Intraday Market Update

As I said and showed last night in "The Week Ahead " post,

" In to the close on Friday some of the averages didn't look too hot and 3C often picks up right where it left off, so this negative activity intraday may produce a negative morning session, which is typical that we see one to three different intraday trends."

So far, we're right on point. However there are early signs that the first of what would normally be 2 to 3 trends intraday, looks to be waning and moving toward the second which is what we prepared for Friday.

Here's what I see in addition to what was shown in the last post.

 3 min SPY intraday still shows the same short duration positive divergence that leads me to believe we see some market strength in the first part of the week. This morning's move can very easily be taken as a head fake move which is one of the last things we see before a reversal, in this case to the upside, but still short in duration and weak in overall tone.

Unless the move below support (which did do its job and pumped up volume on what was likely a stop fishing expedition) makes a "V" turn to the upside from what looks like an intraday flag, it would be normally to expect a more "U" shaped reversal process, but head fake moves, like parabolic moves are more likely to see a reversal event than any other kind of move/reversal. I'm not saying a reversal event is the highest probability for this kind of move, just that it is a higher probability for this kind of move vs. a more conventional reversal process.

Thus far the NYSE TICK is missing in action and hasn't given a strong indication of an imminent reversal, but that can change in minutes with the TICK data, keep an eye on it.

The positive divegrence is clearly there.

 Intraday 1 min we see the EOD weakness in to Friday's close so it's no surprise that market prices picked up where 3C left off and not where market prices left off, this is a concept I reinforce almost daily and certainly every Friday.

Intraday there's a positive 3C change in character compared to Friday afternoon, it's not enough for me to consider adding to long hedge positions, but it is something that needs to be watched.

 As far as the trend that we are in (even early strength this week is transitory as this trend is the prevailing intermediate trend) , leading negative divergences such as this SPY 30 min are exceptionally strong and indicate a large move in underlying trade, lots of selling/distribution. The danger that this creates to our otherwise fairly realistic expectations is that there's a chance that Wall St. finds it more imperative to exit the market than to take advantage of a short term cycle also meant to help them exit the market or sell short, either way, they both come across the tape as a sale or distribution.

 QQQ intraday also has the head fake move and the intraday positive divegrence forming up since this morning.

The head fake move here (assuming it holds) also did its job in running stops.

For the time, the 1 min VIX futures is slightly better than in line, even when they are pinning VIX futures for the sake of activating the arbitrage mechanism to support the market, there continues to be demand for protection. I'd rather see 3C go negative intraday in so much as we are looking for a reversal and whether it makes sense to adjust any holdings or add to any positions.

 The longer 5 min chart is very much in line with the first half of the week market trend expectations (some price strength).

ES also has the same dynamic intraday.

I'm expecting a reversal intraday, but I want to get more information before making any decisions about taking additional action. As far as what's in place now, I see no reason to change any of that.