Important Update

Well once again, the lesson that keeps popping up,

"Whatever you think is reasonable as far as a target goes or a time period goes, DOUBLE or TRIPLE IT!"

It's very easy to look at the market with a reasonable view and come up with your forecast, but the market is the furthest destination in the world from, "REASONABLE".


In any case, I don't see much that has changed in the expectations for what the market will do, however the intraday details as always are difficult.

The one thing we do want to be very aware of is the fact that there has been such rapid and very strong deterioration ever since the new year started, it could at just about any time roll over even the best confirmed probabilities as it occurred off AAPL's highs which I mention often because it was a painful lesson, missing 390 points trying to chase 10.

Here's basically what we have, it looks to be like divergences are still being put together, but not based on the period that led to last week's analysis and positioning (long positions to hedge the trading shorts and to make some extra $), based on the period that started late Friday afternoon in which despite price, 3C went negative intraday which led to the correct assumption, that 3C would pick up today right where it left off Friday (which is why I expected the first half of today to trade in negative territory and the second half to move towards the short term positives that were the reason for adding those late week long hedges). 

I don't think there's any reason to abandon positions already started late last week and today, nor do I think there's enough evidence to add to those positions beyond a hedge and have a forward leaning portfolio that is biased to the long side. Everything looks as it should, just longer and more noise as is typically the case.

Just from an intraday perspective of the averages and the Index Futures, here's what we are looking at...

 IWM looks the worst, the 2 min chart does however show 2 areas of accumulation that are likely to melt in to 1 larger "W", but the danger here is that a slightly deeper pullback to create that typical pattern, could easily fall out of hand and run over current signals, IT DEPENDS LARGELY ON HOW THE CARRY POSITIONS PERFORM AND WHETHER A LEVERAGED PANIC IS CREATED.

 3 MIN ALSO 2 AREAS OF POSITIVE AND A HEAD FAKE.

10 min shows why the expected move is considered "Short duration long", this is a lot of damage in a short span of time.

Q's intraday positive

2 min chart is adding more 3C momentum as is normal

3 min chart is really adding momentum so I wonder if we'll get a full pullback to the intraday lows of today, if so and divergences continue as they are, it should be a fast, strong little bounce and our longs should perform well.

At 10 mins, the larger perspective is quite clear.

 SPY 1 min looks like a little backing and filling is likely, this fits with the TICK data as it was captured.

3 min SPY leading positive on a head fake move today.

Again, while some details and timing are different than expectations, the general tone or story is the same.

10 min with some positive signals, resistance in most of the averages today at Friday's close.

SPY 15 and 30 min and there are 60 min charts that all have this VERY quick, very strong leading negative divegrence, that's fast distribution.

TF/R2K futures like IWM are the weakest of all on a relative basis, but the 1 min is stronger and the 5 min is improving.

NQ/NDX 5 min are certainly improving and validate the expectations from last week as well as the ones from Friday's closing 3C action.

ES 5 min has a solid divergence and a head fake move which is a timing flag for us, so based on this alone, out positions should do well.

This is the intraday TICK I mentioned. It was tame today, then steadily moved higher until hitting a +1550 reading, extreme and strong, then you see more of a consolidation as price and 3C intraday show.

 HYG as a manipulative (short term ) asset (HY corp credit) is consolidating intraday

 but short term it has enough in the intraday charts to suggest it is being used as an arbitrage asset for the short duration long in which positions were set up for Today and Friday.

This is the bigger picture and only intermediate, it gets worse further out for HYG, so I'm not concerned about the market putting in another year or 6 months or even a month of upside, I think the big-boned lady has sung a beautiful, but slightly dark song.

 VIX short term futures have been an intraday impediment to opening new positions, they need to move negative and they are slightly positive, which I say because it's only a 1 min chart.

 At 5 mins there's a small leading negative.

This all fits, it's not so negative as to suggest a big market move that changes anything, but it's  enough for the short duration move and I think our recent positioning is perfect in size, asset type and scope to handle hedging and adding gains on this move.

