Major Market Update

Here are the charts. Although when a market gets this weak these short term divergences can be run over like they were in AAPL when I closed a short to re-enter at higher prices on a bounce signal, then Third Point's top 5 holdings came out and AAPL was gone, suddenly every hedge fund sold at the same time and AAPL lost -45% in 8 months.

So that can happen, the probabilities however are with the last market update and the charts below which is great because it's an opportunity.

SPY

 1 min looks to be in line, this alone isn't a high probability of anything except a consolidation.

The 5 min chart though has a positive divegrence and this is where the strength for a bounce would come from, you can even see the reversal process I talked about last night and this morning taking shape, reversals are a process, NOT AN EVENT.

 However, go to the 10 min chart and there's no 5 min migration of the positive divergence at all. this chart is showing the damage in place and a 5 min chart DOES NOT trump a 10 min or longer chart, especially when they are leading.

My expectation is for a bounce (noise in the trend, but useful for opportunities) along the lines of the yellow arrow, OFTEN THESE BOUNCES ARE MUCH STRONGER THAN YYOU ANTICIPATE BECAUS ETHEY MUST BE CONVINCING.

Then I expect the 10 min chart to cause price to follow the red arrow on a larger move lower.

ES / S&P E-mini Futures

 1 min chart intraday is inline just like the SPY.

However at the 5 min chart there has been some stealth accumulation supporting the market and creating the reversal process that should lead to a bounce.

ONCE AGAIN, DO NOT UNDERESTIMATE HOW STRONG A BOUNCE CAN BE, THEY NEED TO BE CONVINCING. I'd look for Dow 16k, SPX 1800 and NASDAQ Comp 4000

The ES 30 min chart though is the real strength and again it's leading negative like the longer SPY chart so this is where the largest flow of funds is, the highest probabilities, but we are looking at multiple timeframes and multiple moves.

HYG-High Yield Corp Credit because, "Credit leads and stocks follow", just look at my HYG post yesterday that came out at 1:10-1:15 and called the market action well over an hour before.

HYG is holding up a bit better than the SPX here (green) intraday, yesterday HYG fell apart first.

  HYG 1 min intraday is in line with the SPX (green)

 The 1 min trend is ugly in HYG, but for intraday, the 1 min chart is doing what it should. This just shows it's likely to fall apart after any bounce, there's too much damage.

 HYG 5 min went positive for the 3-day breakout and then negative, it's leading so no 1 min chart's bounce is going to trump a 5 min chart and longer falling apart.

Junk Credit

 Junk is holding up better intraday too vs the SPX.

And High Yield Credit is holding up relatively well intraday.

 Yields (red) tend to act like a magnet for the market until a reversion to the mean is achieved as it is in the white boxes, now Yields are suggesting the SPX bounce up to Yields and revert to the mean again.

Sentiment (Pro)

 Here we have sentiment holding up better than the SPX intraday. This alone is not the kind of signal that says, "The market is about to take off", but it is saying there's more strength in underlying trade than what is seen in price alone. This , like many indicators will likely lead positive very obviously BEFORE a move.

 Sentiment's trend over 2013, as you can see, it's not good at all.

Short term VIX Futures

 These went positive and that's why I went with the VXX Call last week, price followed the divergence/accumulation, but right now it's in line, not horrible, but not leading.

The longer 10 min chart shows any pullback in short term VIX futures should be just that, short term as this is a strong leading positive divegrence and this asset moves opposite the market.

 Actual VIX Futures

 The 5 min chart shows accumulation, a gap up and some distribution in to today's gap up, that fits with the 5 min SPY, ES, HYG charts, etc.

However at the 15 min chart we have strong leading positives that are not going to be turned negative and...

As I said last week, there has been stealth accumulation of VIX futures (protection from downside) and that can be seen on this 60 min chart, the strong underlying trend is huge accumulation so ultimately no matter what happens in the next day or so, this is where the probabilities are, VIX Futures higher and the market lower.

Spot VIX

And the above analysis of VIX futures fits perfectly with the Bollinger Band Squeeze in Spot VIX, this depicts a highly directional move about to break out, all of the evidence says it breaks to the upside although there could be some dilly-dallying in the very short term. REMEMBER THE VIX MOVES OPPOSITE THE MARKET AND SHOWS EXTREME COMPLACENCY RIGHT NOW, TRADERS ARE COCKY AND HAVE NO FEAR.

You know what they say, "Pride goes before destruction and a haughty spirit before stumbling" or otherwise known as "Pride cometh before the fall", in this case perhaps, "Price cometh before the fall".