A.M. Update

We find ourselves looking at a rather ugly gap down this morning (below SPX's lows yesterday) which is only the open and it's a long day and a lot can happen, but as of Friday just as we expected a head fake move above the multi-month range and confirmed a head fake move above the range, Friday in The Week Ahead my feeling from the charts was,

"Looking at the 3C charts in to the close in both the averages and futures, my feeling is the head fake move above $1900 which was resistance of the 3 month range and the area we expected a head fake move which in my opinion is more than large enough to do what they are intended to do, will start being resolved to the downside next week, it looks from the 3C charts going in to the close that this will likely start early next week"

Since then we've seen a drop in the ROC of price until we were at basically flat levels yesterday, a total stall which is part of the reversal process as sharp "V" turns or reversal events are exceptionally rare. Yesterday's close left us with a bunch of Reversal candles, and the process for the first two days of the new week...

Monday and Tuesday of this week show a total loss of momentum, but more importantly, the rounding "U" shaped reversal process. I'm not sure whether to count the yellow area as the reversal process, seeing where distribution has been in extraordinary strength, I'm inclined to follow the "Igloo with Chimney" rounding top (red) . In any case, you'll probably remember the seemingly bullish increased price ROC is actually a change in character that often precedes changes in trends.

In addition the strength of distribution as soon as we crossed the top of the range blew away already incredibly strong leading negative divergences as BAC and later GS both confirmed, Institutional players have been solid net sellers in everything but utilities, a defensive sector.

Overnight the USD/JPY Carry trade broke support at 102.20 and then right through 102, Index futures followed it down.

USD/JPY 5 min chart.

The Bank of Japan will likely try to defend USD/JPY $102, you'll see by the next chart...

4 hour USD/JPY, note the range as the BOJ tries to defend against a strengthening yen, but  also remember how dislocated ES (purple) is from the correlation, it has a long way to go, essentially all of the move above the range and probably most of it below the range, at that point few pros will be left in the carry trades at 10-100x leverage, every tick is a killer.

There are some rumors that the F_E_D may decrease asset purchases by $15bn at next week's F_O_M_C, ending QE a couple of months early, also bringing interest rate hikes that much closer.

In addition, you may recall me saying the Financial sector hasn't been looking good, "You might want to start building a position in FAZ" (3x short Financials) as I have already filled out).

According to BAC today, 

"The number of new commercial loans made by BAC has declined notably over the first half of the year. Measured as an indexed level to cycle peak (which was December 2005), the data show that the recent drop was the largest since the recovery began."

IN ENGLISH., The destruction of new commercial loan creation saw the largest drop since 2008 Lehman, that didn't end well.

Still even with all of this news, Wall St. works weeks, months and years in advance, we've seen it on all of the charts, I still think we are headed back in to the range, when we move below it, then I'd say watch out below. I think I'd want to have all of my short positions in place by then, for now, 1 day at a time.