Quick Market Update

Honestly I think we can all see that the momentum and market strength as hollow as it was as it was short covering and weak retail hands buying, is not on display today.

Friday in the The Week Ahead post, my take on the signals from the last two hours of trade as well as everything we know about this move since before it began around mid-May when we knew something was building, seems to be culminating, I do think the F_E_D Correlation post was very on the spot as far as the market front running, the richness of the market vs the known F_E_D balance sheet extrapolation all the way out the the end of QE3 as well as the 25-30 point divergence in CONTEXT, all pointed to a head fake move as we suspected mid-May.
In any case, from Friday's The Week Ahead


"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. I'm not sold on one lump sum move, but rather more of something like a stair step, when $1900 is broken on the downside, I think that's where we get a lump sum move."

I purposefully tried not to draw on these charts, some do have reference to the bear flag where we saw accumulation and knew that it was not a real bear flag, but a bear trap to set up upside momentum which turned in to a short squeeze as well as the retail "confirmation/breakout crowd" chasing.

Take a look at some of these charts and how quickly they are falling apart (this doesn't mean we won't still see intraday bounces and lots of volatility, Wall St. is never going to make things easy), but there's a distinct change in character and it was obvious in ROC of price.

 The 1 min DIA (and other averages) steering divergences which looked more like "in line" started showing significant changes in character Friday, today a lot of them are just adding to that downside in a big way.

 There's migration as well, even though this is a closer view (as the trend view has been pretty bad through the entire process from mid-MAy).

 Look at the migration to the 3 min chart and the ground lost really since about 12:45 today AND ON A POMO DAY NO LESS (I guess we know what those are worth now).

 And 5 min migration...

The IWM was showing signs as you know from numerous posts last week that it was going to be showing better relative performance than the other averages as it had fallen behind them, that "better relative performance" turned in to the best week for the R2K for 2014, but again on pretty weak ground, short squeeze covering and weak hand buying as we know fairly certainly that the pros have been selling for this entire period and that's not just me saying that, 3C showed us, but that's hard facts and figures from BAC and GS.

 The IWM 15 min is actually in a very ugly downtrend or had been with perfect 3C confirmation, the run on a short squeeze in most shorted names and small caps sent it higher, but there's absolutely no confirmation whatsoever, which makes SRTY long a very interesting prospect, although the R2K doesn't have the same lofty position as the other averages despite the strong relative performance.

QQQ 1 min, as I said Friday, it was the first day we saw real divergences in the 1 min timeframe, look at what was added today.

And the 2 min which I tried to balance between trend view and intraday so you can see both, that's a lot of leading today.

QQQ 3 min, also trying to balance between trend view and intraday, the last 2 days have seen marked deterioration, thus the reason I felt this (what I fell 90+% certain is a head fake move >SPX 1900) is wrapping up this week.

SPY 3 min trend view showing the bear flag we first saw and knew something wasn't right, just after I had said that I thought the market would not see a serious downside move until that 3 month range was head faked. Then the Crazy Ivan which gave the market sling shot momentum around the bear flag with initial short squeezes.

Look at the new leading negative low in 3C! Add the price differential and you have a major divergence, this is what 3C was designed for, these are the kind of charts, i don't ignore.

 SPY 5 min seeing migration just from the faster intraday charts, also nearing a new leading negative low.

 And the trend of the short squeeze from the bear flag and Crazy Ivan through and above $1900 as we expected or at least thought was necessary before any downside reversal could begin, if you look at the BofAML data, and the new Institutional selling and new Retail buying during the same period, YOU CAN UNDERSTAND WHY HEAD FAKE MOVES ARE SO COMMON.

This is the 1 min intraday, the market is fighting to get a toehold, so far most of the Index futures have at least a reasonable 1 min intraday positive divegrence.

This doesn't surprise me, there are some assets I have seen that are on my short list (either long or short) and they do look like they are a day or two off, others look ready now and those are the ones I'm trying to get out there.