Knee Jerk End-game?

It's looking more and more like that and a knee-jerk that lasts about 2 days is fairly normal, just like everything else there's a reversal process as multiple timeframes have to work together in and out of alignment to get to the reversal part of the process. I know that sounds confusing, but I'll put out a video and show you how a longer term negative is really the road map, but intraday positives and head fake breakouts are the gas and brake pedals that allow the logistics of the trip.

I'm still open to confirming, bullish signals in which case a number of positions would have to be re-arranged, but so far (since 3 p.m. yesterday, all overnight and thus far all today), that's not the case.

Here are a few samples of what's going on.

First the most important reading thus far for futures (SPX) would be the longer term charts since yesterday like this 15 min.

 The most important chart for near term trade going forward are these longer Index futures like the SPX/ES, which was negative last night, but I wanted to see regular hours data, it has grown worse.

In the very short term, to move a knee jerk move to the downside, there needs to be some help, I'll simply state the concept  as this, "From failed moves, come fast reversals", so the yellow arrow represents the breakout that would have to first happen since there's a bull flag already setting it up, then the failure of the move creates a small bull trap that snowballs downside momentum, this is why "Failed moves" create "Fast reversals" as more and more traders are at a loss and selling, there's more supply which takes out more of the bid stacks until there are few left and at much lower discounts.

The 1 min ES chart shows the positive divergence that can get that yellow arrow breakout seen on the chart above, but the market isn't doing this alone.

Note how the SPY looks similar, even though it hasn't had as much time (the overnight session).

 2 min positive intraday

 5 min negative continuing deeper

And the 30 min chart with a larger breakout, probable head fake or to be "failed move" that creates downside momentum on a larger scale, see how the different timeframes work together although they may look different.

As I said, the intraday positive is not from the market itself, obviously the lack of follow through today on the upside shows a problem with demand or it is being overwhelmed by larger distribution so once again the SPY Arbitrage is being called out to help intraday.

SPY Arbitrage model

However the 3 assets that move the Arb. are HYG (HY Credit), VXX (Volatility Futures) and TLT (20+ year Treasuries). For the arb to work, HYG must go up and VXX/TLT must go down or some version of relative performance that creates the same effect.

 The problem here is HYG Credit that has been supporting the market is now seeing steady and strong distribution as seen above. This means it may hang in there long enough for the SPY Arb to move the market, but I don't think it will stay up here much longer, that would be institutional risk off.

 I said earlier in the week that the longer term VXX chart looks outstanding (positive), but until the local 15 min goes positive, I don't feel very comfortable with it, this is the 15 min positive, it kills two birds with one stone because it can be accumulated at discounted prices and price alone being low helps the SPY arbitrage, everything works together.

As far as the last asset, TLT (20+ year treasuries), it's hard to get a read on, but it does look significantly better than the benchmark 10-year that is leading negative after popping yesterday to the upside, I mentioned the decline in 3C here last night so this is interesting. I think TLT could support all of this, but the interesting longer term effect here is how and why long term treasuries are looking so much better than the 10-year benchmark.

10 Year T' Futures on a 15 min chart have seen a worse negative divergence since yesterday's pop higher. This itself suggests the market move higher is a knee jerk reaction, however different length trends, like 1 min will behave differently, although they all seem to be working toward the same end and that is sending this knee-jerk move (I think probabilities are high it is such), lower.

I mentioned the $USD which was destroyed yesterday was seeing overnight accumulation as the currencies that gained saw distribution, this 5 min chart shows this has continued, again, not good for the market move from yesterday moving forward.

 Yields are a leading indicator, they act like a magnet for the SPX (green) and look how they led while the SPX was being accumulated in August, then went negative and now leading negative, they are going to be putting pressure on the market to the downside.

This is the intraday.

HY Credit is not as bad as I expected, but it is not confirming either, it hasn't made a higher high for the entire month on yesterday's move so watching this as well as HYG in the near term will tell us more about the market's longer term prospects.