX and TLT) started showing some intraday divergences suggesting they'd be used to help the market with an intraday bounce and then the SPY Arbitrage chart/model started showing the same.

Around the same time as the arbitrage model and signals, we started getting signals in the market averages, I'll admit that they were very late to come, had I not been watching all of the above, I'd probably be telling you about the halt of downside movement just as it began.

With 3C, any new divergence starts on the earliest/fastest timeframe, 1 min so if we are going to go from a negative (3C in line) signal like this morning...

Note 3C went negative, price followed and 3C confirmed the downside in price.

A bounce (intraday or larger) or even just a consolidation, will begin on the 1 min chart. This is why we look for migration through longer timeframes.

If the 1 min positive divergence (in this case) is strong enough it will move to the 2 min chart and the probabilities will go from a simple lateral consolidation to a higher probability of an intraday bounce (meaning not a bounce of days). If the 2 min is strong enough, the 3 min will go positive and so on and so forth.

Now if that positive divergence is starting to lose support, the first place you'll see it is once again in the 1 min chart where the former positive 1 min will show a negative divergence and if it is strong enough, it will flip the 2 min and then the 3 min and when those charts link back up with the next longest negative (assume the positive divergence for a bounce only made it to a 3 min chart and the 5 min stayed negative), then by the time the 3 min chart is negative and reconnects the chain from 1-5 min and beyond, the probabilities become bearish again. If we can see this process and get in to a position while it is still higher from the intraday bounce, we are in good shape.

XLE, the Energy sector is one of the assets showing this today. The difficult part is it took nearly half the day, maybe more for the positive intraday divergence to show up on 3-5 min charts, by the time the first negative shows up we won't likely get our next confirmation at the 2 min chart for another hour or two based on today's pace.

 XLE 1 min goes negative, price follows and it wasn't until 1 pm that the first positive divergence was in, while it was 10:45 a,m, when the first signs of such a day started to form in AAPL.

 A 3 min positive divergence (still quite small in terms of what's already in place (bearish XLE) didn't form until 2 p.m. So we didn't have decent confirmation for a couple of hours and at least an hour between the first divergence and a 3 min chart.

So toward the end of the day we had several assets giving off 1 min negatives, these could easily tear right through the 2, 3, and 5 min timeframes and put us in a very bearish market considering what I saw this morning on quite a bit of market support. The point it, the time was nearly 3:30 here so figure an hour to confirm and that puts us in to tomorrow.

Here's the 10 min chart, all of the charts above this mean nothing compared to this and this is why I wonder if I'm being a bit too myopic at times. this and the chart below show strong weakness in XLE, the intraday charts are great for timing and getting the best entry, but if you wait too long you can end up missing positions.

I figured with Bernie out tomorrow after his last stunt, it's better to be safe than sorry and decided to wait for the signals to better confirm and align.

There is a VERY interesting issue that I want to discuss, it's too complicated for me to get out tonight I believe, but I'll try to get the gist of it started in the next post.