HYG v SPX intraday is clearly leading the SPX, this makes sense given the 3C charts and our expectations, however

 While HYG is leading (at the white arrow) it is within a larger negative so if we were to say, "What does this represent in terms of trend or Dow Theory", I'd say,

"It means that the sub-intermediate trend is down  (based on signals) or going down, the short term trend is up. If we were playing rock, paper , scissors, the short term positive is going to get beat every time as if it were paper and the red box were scissors"

THIS IS MULTIPLE TIMEFRAME ANALYSIS IN PRACTICE AND AT ITS BEST

High Yield Credit v. the SPX is showing a positive character, especially on today's head fake move in the SPX. If HY credit were actually 3C in this same configuration, it would be telling us that there has been accumulation building for a move (as is the truth) and today's head fake movve in SPX created a stronger accumulation signal which is one of the major reasons head fake moves exist and why they are such good timing markers".

However once again, looking even at a sub-intermediate chart of the same, High Yield Credit has ran the other way. On even longer term charts, HY credit is even worse.

Credit has been one of our best leading indicators and we are again using it in multiple timeframe analysis, it says the same as everything else, "Short term bounce", but it will be sold and the next leg lower will follow.

The unique part of the situation is the next leg lower is not likely to be the typical small consolidation or even a deeper 10% correction, in fact, I don't think the next leg will be corrective at all, I think it will be a definitive trend change. The arrows show the short term multiple timeframe analysis, the red box shows the bigger picture, both are true at the same time, it all depends on which you trade.

I think a lot of traders' greatest challenge is fitting their trade to the timeframe or timeframe on which they've had an insight. For instance, to open a Trend Trade long and manage it in such fashion will create a losing trade, even if you were right about the initial bounce.

Opening a short term swing trade long for the next day or few days, will also be a losing trade. You must fit the trade to the timeframe and trend, otherwise you can be right all day long about the moves coming, BUT USE THE WRONG TOOL FOR THE JOB AND MESS IT UP BADLY.

VXX (SHORT TERM VIX FUTURES) SHOWS AGAIN THE POSITIVE BEHAVIOR IN VXX AT THE WHITE ARROW VS THE SPX (SPX PRICE IN GREEN IS INVERTED SO YOU CAN SEE HOW VXX IS PERFORMING VS ITS NATURAL CORRELATION WHICH IS 1.0)

 I have said Gold is a good inverse asset to follow as it has been trading the opposite of the market for some time. If I only had gold as an indication, I'd feel good that I had a strong idea of what's coming, this is why I opened a leveraged gold short Friday for a short term position (thus the need for leverage), that was DGLD.

GLD intraday is clearly shifting negative, if price follows 3C's signal, then GLD moves down near term, the market moves up and DGLD moves up and makes money.

I had many other timeframes, but there's no need, they are consistent. The 5 min above is showing a strong leading negative signal, all of that happened today and there's a rounding reversal area in place.

Even the 10 min chart is leading negative, all of that in one day, so as I suspected, the intraday action early today would be negative. I expected though that since we usually have 2-3 trends within a day, that we'd move back toward the market positive that was interrupted on Friday's last hour of closing activity.

While I was wrong on the timing of the second short term trend (correct on the first as trade picked up right where 3C left off on Friday) expected to occur today, THE EVIDENCE THAT THIS SECOND TREND IS COMING AND IN FACT VERY CLOSE , IS RIGHT ABOVE IN THAT GLD'S 10 MIN CHART IS LEADING NEGATIVE (remember the market tends to trade opposite GLD and remember Friday we opened a DGLDD - leveraged gold short) to take advantage of what we saw Friday which is even more clear today on a strong 10 min intraday leading negative move in GLD.


I put all of these charts together before the close so I want to check on them as of the close, but I don't think anything significant could happen in that time. I did say I expected a little larger "W" and that meant price in the averages needed to pullback a bit, so far that's what we have on the close. For the most part, the averages pulled back very close to the area expected as I began this post.

I think the charts above are solid and I'll find that the last 30 mins or so didn't change anything, except bring us closer to the next trend.