Market Update

The last thing I said in this morning's, A.M. Observations was a warning about increasing volatility, this means downside moves are going to be bigger, but insignificant corrections are also going to appear much stronger as well and after a period of low volatility like the last week-plus, those upside "jiggles" will appear to be stronger than anything you've seen in over a week as a function of increasing volatility, thus my warning at the end of this morning's post...


"Volatility should remain high, lets see what this week brings, I'd encourage you to look at the trading in terms longer than just a day, volatility should be high and falling for every shake on this kind of volatility will have you in and out of good positions, but it's also a sign of changing character and those precede changes in trends as we can now see clearly."

We are also getting back to a more "Normal" market, which is something we haven't seen since 2008 with all of the intervention and what I mean by normal is greed and fear are the drivers of the market rather than how big the morning's POMO is, so many things like volume will take on new importance that they previously didn't have, in fact volume was of no importance at all, that will change.

As for what I see right now intraday, it looks like we will see a bounce , this is what I said in last night's post, something along the lines of, "I think we will see several trends between now and 4 p.m. tomorrow (today)" which is neither good or bad, it's just the normal functioning of the market, like the waves and tide, just in smaller proportions. Actually it is what you make of it.

Here are some charts of the averages so you get a feel for what's going on so far on an intraday basis.

QQQ

 You can see an intraday 1 min positive forming here.

Also Friday's leading negative and a 2 min positive

At 3 mins the Q's are basically in line , so as of now this isn't a very strong divegrence, it's more along the lines on an intraday bounce, but keep volatility in mind.

As of the QQQ 5 min chart it is in line with the price trend, no positive divergences at all.

 And the 15 min chart is quite negative, I don't think we will be seeing anything positive develop here, in fact it is where the probabilities are for any short term moves, this is the stronger magnet on price, that doesn't mean we won't get waves/bounces, but they should continue to resolve with the larger outgoing (bearish) tide.

IWM

 The IWM 1 min has a very small relative positive, if it were on its own I wouldn't even mention it.

The 2 min chart has just as small a relative positive divegrence, as far as timing, you can see a rounding "reversal process" taking shape so this move is not quite formed and ready to go, it also is not very large.

IWM 5 min is in line and no positives at all, so once again this is in the realm of intraday and is more of a correction than anything at this point, it is not what I'd consider a return to the previous bullish price trend.

SPY

 The SPY probably has the best relative performance in this intraday divergence, the 1 min looks better than the rest, but still a 1 min chart.

The SPY divergence stretches out to 5 min as seen above, it's still forming the reversal process.

However at 10 mins 3C is in line with the move down in prices so anything positive in the SPY stops at the 5 min chart above.

DIA

 DIA 1 min is not impressive at all, in fact this is the worst relative performer for the intraday divergence.

As you can see the 3 min is no better, there's essentially nothing here, I certainly wouldn't show this on its own, but I did want to show where the relative strength and weakness was and that this was not a market wide bounce of relative strength.

The DIA 5 min chart needs no commentary, this is very ugly so I'd expect this to be a very poor relative performer if it is able to perform at all which they usually do as the market runs together directionally, but like Friday we had a few averages in the +20% range and the Russell 2000 in the -40% range on the same day.