XLF Financials

I'm not going to cover FAZ because you can more or less reverse XLF and get FAZ indications.

As I said yesterday there's this unhealthy dispersion where the markets have broken away from each other as all moved together at once as all were being fed equally at once, as funds dried up and retail margin lev, it seems there weren't many others willing to chase this market and I get that just by watching their favorite risk on asset, credit.

The point being, this dispersion in which all the averages are broken up is chaos, not rotation.

 XLF 1-day with the bearish engulfing pattern clearly visible which is a confirmed reversal pattern.

In the spirit of a Wall Street maxim we often repeat, "To make money you must see what the crowd missed",

a 3-day chart shows a clean, clear reversal, an Evening Star with an engulfing candle as a bearish engulfing confirmation candle.

Once the head fake area > $21, which I had said several times, I would not add to Financial shorts until XLF was over $21 as it was a clear zone of resistance and therefore an obvious target for a head fake move (in this case a failed breakout of bull trap)- once this area at $21 is broken, stops get hit en masse, this leads to a self-fulfilling prophecy of sorts and an event that snowballs as every trader has different risk tolerances and multiple levels of stops, at some point the shorts come in and then we watch for a counter trend shakeout to trade.

 I think we have 2 head fakes, the market is fractal in nature, one represents the first leg and then there should be a consolidation or correction before the deeper second leg starts. My guess is the first leg probably takes us below $21 and maybe near the bottom of the trading range and the second leg below the range.

 3C distribution signal for the first leg or smaller rounding top.

3C distribution for the second leg or larger rounding top.

Overall Financials, 30 min chart, obviously there are big problems here, but no where has distribution been so heavy as in November, I can only say that in my opinion (other than smaller trading positions), smart money has been gone for a while and any of these moves to new highs or breakouts above $21 were simply used to set up short positions.

 Unlike IWM or QQQ charts you saw earlier, XLF has no such intraday divergences

Here's the 2 min chart which actually looks even worse.