Market Update Intraday & Macro

You may have noticed I'm including a lot more macro market updates recently, I don't know if you had a chance to read the article I linked to the other day, "What makes a trader a good or bad trader" from a brain chemical point of view, essentially there's a simple motive that they have convuluted somewhat with brain signals, it's pretty simple though, it's the age old difference between those who can see a train-wreck coming, those who gather evidence that tells them a train-wreck is coming and those who assume however the market has behaved the last several years, it will keep on behaving that way, essentially the "It's different this time crowd" and there are plenty of people there to boost their confidence like CNBC or the sell-side.

However, ask yourself, "What are their motivations?" Starting with CNBC who will likely never say anything bearish about the market until we are in a bear market. What does CNBC do? What is CNBC's business model?

CNBC sells ads, they sell interviews with CEOs that sound like interviews, but are actually paid advertising. What does it benefit CNBC to be realistic about the market when it is looking bearish? Nothing. Most traders are long only so they don't want to hear about shorts and how many short recommendations have you heard on CNBC? I'm really asking because I don't know, I don't watch, but I bet it's very low to none. If you are the CEO of a company CNBC said to short, are you going to do a paid advertisement or interview with them?

What about the sell side like Goldman? Have you ever noticed how we always make money when we do the opposite of Goldman's recommendations? I stopped counting, but at last count we had 9 consecutive winners doing the opposite of Goldman's recommendations and the logic is simple, Goldman doesn't pay hundreds of millions of dollars a year to analysts and professional networks to give you free trading advice when the market is a zero sum game meaning for GS to make money, you must lose money and if you followed any of their free trades, you lost money at least 9 consecutive times since I stopped counting.

So we are left with the evidence we gather, hopefully it is unbiased (the reason I don't ever watch CNBC) and confirmed through multiple assets.

As for intraday, the early accumulation (small) from Tuesday was expected to give way to a head fake lower low/stop run that would be accumulated, that happened on the gap down yesterday, then I expected more accumulation and a bounce that we could ride as a long piggy back trade, but the real trade was to use it to short in to higher prices as they can't hold for much longer now that right shoulders of H&S tops are breaking everywhere. What comes after a decline from a right shoulder which looks like a nasty correction in itself (it would be about -7% in the IWM)? A break through the neckline/support of a major top. There are a lot of details as to what happens next , when and where, but the story almost always ends the same as the two forces that drive the market continue to do so, Fear and Greed and Fear has always been the dominant market force.

For example... The bull market that started with the 2002-2003 base and led up to the 2007 top was about 5 years on excellent economic data as the economy was supported by consumer spending which was a result of equity from higher home prices, I'm not arguing this was a healthy model, just that the economy was much healthier at that time than it has ever been since 2009. The 5 year rally sent the SPX up approx. 100%and in 16 months the market took back the entire 5 year rally, plus about another -13%.

Intraday I'll use the SPY, I don't usually expect much on a Friday with options expiration (even weeklies) until after 2 p.m., then we tend to get excellent data. So far the market is trading as if it has been pinned as is normal for an options expiration Friday.

 Intraday there was 1 positive divegrence, but it seems only to halt the SPY from falling more and likely keeping it in the range of the max-pain pin.

 The 2 min chart shows the same and in line after that.

A larger view of the 2 min chart with initial accumulation on the 8th, distribution in to the afternoon on the 9th and a gap down which was accumulated on the 10th, then distribution in to the afternoon yesterday (10th).

While there may be a bounce/base brewing, the action thus far is not clean as I would have expected fro a larger base, it looks more like "maybe" the start of a base and interrupted by options expiration and the max-pain pin at best.

 The 3 min chart has several divergences since the 8th, but what has the bottom line been for price? It hasn't been a clear positive divergences, it has been more like a clear price range the market has been held in and when it threatens to move to high it sees distribution and when it threatens to break too low it sees accumulation, but on a very small scale. "P"= positive divergence, there wasn't enough room to draw it in with a white arrow.

 The 5 min chart is the closest to any trend at all, but even here it's fairly weak and undeveloped and not well confirmed.

Believe me, I'd like to see a bounce to short in to, but Im also ready if we don't get one and will find plenty of opportunities along the way.

 The SPY 10 min shows a lot of recent, very strong damage, this is a closer view so you can see more recent action, but looking at the trend in context...

 It gets a lot worse and this is hardly the worst of it.

On a macro basis, the IWM multi-hour chart (2)

 We have a H&S like pattern confirmed by volume (they never look like the textbook). Look at the 3C trend through the shoulders, head and the final right shoulder at a new leading negative low.

Also note the right shoulder has ALREADY BROKEN, this is a market that topped in March and is now close to moving from stage 3 top to stage 4 decline.

Here I overlaid the QQQ (red) on top of the IWM to show they are not that different and see distribution at the same places.

 QQQ 60 min chart and what would correspond to the IWM's left shoulder, head and right shoulder.

The DIA 2 hour trend speaks for itself.

However when I say an "Opportunity that no one alive has seen", this is what I mean as studying historical markets is one of my pastimes.

 These two charts are of the same asset, the Dow-30, they are the same indicator (3C) on the same scale (zoom). The above is the negative divegrence leading in to the 1929 top, yes, they knew about the market weakness well before the actual crash and just like now, smart money back then did what they could to get out of the way.

Now compare the same settings to the Dow today.

DJ-30

Notice anything?