Futures / Market Outlook

You may recall at the start of the week I was hesitant to enter any positions as the week is so chopped up, low liquidity, etc. So far there have only been two positions traded this week, both did well, but not the number of positions for a leg down, you may recall too that I was skeptical of whether we'd see that leg down this week or if maybe even the low liquidity would create a false one, thus I felt it to be a better idea to just sit back a bit this week.

From the futures charts, I think we are still on track, just delayed by a week (this week). The original thinking starting last Thursday was that we started the strong move up expected and we saw the best 3-day move of the year up until that Thursday, but we'd be seeing an interruption of the move with a leg down. My original thinking and current thinking is that the move/leg down will be nasty as Wall St. doesn't do much without a reason and most of those reasons are intended to move the market just like a wrestler needs to create movement in their opponent to open opportunities.

The 3C Index Futures charts posted this morning make that assumption look very reasonable, but the other side of the coin is that the move to the upside, which in my view, should be far stronger, in fact stronger than I think we can even comprehend at the moment, looks to still be very much on the table. You know what I think comes after that and that is why that market move up is really a means to an end or what I'd consider, "The Prize" that we need to keep our eye on.

Here are ES futures as an example of the trends expected, you'll notice (even after going through this week which seems to have been more of a pause than anything) essentially NOTHING has changed in our expectations.

 1 min intraday really helped the SPX on the open despite the NFP as it made a new high for the week just before the NFP, the previous high was from about 4 a.m. this morning. Right now this chart is noisy and I don't think of much use this minute.

 As posted before the NFP this morning, the 5 min chart above and 15 min chart below look much more indicative of the "Leg Down" move expected with the first signs popping up last Thursday.

15 min leading negative divergence, this is one of the reasons I think the move to the downside could and probably should be much stronger than most expect. I think people expect a pullback or a correction as we'd see in a normal bull market move that is really insignificant and makes sense, this is not the same atmosphere at all.

 Interestingly though (and this is the first chart that starts to confirm our expectations), the 30 min chart representing the ultimate "Larger Upside Move"is relatively strong with a much bigger accumulation area than any slight distribution.

And the 60 min chart is where I would be kind of nervous to flip the page and see if the next chart confirmed what the 30 min chart started to suggest (that our expectations were still on track despite this week's potential for chaos), it absolutely does as it has a large positive divergence at the base and a leading positive divergence ever since starting its move to the upside.

Don't forget the position opened before the holiday break, a long in UVXY (VXX) which was in the timeframe that we'd expect the downside move to be in (likely picking up again early next week). The only reason I chose a long equity position over an option position was because I expected there to be noise between this week and the resumption of the move down (VXX and UVXY both typically gain as the market loses ground).

UVXY going from a leading negative divergence and price dropping to last week's very sharp leading positive divergence.

And even though HYG has dropped this morning with the SPX gapping up (suggesting the market in the very short term will be following HYG lower as we expect...

 HYG gapping down doesn't look supportive of the market up here at all and suggests the 5/15 min ES charts are correct, however...

The 30 min HYG chart is a much larger picture and very positive (representing the 30-60 min indications of the ES charts) for a large upside move after the leg down.

I hope my presentation was clear, the charts are clear. The expectations are still the same as last Thursday when the first signs of an interruption to what had already been the best 3-day move all year in the SPX, first appeared. The charts suggested a pause in the start of the larger upside move to see a downside move that will probably be more dramatic than a simple correction, however it does appear to be Just that, A PAUSE. The charts still suggest the very strong upside move (that I believe already started) will continue after this leg down or shakeout) and that move will essentially be the gift that allows us to make the moves that will set us up for the most important trend to come.