Important Market Update

This is a pretty important one and it's a rather tough one. As I've been looking around at numerous assets from carry trades, the Yen, Index Futures and especially stocks, I'm seeing this same pattern over and over again. Today gave a little more insight because of some signals, my problem in showing you this is that I've seen so many that I can't impress that upon you enough without posting hundreds of charts.

The general idea falls back to the concept that nothing moves straight up or down, the gaps and holes, volatility and shakeouts.

There are a number of very short term positive divergences, in fact the trouble I'm having is deciding whether it is even worth trying to play any of them or use them as a hedge because the other side of the spectrum is so ugly that I'm afraid to even enter any of these long.

I'd say the most sensible thing to do would be to see if there's any upside that can be gained off these moves and use that as the entry for shorts, add to positions, etc, but this is way further along the line and much uglier.

I'll try to give a few examples with some stocks we follow and are major names. Rememer that the really convincing probabilities here is that this trend is everywhere once you recognize it, is currencies, Index futures, stocks, carry trades, etc.

I'd say that the market has rolled over and we are on the right half of that rollover and these smaller moves that look to be forming are just volatility moves, the danger is on the right side of the roll, that's where you get the big, nasty drops, which is why I'm very nervous about even entering any of these as even VERY short term trades or hedges.

I'll use NFLX as an example and then show others, the others can be summed up in 2 or 3 charts maximum from the 1 min to the daily or 4 hour timeframe.

 NFLX 1 min with an intraday positive, I'd never trade this long based on a 1 min chart only, but there seems to be something developing there today.

NFLX 2 min looks more impressive, but remember, this is only a 2 min chart, I usually wouldn't even take a short term 1-2 day options trade without a 5 min positive. NFLX is one of the few that does go out to a 5 min positive, but right after that at the 10 min chart we get this which is a transitional marker.

10 min has nothing except in line downside.

This is what I think the short term trade is and the real end game.

 assuming this is the short term move, a gap fill or just some kind of volatility move that gets longs excited, I don't even know if it can make the normal extreme move that the market puts in because it's needed to move sentiment and emotion, but NFLX, like so many others have turned already and we are on the right side of that turn.

What moves a market? Some say supply and demand, but the real mechanism is fear and greed and fear is ALWAYS stronger than greed, that's why the right side of a pattern like this is so much more vertical on the downside. I'll show you in a minute.

This is what I believe the full picture looks like, so you can see my hesitation in even considering playing a long side move or even a hedge, the risk : reward profile is drastically different on the right side of the roll.

Example...

This is a weekly chart of the SP-500, it doesn't matter the chart, index or asset, it's the concept of fear being stronger than greed.

The bull market (white) lasted 5 years (#1), at #2 you have the roll. The current move I'm showing above would be something like #3, except #3 here is a lot larger than what we'd get from a 5 min positive divegrence.

#4 is the point, all of the 5 year bull market was erased in 16 months, most of it in 8 months and then some as it went even lower. Just look at the slop of the white arrow vs the red arrow. I don't want to be caught on the wrong side of that red arrow area.

Continuing with NFLX...

 The 30 min chart already has tomns of damage and nothing positive.

This 60 min chart also shows even more damage and gives you an idea of what the actual top structure looks like.

The 4 hour chart is exceptional amounts of damage.

Other charts can be summed up with far fewer charts, I just wanted to give a bigger overview with at least 1 asset.

 BIDU 2 min positive, not much and it's already started a move.

At 15 min it looks like it has clearly peaked.

The 50 min chart gives some idea of the downside implications and why I'd be very nervous to be on the wrong side of the trade as this is the kind of area that I've talked about that is surprising and extreme. You wake up one unsuspecting morning and have a gap down that takes out months of longs, that creates a lot of snow ball effect.

AMZN

 3 min positive

At 15 min it's done.

And the downside risk...

PCLN

 5 min positive, I've hoped to see this above $1200 to finish adding to the position.

PCLN coming down on the right side of the roll, or top.

If there were stronger charts in PCLN, I might take the trade to $1200 as that's where I've always thought it would go and that's where I want to fill out the core short, but that 4 hour chart at this stage, will run over a lot of divergences.

AAPL which is a bit different because it already had a -45% loss

 1 min positive, I'd say this is positive to 5 min, but that's still not a very strong divergence

At 30 min...

These are just a few examples, the really strong and more overwhelming case here is in how many charts are almost exactly the same, how many different assets, carry trades, the Yen (positive)...

I may let some more time go by and see if there's a stronger case for a long or a hedge position, right here and now though, I feel it's too dangerous, but at least now I understand why the change of character since the New Year is so different, we are in a totally different place.

It's time to do some house cleaning and thinking about how you want to be positioned and it's time for me to fund my account.