Market Update

We have some 1 min divergences, not really strong, they look more like consolidation divergences since the 2 min charts aren't following, although there's not much to follow.

I'd be temped to take December Index puts off the table and leave January in place for now. Looking at the VXX I'd say it's probable that we get some retracement of this morning's decline, but....

 SPY 1 min, as mentioned in the Wrap last night, the majority of the averages saw 3C decline in to the afternoon as can be seen above, the IWM was the lone survivor and the lone cause for any sort of bullishness today, even if it was in the IWM only, but I think that's more an oversold condition that's on a relative basis vs the other averages, not oversold in truth.


The problem with the consolidation right now if you look at price only in the yellow box is that it has formed a bear flag, technical traders expect that to break lower with a second leg about as large as the first (this morning's decline), that means there's an increased probability the market will do the opposite even if only for a very brief hour or two just to shake out those technical traders, I am not saying "High probability", but increased, the more obvious the flag becomes, the higher the probabilities.

 2 min charts have been leading negative and aren't positive enough to be looking for a strong correction to the upside at this time, with a 1 min only positive the probabilities are 50/50 between a correction in price or through time (sideways), add a 2 min positive and a correction in price (up) becomes higher probability.

 The two things right now that are highest probability and say, "Stay the course" are the longer term charts like this SPY 15 min, this is where the downside probabilities have been and that hasn't changed, but intraday trade is a lot different than a 15 min chart, this says "Big picture, market goes lower", intraday charts can still jiggle around.

The other high probability that we may have indeed reached an important pivot is what I reminded everyone of last night, that VIX BB squeeze hasn't gone away and it has done everything we expected it to do and those expectations were laid out before price moved a penny.

Like I said, the initial breakout sees price hang around the BB squeeze and pullback to the 20 ma as it did, yesterday a bullish daily candle was put in, this argues for a stronger up ward move in the VIX, lower in the market.

However, that doesn't mean there won't be a lot of trading opportunities on both sides, just be aware that the highest probabilities are bearish.