Market Update

Thus far we have the general intraday activity of a base and that of an op-ex Friday, it's hard to say if they are two separate events or , but I'm leaning toward our base is still alive, here's why and we'll look at little at GDX (GLD by correlation ) and USO.

 This is the late day distribution intraday in the SPY from yesterday that was pointed out just before it began to take prices lower in what seemed like an inverse H&S pattern being formed, it took out some of the BTD's when afternoon support was broken as volume picked up on the downside.

This morning it was negative right on the open which sent prices lower and created something more akin to a small "W" bottom and then supported the SPY before that price pattern dropped too low and destroyed the pattern, pretty much in line there since, which is the same kind of activity we see on op-ex Friday's any way.

The 2 min chart shows the same thing, late yesterday's distribution and early this morning's and then accumulation at today's lows creating that small double bottom or "W" pattern.

The 3 min chart didn't see much damage from either late yesterday or early this morning's activity, there is a clear area of support that we'd normally look for a head fake move, but I'm not sure such a move would be beneficial if they are trying to get retail to buy the "W" base.

And the overall pattern since distribution earlier in the week to yesterday's change in character which also changed a lot of short term trading positions.

UVXY / VXX (short term VIX futures) are still very strong as you'd expect with the spot VIX in the place it's in with a BB squeeze that has acted exactly as it should for a big move higher (market lower).

The same strength is there on the 10 min chart, you may recall yesterday I said I thought if there were any bounce/correction it would be on the 1-5 min charts, being VXX typically trades opposite the market this is just more justification for that comment yesterday as that's also what we saw in the averages.

However at 5 min we see the positive activity put on hold.

Remember last week when we had 5 consecutive down days and I said they were holding HYG together for 4 days previous to Friday's move up breaking the down streak? I also said the 3 previous days in VXX, they were holding that down or in place.

 Here are those days last week (yellow) in VXX/UVXY and then the market pop (VXX/UVXY down) last Friday, it seems the same is happening since yesterday and in to today in VXX/UVXY.

On a 1 min chart you can see it with more detail, thus far a shorter period, but similar activity which stood out last week as we mentioned it before the market made Friday's move up as it seemed that move up had been in planning for at least 4 days prior to the NFP, so it also seemed the move had nothing to do with the NFP or they wanted it to seem like the market was immune from whatever the NFP came in at, good or bad (it just happened to be bad for QE lovers).

 HYG was the other asset, they are two of the three SPY arbitrage assets and arguably the two most important. We can see HYG's action last week, this week it's not as strong as 3C is still leading negative rather than stuck in line.

On a 2 min chart the details become much more clear, yesterday and today are similar to last week's 4-day period leading to Friday's NFP (red)

I'm guessing this similar behavior is for the bounce expected yesterday or at least prepared for yesterday rather than an op-ex pin, but who can say for sure, it would be easier to say if today wasn't Friday as price reacts much the same on an op-ex Friday.

I'm fooling around with an indicator right now that will hopefully be able to forecast the strength of a move, it's a notion that came to me last night and I've been trying to code it, it's quite difficult, but it makes sense when you think about the stages of a move (1, 2, 3 and 4) and how they are proportionate, I'm trying to use a variation of that proportionality to forecast a move's upside and if that works, then I'll work on the downside as well, it's quite a unique concept, but I think it makes sense and it would sort of be a "secret" Wall St. code so they all know when every other herding sheep of a hedge fund will react.

As for USO, I've been looking for a pullback, I should have said correction as that is more appropriate and can happen through time or price. If a correction is correct through time, then today's move may be the head fake that tells us the "correction" is almost over. You may recall, I REALLY like USO long for a sub-intermediate up trend.

 This is the last head fake move right before USO's first move out of it's long base, then the 3C signal for a correction.

All new divergences start on the fastest charts like this positive 1 min on a possible head fake move that we see right before a reversal (of the correction).

So far it has moved to the2 min chart, if it moves all the way to the 5 min chart, then it's time to add USO long back to the mix as we exited it as we saw the correction coming.

As for NUGT (GDX and GLD by correlation), we were also looking for a correction there that we got and made some extra scratch by playing DUST, but still looking to re-enter NUGT long, we may be getting close to that point as well.

Again, all new divergences start on the fastest timeframe, the 1 min is positive today, although NUGT would need a wider base (Maybe a day longer or so), this may be the initial signal that we are there.

The 5 min chart needs to go positive here too before I'd feel comfortable going long NUGT and or GLD, but once again, we may be in the area as the gap was filled which is all I was looking for.

Consider it may take another day or so for this to build a base and reverse and consider that it usually trades opposite the market, that tells you something about the market as well as both the corrective phase to a possible long in NUGT/GLD is starting and the possible short duration base for an upside market correction may be nearing it's end before it's short duration move, they almost match up perfectly.