The Week Ahead

We finished out Friday with this post,  which essentially shows the intraday charts showing the same thing we saw virtually all of last week, even just before the numerous calls we opened and closed August 7th and 8th. The basic pattern of all of last week, even on gap up days, was early morning market weakness which was foretold with 3C negative intraday signals the afternoon preceding and slightly longer charts showing stonger signals suggesting that after initial weakness in the a.m, we'd see market srtrength, this was the dominant signal last week and was the dominant market behaviour.

This 15 min chart of the SPY shows last week's dominant market action, weakness in the a.m. foretold by intraday negative divergences the afternoon before with slightly longer intraday charts in the 3 to 5 min range showing strength also foretold the afternoon before (market weakness in the a.m. in red and afternoon relative strength in white).

This is essentially what we ended the week with Friday as the linked post above makes clear...

"Much like we saw earlier in the week that set up the first round of calls that did pretty well, there's what looks like either closing or early Monday intraday weakness like there has been every afternoon the last 3 or 4 days now, behind that there appears to be the signals for a bounce like we saw earlier in the week"

To start off the new week's futures trade we saw Japanese Q1 GDP miss consensus of a +.9% gain, instead coming in at a weaker +.6%, but as I often warn, "be careful with knee-jerk reactions" and that would include tonight's continuing market action.

Initially the Nikkei 225 futures lost EXACTLY 200 points (similar to the Dow Industrials losing 200 points) as the Yen initially surged, sending the carry pair USD/JPY lower...

 Nikkei 225 futures lose exactly 200 points as the Japanese Q1 GDP data comes out, but is quick to reverse.

 The 1 min Yen futures initially spike (white arrow) in to a 3C negative divergence and then give up all the gains and then some, which did this to the Carry cross, USD/JPY...

Initially dropping substantially in to a positive 3C divergence, the pair quickly regained all lost ground and rallied which is bullish for the market/Nikkei.

US Index futures had no reaction whatsoever.

Gold, which gave some short term signals suggesting a pullback in to regular hours trade early in the week, gapped up, but still has similar signals to GLD late last week.

 Gold futures gapped up on the open of futures trading Sunday, but...

The 5 min chart shows a positive divergence mid week as well as tonight's gap higher and a slightly longer term negative divergence suggesting Gold does see a pullback early this week which initial indications suggested would likely be a good place to enter another short term gold long on the pullback.

The main theme for the first part of the week continues to be the probability of a market bounce.

The 5 min 3C chart of the Yen (which has been seen strength as the Yen is bid up in an effort to close out the USD/JPY carry trade -market bearish) appears as if it will get an early break this week.

The stronger 5 min Yen futures 3C chart suggests the Yen sees some weakness heading in to the new week, this would give the USD/JPY a chance to rally a bit after being beaten down last week, also giving the market some top side head way.

Essentially NOTHING has changed since last week, suggesting a short term bounce that is capped on the upside, meaning even if it can sway retail sentiment to the bullish side, it has little to no chance of being anything more than a short term bounce, which makes any short term market strength ideal to use as a tactical short entry while more nimble traders may wish to hitch-hike a ride to the upside before entering larger short trades.

For example...

 ES 5 min suggests a short term bounce

NASDAQ 100 futures - 5 min suggest the same

Russell 2000 5 min futures suggest the same.

However move to the more important 30 - 60 min charts and nothing has changed, the big picture is still clearly negative making short term price strength useful to enter short positions.

ES 60 min

NQ 30 min

TF 30 min.

We'll look more specifically at assets and entries as well as short term hitch-hiking trades as the initial signals for the new week's trade settle in after Monday morning (typical volatility) trade settles.

Bottom line, NO SURPRISES