Market Update

Hopefully you can see now why the SPY Put trade was meant to be so short, but in opening that position I had said,

"I'm going to enter what I think for the moment, will be a short term trade, however the longer term set up I don't think is far behind"

First let me use the SPY as a proxy for the broader market, it applies for all the staging except for the IWM, this is easier than posting 10 charts for each of the averages.

"If you don't know where you are on a map, you have no idea where you are going", this has been a theme recently I've been trying to stay on top of because just about every trend in every timeframe has 4 stages and then it starts over again, if you know where you are in a stage, you have some idea of what's coming next. Taking that a step further, especially with a probable head fake move in play, we are also looking at multiple timeframe analysis which has aligned with both the large and small trends both at stage 3 except for the IWM which entered stage 4, but reacts similar to stage 3 and should move in similar fashion as it is in the first move of stage 4 which is a volatility shakeout of new shorts entering on the break of the stage 3 top.

 This is a map of the stages for the longer February Cycle in a stage 3 top with recent action the last few days at a head fake area which is what we see about 80% of the time just before a reversal, it's the shape of the top and head fake that I often describe as "An igloo with a chimney on the right side". That Chimney area happens to be stage 3 of the shorter cycle that started March 27th, so both trends have aligned at stage 3.

Here's the same chart with the staging, to the left at the "U" is the larger cycle's stage 1 base and the larger stage 3 top, to the far right is the March 27th stage 1 base and now stage 3 top which is acting or at least in the right place for the "Chimney" part of the larger trend's Igloo shaped top or the head fake move, even though it's a pretty tame head fake move thus far.

 As far as the highest probabilities, this 4 hour chart of the SPY makes it pretty clear what the underlying trend for the entirety of the larger February trend has been, distribution as we expected and clearly wrote about days before the move up started, again I reference the Feb. 4th note that was meant to anchor expectations so you didn't end up in an emotional decision, essentially trying to prepare you for what you'd see so you knew in advance, but also knew what the condition of the market was. This is clearly deeply leading negative/distribution, which was the entire point of the February cycle.

 On a 15 min chart we have essentially the same thing just with more detail/noise, leading negative at the February (larger) cycle.

Looking at the trend of the 1 min chart you can see the distribution trend at the February cycle's stage 3 top and even as it is in leading negative position, you can see accumulation from the 27th for the smaller cycle as both stage 3 tops are now aligned. To the far right there's a small positive divegrence in a deep leading negative position, this is exactly why Wednesday's put position was expected to only last a day, but also why I said, "I'm going to enter what I think for the moment, will be a short term trade, however the longer term set up I don't think is far behind"

 On a SPY 2 min chart (locally) you can see the negative divegrence and reason for the Put position and why it was closed as well yesterday, you also see in yellow, price in an area that would or could be considered a head fake are or bull trap, but price action there is VERY tame as those head fake moves generally are convincing, meaning strong.

 The 3 min chart shows the same distribution signals for the Put trade on Wednesday as well as reasons to close it yesterday, as you saw, I didn't expect it to last much more than a day, but it was a good set of signals worth trading. So far the positive divegrence intraday that closed the Put trade hasn't led to much, that could be NFP or op-ex related or just the stage progression.

In this situation, the VXX signals are the tie breaker and have been for a while.

 This is the same 3 min chart, just to show you the trend, this is CLEARLY negative, the shorter trend that's in stage 3 is in leading negative position so any head fake move, no matter how strong from here forward really has strong probabilities against it holding which is the definition of a head fake move.

 As far as the shorter cycle, it was defined by a 5 min positive divegrence on 3/27, the first one in weeks, it's stage 3 area is defined by a 5 min leading negative/distribution. Thus, ANY MARKET STRENGTH OR ASSET STRENGTH, I WANT TO SERIOUSLY CONSIDER USING TO ENTER SHORTS OR ADD TO SHORTS.

By the time the VIX futures divergence is flying, we won't have much time left to get organized.

And the SPY 10 min chart brings us full circle as we started with longer charts above. I think both the larger and shorter trends are clearly in distribution and at a possible head fake move as so many of you have written me about the last 2-days.

As for the other averages, we don't need to go through the entire staging/cycle thing as the SPY works fine as a proxy for the large market averages.

IWM

 IWM 1 min chart with a positive intraday yesterday afternoon, this was in no way strong enough to trade so I just left it alone and let it do its thing and follow along until the set up emerges.

You have to look at this 3 min trend chart of the IWM more closely, but you can see where it broke down from stage 3 to stage 4 and just like the initial break of the neckline of a H&S top, we got the volatility shakeout of new shorts that I went over several times yesterday, that means although the IWM is not at the same stage, it is in the same position to move with the market as the volatility shakeout should turn to the downside the same time the broad market transitions from stage 3 top/distribution to stage 4 decline. The IWM should move to a lower low and establish the stage 4 decline.

 This IWM 5 min chart is interesting, although it's a very close up view, note the positive yesterday (mentioned above yesterday afternoon), still not worth the risk in trading it considering where we are.

 QQQ 2 min smaller trend from 3/27 accumulation or stage 1 to what is clearly stage 3 distribution/top and acting pretty bad, it could see some counter trend moves or bounces intraday and I want to use those to enter short positions on price strength/3C/Trend weakness...

QQQ 5 min with the smaller cycle from 3/27, remember it was the first in 2 weeks to make a 5 min positive, still not worth the risk of trading for me, the distribution we are seeing stages this at a solid 3 and in to stage 4. With the short and longer cycles aligned, the break of the smaller trend to stage 4 should lead the February larger trend to do the same.

Thus the only real business we have left as far as timing is the VXX/VIX futures, as they have been for weeks, they remain the key to timing of the pivot.