Market Update

For the most part, this is just noise and there's not a lot that's very exciting as far as positioning right now, we are kind of going through the movements, however we are pretty much on track. As we approach some better timing there are a number of positions that can be opened.

First the immediate market update.

We've had solid downside on Friday's negative divegrence that has continued on the open today as is normal to see with 3C divergences . ES (SPX E-mini futures) has lost a whopping 17 points since the open this morning, that's an impressive FAIL, although it looked like it was heading that way last night from the early action in the Yen as of last night's post.

Here's what we have now, you could call it a bit of an oversold condition, but it's more about tactics, movement and opportunities.

 First, the NYSE TICK (intraday) data from today shows the typical "Retail Chasing" +1300 reading on the open, this is a great example as to why we don't chase things, but let them come to us.

Since then, TICK has seen a solid downside extreme just shy of -1500, this is where we are getting a bit oversold on an intraday basis. I don't believe in true oversold/overbought in the way they are described in main stream analysis, it's just the market can't be predictable and too much movement in one direction has too many traders on the same side of the boat and that doesn't work in a zero sum game.

 The intraday 1 min 3C signals for ES this morning are near perfect, distribution at the highs and we have what looks like a bear flag that traders would expect to break to the next leg down, which in this case would be close to another 15 points or so when accounting for the flag, but I suspect this will flatten out and create a small intraday reversal process and we should see a bump on the upside retracing some of the sizable loss this morning in ES.

 No need to go to the carry trades which the market is tightly correlated, just go directly to the Yen. This 1 min chart of the Yen futures shows good upside confirmation, but recently you can see an intraday negative divegrence in red, it's actually leading negative. I don't think this will be a serious or threatening pullback because of the following chart/s...

The 5 min Yen chart was barely leading positive last night, but migration of the divergence occurred overnight as it travelled laterally in a range, as I said this is where the most activity in underlying trade is often seen, right where price looks to be the most boring.

There's no damage at all to the 5 min chart and it's leading positive in a big way so a 1 min negative is a signal that should move the market, but it likely won't overcome what has been built here. We could get in to the fundamentals, the initial knee jerk last night on the added Central Bank liquidity and as I said last night, as that knee jerk fails, the serious questions regarding why this injection was so big and some concerns that fade the knee jerk and maybe a lot worse.

For now, even without ES, the Yen alone suggests it pulls back, the Yen carry crosses move up and drag the Index futures with them (on an intraday basis). THIS IS WHERE WE CAN GET SOME SOLID INFORMATION SUCH AS WHETHER THERE'S DISTRIBUTION IN TO ANY RETRACEMENT/UPSIDE MOVE.

 As far as the USD/JPY carry, it has been in a downtrend since the start of the year, lower highs/lower lows.

I have the same short term concern as last night, a move in the pair above the last reaction high around $104.91 would cause technical buying as the downtrend would be interrupted. I don't view this as anything more than a delay or hassle, but there is a silver lining if it occurs and that's in letting shorts come to you if you need them and having a strong entry at better prices with lower risk, but for now it's just an area to watch for and more of a nuisance than anything as I'd rather we just got on with it. I KIND OF DOUBT THE 5 MIN YEN POSITIVES WILL ALOW THAT KIND OF A MOVE ANYWAY..

We do want to see the next lower low made soon.

 As for the Crazy Ivan around a bear flag on a daily chart of almost any market average (A) is the bear flag, (B) is the expected technical break below the flag, (C) is the upside shakeout of shorts following the break below the bear flag and the Crazy Ivan shakeout and (D) should be the resolution of this area.

As for some charts...

 Intraday the IWM (nor any of the averages) did not confirm the gap so it was destined to fail, there's a VERY slight divergence, this is likely to grow, I'd think the market / IWM will have to put in a little more lateral work to get a foothold that can get any upside traction, I'm not talking about a new high, I'm talking about a retracement of some of this morning's losses.

 So far there's no positive at all on the 2 min chart, it is/was leading negative since Friday and further back so this morning's price action shouldn't be a surprise.

If this stays leading negative at 2 mins (which I doubt, but if it does), then there's very little strength for even an intraday bounce. I doubt very much we'll see anything of significance here.

The  you have the institutional 5 min timeframe leading negative, I really don't think any bounce is going to change anything here and the probabilities remain very negative. This is not even in true scale, it's much worse, I'm just trying to show recent action only.

So I think over the next few hours there's just going to be some jiggling about, after we get a retracement (assuming we do), then there may be some interesting positions worthwhile.

Keep your eye on PCLN, we are looking for +>1200 to look at starting or adding to a core short and/or put options.

I have that Dr's appointment soon, I won't be gone long and I don't think I'll miss much beyond what I laid out above.

The VIX/VXX divergences aren't quite where they need to be yet for a really serious signal that we want to move on quickly.