Opening Indications

I don't think the pullback we just saw should be a surprise, in the What's Really Moving the Market post in pre-market, I was already showing negative Yen, USD/JPY and ES divergences that all suggested a pullback, but also a 5 min USD/JPY positive that is in formation so the pullback expected (the volatility may have been a bit surprising, but as noted yesterday (and many times before), volatility always picks up between the transition from 1 stage to the next, in every single stage (from 1 to 2 and 2 to 3 and 3 to 4 and even 4 back to 1).

Also I had written about the reversal process in this post A.M. Early Update shortly after the open, however the pullback started before I finished the post.

Probably the two most important numbers to keep an eye on right now (as far as getting to a bounce that can be shorted) are USD/JPY >(above) $102 and Russell 2000 > (above) $1114.54 (its 200 day moving average which it broke under yesterday after 7 threatening attempts over the last month. What's under the R2K's 200-day moving average? SUPPLY OF COURSE!

As far as signals or opening indications...

 SPY 1 MIN IS IN LINE, NOTHING INTERESTING, THE OPENING WAS LEADING NEGATIVE AS EXPECTED WITH ES NEGATIVE IN PRE-MARKET AND THE CURRENCIES THAT MAKE UP USD/JPY WERE THREATENING "MARKET PULLBACK".

 The 2 min SPY is starting to accrue the positive divergences and we have a relative positive in place on a 2 min, there's still significant work to be done and we should remain in a choppy, lateral basing area for the immediate near term.

 SPY's volume looks like short term capitulation as the pick up often signals a climax of sellers, I also expect a rounding process or a "W" type process to start to take shape shortly.

 DIA's 1 min with a couple of positives.

IWM 1 min positive on the volatile dip this morning.

And the 2 min putting together a slightly larger positive divegrence, again this is a process.

QQQ 1 min with yesterday's positive and in line now.

The 5 min has a relative positive divergence so still very early in the process, there is a danger with such weak divergences (because it is so early) in place that they may be run over, this is why I maintain the few shorts in the trading portfolio rather than sell them because of an expected bounce to short in to. As far as a target, we first need to se e what kind of base forms, how strong the divergences are and how big the footprint is, but at this point I'm not expecting anything like a new high, more like a gap fill.

 ES with the pre-market negative and price making good on the signal, but a relative positive, meaning there was very little underlying selling there if any, more likely it was accumulated.

 The  NASDAQ 100 futures have a relative positive on the early /volatile dip.

And R2K futures look like ES/SPX futures above.

This is the $USDX negative divergence that would cause USD/JPY to pull back and with it the Index futures and market averages, I mentioned some of these divergences pre-market.

 The Yen still remains fairly strong so it's not ready to give up yet and let the USD/JPY rise  and I'll show you exactly why.

This is the 1 min USD/JPY, it needs work, but there was actually some improvement after the dip.

This is the same chart, but 5 mins, the base is forming and a positive divgerence is forming, but NOTICE WHERE USD/JPY PULLED BACK, RIGHT AT RESISTANCE AT $102 which has been a key level, above $102 and we should see numerous buy orders sending the FX carry pair and the Index futures higher on the move we are now expecting, the move we can finally short in to some size and not be concerned about continuing chop.


$102 is KEY!