Starting fresh on a Monday sometimes it's easy to forget what the trends in underlying 3C trade were last week so I want to give you a quick recap and update for this morning's opening indications which have been in line per 3C as well as TICK data, not too insane on the TICK downside, but a solid -1000 and trend down.
I'll use the SPY as the main example and fill in the rest of the averages.
This is the SPY 5 min chart. I am now viewing the divergence at point "A" which saw heavy, immediate distribution as soon as it gapped up as a separate event from divegrence "B".
In fact I wouldn't even give divegrence "B" very much credibility if it weren't for the IWM which really had not gapped up from divergence "A" but seems to be building a larger A+B, otherwise if it weren't for the IWM, I'd not be considering a bounce to the extent that I am now which isn't to say a whole lot of good about the market, it's really one average that is an outlier and has seen the most damage, therefore is the most oversold/ However, that being said, where we are in the market, things like oversold/overbought don't matter, what matters is Wall Street's perception and even set up cycles they have invested in they will abandon immediately if they feel they are in imminent danger, that's what happened with the AAPL short we had at the AAPL highs and a bounce cycle that was set up, it was abandoned on the news the Third Point had sold its AAPL position which started the -45% , 8 month AAPL decline. This is why the extent of my long exposure has been hedging with IWM calls which I know the maximum loss and am willing to accept while leaving the larger shorts like SRTY, SQQQ and FAZ in place.
SPY negative divergence Friday afternoon which is why I expected a gap down today as I said,
"3C tends to pick up right where it left off , even over a 3-day weekend".
This is the 1 min intraday chart showing Friday's negative divegrence, although price action "seemed" strong Friday, it couldn't hold for more than a day, that's 3C's edge,
the ability to contradict price.
Right now intraday trade has a VERY slight positive, almost in line, this is not the kind of accumulation on a move lower I was speaking of last week.
SPY 10 min from the first accumulation point, you can see it was heavily distributed in to on any price strength above the cycle set up at the July 10th lows.
This is hardly the extent of the damage, this is the same chart with a little more context...
10 min SPY and this really is no where near doing the situation justice, it is much worse than even what is portrayed here,
but just as 3C contradicted price action Friday, the longer term or bigger picture has 3C contradicting a much larger area than what we see above, this just seems to me to be a pivotal point in market direction.
QQQ 5 min with the 2 separate cycle "set-up" accumulation areas. The distribution after A is what tells me to view these as two separate events, only the IWM looks like 1 event.
Furthermore the accumulation at "B" is already nearly spent as distribution Friday was heavy in to the bounce.
QQQ 2 min Friday afternoon and the reason I expected the market to open weak Monday
Intraday the 1 min QQQ is almost perfectly in line,
again this is not the accumulation in to lower prices that would tell us something about the market preparing for a larger bounce, it still may come, but it's not there as of yet, so far just 3C confirming the damage this morning.
This small 2 min intraday divergence wouldn't be anything more than intraday movement, it's not the accumulation i to lower prices that tells us a bounce is high probability, it may develop further, but so far there's nothing too surprising in the market this morning and the overall weak tone persists.
The IWM, even if it does get off a bounce of some consequence is in big trouble as we see again the power of 3C contradiction of price in to the highs,
which you should note takes place just after Q2 window dressing ends, a trend seen everywhere in breadth indicators, leading indicators, credit, etc.
This is the ONLY reason I suspect the market has any ability to bounce, the IWM 5 min positive,
remember the IWM never did bounce with the rest of the market after positive divegrence "A".
Whether this hold or not is what I'm trying to determine and lower prices are a way to help determine that, so far there has been nothing supporting a bounce as we have not seen accumulation in to lower prices yet.
IWM intraday 1 min, again this isn't much more than intraday steering divergences and not strong at all.
This morning's TICK trend at -1000
And my custom SPY/TICK indicator in line with price action.
Thus far it doesn't look like there's anything interesting in underlying trade, it looks like the market is just confirming the weakness in price. We will see some intraday bounces I'm sure, it's way too early to expect nothing but a straight line trend.
I probably don't have to say it, but for the first time in 5+ years the market is operating as a discounting mechanism as it should as the F_E_D pulls away so any escalation in world events is likely to have some impact which is one of many reasons why I'm keeping core short positions in place.
No comments:
Post a Comment