Important Market Update

I was hoping I could get this together quickly enough before anything moves.

First, remember it's an op-ex Friday, even the weeklies count so the probabilities are the market stays fairly close to a pin and right now that's from +0.14% to -0.20% which I'd say is a fairly tight range and an op-ex pin, but as we have seen so many times before, most contracts are closed by about 2 p.m. and the market starts to move, the price movement isn't generally that interesting to me, it's the 3C movement during that period that gives some of the best information for the coming week.

We have positive divgerences in all of the major averages, but I want to try to show you why I've been saying the following comment and said it again yesterday in the EOD Update WITH EMPHASIS . This is literally how the comment appeared in yesterday's post linked above.

"UNLESS THERE'S A VERY STRONG POSITIVE SIGNAL IN THE AVERAGES, THE ONLY USE I HAVE FOR A BOUNCE IS TO SHORT IN TO PRICE STRENGTH AND UNDERLYING WEAKNESS, IT'S A FREE GIFT IF YOU HAVE THE OBJECTIVITY TO OVERCOME THE EMOTIONAL DIFFICULTY OF SHORTING IN TO PRICE STRENGTH, it sounds easy now, but when the moment comes and sentiment in financial media has changed, it's a lot different.

"Every boxer has a fight plan until the first punch is thrown""

I think after you see the charts and where probabilities and different cycles are, you might agree with me, I know it's hard to sit on your hands, but this has been the type of market that sitting on your hands is sometimes the best course of action, it's the type of market (the last month or so) that the name of the game is not capital gains, but capital preservation.

Here are the charts for the update.

 OK, the intraday 1 min SPY has made up alot of ground and has a leading positive divegrence at the time of this capture which will probably be 20 mins by the time I get it out to you. My guess is that we'll see an afternoon ramp job, but I want to check VIX futures and USD/JPY first, I didn't have time to yet because I'm trying to get this out as fast as possible.

 The SPY 2 min chart showing distribution at yesterday's highs as we know (as USD/JPY approached $102) and some migration of today's positive divegrence intraday.

Basically the same thing in the 3 min chart with a little less migration of the divegrence as would be expected

And  the same thing in the 5 min chart.

 I want to point out the 15 min chart as this is where the probabilities are stronger, it's a stronger timeframe showing more of the underlying trend, the heavier flows, those intraday positives are not  divergences I want to try to trade from the long side when a 15 min chart looks like this, but this is just the start of my example.

The QQQ looked better than the SPY on the close yesterday, it was already positive on the 1 mi chart, it has clearly added to that today with the positive starting yesterday afternoon around 2 pm.

The 2 min chart shows distribution of yesterday's intraday highs and a leading positive today so migration of the divergence is in effect and it is growing stronger intraday.

The 3 min chart has some migration as well.

Now look at the very same 3 min QQQ chart, but the trend...

This shows the short or medium term cycle that we entered a bunch of longs and closed a bunch of shorts on April 11-15th, that was a nice area to enter trades. By the 22nd we were getting negative signals and we were exiting longs. Look at 3C since then in what would clearly be stage 3 of the April trend, it's leading negative, even though we have some intraday positives, where do you think the probabilities are?

I'm not saying the market won't move up off those positive divergences, but would you think it's better to try to catch the long or short price strength? I want to trade with the probabilities and short the price strength, not try to trade it long unless as I said yesterday,

"UNLESS THERE'S A VERY STRONG POSITIVE SIGNAL IN THE AVERAGES,"

And by that I mean the kind that jumps off the chart.


QQQ 5 min with some positive action today, this isn't the very strong signal that I want to chase, it's the one I want to short in to a bounce.

Here's the 5 min chart's trend going back as far as I can to the large trend, the February trend (remember I said there are at least 3 trends in different timeframes all in either stage 3 or some area of stage 4).

We have stage 1 base in early Feb, I think the 3rd, stage 2 "Mark-up or Rally", stage 3, "Top/Distribution"  and in the QQQ's case, it went to stage 4 for the February cycle and retraced the entire rally, the other averages haven't done that yet (SPX and Dow are the furthest from doing that).

If you keep moving to the right we have the medium term cycle from April 11-15th and that's the one we started moving out of longs around the 22nd, since then it's been a lot of volatile lateral , stage 3 chop. We know what stage comes next, we know what the probabilities are.

The question is one of greed because we know it's probable we do get an upside move, but how is it best traded? For me , trying to hitch-hike an upside move without a VERY good reason to do so is just greed, and as they say, "Bulls make money, bears make money, pigs get slaughtered".

The overall trend of the QQQ on the downside has been confirmation.

This is the QQQ 15 min from the medium April 11-15th (start) cycle, then stage 2, then stage 3, you see the chop, is it worth it?

Hey, there can be a head fake move above the chop, we know that's a probability before stage 4 is entered, but is it worth it?

The IWM I captured fewer charts as I think I made the point, but still wanted to show it...

 The 1 min from distribution yesterday at the highs to a leading positive divegrence on the 1 min

and leading on the 2 min

We have a leading positive out to 5 min

However, look at this 15 min chart's trend from the February 3rd (large) cycle, the IWM like the Q's "almost" retraced the entire cycle, the SPX and DOW have not. There are divergences on the way down and some cycles, but the overall 3C trend is confirmation of the downtrend.

So I'd be careful with long positions, I'd much rather short in to price strength and 3C underlying weakness.

I'm going to look at the currencies and VIX futures.