I was considering an IWM short just based on yesterday's data, overnight solidified the data more and now regular hours are continuing the move, first let me show you the market averages as we are still in the area of the "Knee-Jerk" reaction and it can be profitable, I don't spout off these concepts just to try to predict what will happen, it's a higher probability concept that can allow us to set up profitable trades.
SPY 2 min with yesterday's negative and today adding to it. The concept from here is migration of the negative divergence through longer timeframes, the longer timeframe, the more significant distribution is.
You can see the divergence is now making its way to the 3 min chart
The Custom TICK Indicator I built shows a negative outlook thus far, look at the linear regression trendline of the SPY (top) and then that of TICK (middle), the differential is represented on the histogram in the lower window, this isn't a healthy internal structure thus far.
Right now the SPY is in a rectangle consolidation, volume is fading as it would if this were a bull flag, but the fact we have a lateral rectangle negates a bull flag, it doesn't mean the formation "looks" any less bullish. However if the flag portion were to start to form an upward sloping parallelogram (orange), then there would be trouble here as flags consolidate away from the preceding trend of the flag pole.
The other possibility or probability is a head fake move above the resistance area of the rectangle, this would likely offer a short opportunity as long as the 3C charts continue to deteriorate and the break out is confirmed to be a head fake (the opposite set up of the Gold post I put out this morning).
The TIC chart has gone from a strong trend up yesterday to a strengthening trend down, the point of my indicator above is to show the differential, if the SPY were moving down with TICK, the set up would not be as interesting, but as long as the SPY can stay in the area with TICK declining, market breadth is falling apart and thus so is SPY support.
QQQ 2 min negative
The 3 min is starting to go negative, I'd feel better if the 5 min were negative and the only reason it isn't or the most likely reason, is simple time, it takes time for the divergence to catch up.
IWM
The 1 min chart looked bad yesterday, today worse.
The divergence has migrated to the 2 min chart leading negative,
It has moved to the 3 min chart
and even the 5 min chart. Interestingly, the in line status wasn't strong enough yesterday to confirmon a 10 min chart as strong as the move was so underlying trade is fragile in the IWM.
IWM 10 min not only did not confirm, it seems to be displaying distribution in to the move higher which would confirm a head fake move or knee-jerk reaction that will likely fail.
The triangle offers several shakeouts from a simple fail to an upside head fake to a Crazy Ivan shaking out both sides of the rectangle-longs/shorts.
I'd like to see a move above the rectangle and confirm the head fake, it's already highly probable it would be a head fake if it occurred just because of where the charts are now.
If the IWM looks like a trade, I'd want the upside price move to enter an option position, if it didn't do that, then I'd go with SRTY 3x leveraged IWM short ETF, this would likely be a quick move, maybe a day or so, but I'd rather let the market tell us that then guess at it.
I'll set alerts for both sides of the rectangle.
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