Market Update

This is exactly why I had no interest in considering a long Friday (I might have considered it today if the signals were lining up) and why I wasn't even interested in hedging the trading shorts. The market has some very nasty cracks in place, it seems like in every asset EXCEPT the averages *which is why it is even more deceiving and deceptive) we are coming down off the right side of what I'd call the pivot or absolute top.

Being involved in market correlated longs right now for me requires a high degree of evidence because of this situation.

My earlier update reflected damage already occurring and now it's getting even worse. It is still mid day and a lot can still happen, but this is just nit looking very good.

 SPY 5 min chart losing quite a bit of ground considering the timeframe and that it's all occurring today. There's a mini H&S in place as well today.

 The 30 and 60 min charts are what I was talking about last night as really standing out, remember that about half of that leading negative on 30 and 60 min charts was done in one day and not in the low volume of Christmas time, but after the New Year.

To better illustrate what I mean...

 For a cycle things make sense going from accumulation to confirmation and then to a distribution area in December before the market popped once again. It's in that pop that honestly looks to be about the right size for the "Igloo/Chimney" shape top, that we find an incredibly strong leading negative, as I said before, searching back as far as I can go, I can't find anything as dramatic. The first negative you can see on the chart above this one at the first red arrow would normally be more than enough to turn a cycle this big down so what we have to the right of that is pretty extreme even among very extreme standards. If you follow the continuity of the 3C line I drew in, you can see the natural process and the abrupt change, this is not normal, what we have to the left at the first negative divegrence is normal, this is extreme.

This is a longer view of the APY 4 hour chart.

There are a few different reasons I show it, one is to give you a feel for what's going on with the probabilities, where this market is almost certainly going, but also when you have charts this ugly through out the longer timeframes, it means the chances of the shorter timeframes that are running counter to these signals (positive divergences) have much less of a chance of holding together.

This is the same concept as, "A bullish triangle works a lot better in a bull market and virtually doesn't work at all in a bear market", the longer term probabilities do effect the probabilities of shorter term charts. It's just like anything else, if you have a big boss that's in a foul mood, the probability is that the worker bees under him are not going to be in the best mood either.