This is a strange looking market as most averages usually move together directionally if not pretty close on a percentage change basis, that hasn't been the case for some time and usually that's healthy rotation, but not in this market.
From the look of intraday futures as well as the market averages, it appears as if QQQ and SPY are set to start underperforming and IWM is set to way out perform,
still no where near enough for me to cancel core short SRTY even for a quick URTY trade, but on strictly a trading basis I would consider URTY long here or IWM calls, I may even add to the IWM calls which should be enough to not only hedge the SRTY position, but do so at a gain as well.
Here are the charts, this is a continuation of what we have seen all week in everything but the IWM which looks like it is still sitting in the cradle, getting ready for its move. I really don't want to call out Trade Ideas or add to trades in FB, TWTR, PCLN, NFLX, P, etc. until the IWM makes a move.
SPY 1 min intraday
no confirmation on the gap
2 min showing the volume event yesterday that often acts as a short term oversold situation, the opposite of what many technical traders think is happening, they think it is smart money selling, it's actually smart money buying, but in such small quantity, it's not more than a bounce and it's used as a part of a larger strategy to sell/short in larger size in to demand created by headline new highs, etc.
3 min chart shows the obvious damage since the bounce started this week as we forecasted all of last week from Tuesday on for this week and specifically in Friday's the Week Ahead post.
The 5 min chart confirms this is the kind of bounce we expected, the kind that would be sold/shorted in to as both selling and shorting come across the tape as a sale.
This is why we want to use it for the same reason, follow in the footsteps of the elephants that move the market.
And just a reminder of SPY's overall larger perspective, or resolution of highest probabilities, another reason to use price strength to sell in to. Remember the 2007 top was also at all time new highs for the SPX.
QQQ 1 min non confirmation, meaning the gap up is being sold in to.
2 min non confirmation, just meaning the selling is heavier.
3 min meaning the same and showing a trend of it since last week's accumulation area on Thursday primarily, although the first hints came through last Tuesday.
QQQ 5 min leading negative, I don't even have to draw in the distribution trend, it's obvious and confirmed in other averages as well as ETFs/ inverse ETFs.
IWM has a different tone, this is the 1 min chart leading positive, it's sitting in a reversal process cradle.
Remember it was hit the hardest, down 4% last week so it has the biggest dead cat bounce or should have.
IWM 2 min, the same positive leading trend, very much unlike the Q's and SPY,
but the IWM has offered nothing to sell in to yet.
IWM 5 min looks very strong for an excellent bounce, this is why I may add to calls, but at this stage of the market with breadth falling off as I showed last night which I have only seen twice in more than a decade of watching the indicators,
there's no way I'm letting go of shorts/core shorts.
And a reminder of IWMs 15 min chart, the dominant theme is distribution and the current area is little more than in line, so accumulation for a bounce is there, but not so heavy that it's anything more than that,
but as I warned last week in trying to anchor expectations so you would not be fearful of shorting market strength, these moves HAVE to look convincing, even if you know they are coming they will still look very strong and cause you doubt, that is what they are designed to do, that's how they get bullish sentiment high so they can move inventory to weak hands and scare shorts out. This is a zero sum game, someone has to lose for someone to win.
The IWM cradle. There's support that is getting obvious, I'd look for a move below IWM support as a head fake move as a timing indicator to start an upside bounce, say under $113.75 area.
On a larger scale and showing how volume events often are part of reversals rather than what technical traders often assume.
Other than the open at +1250, the TICK has been very mellow. If you can draw trendlines and then look for breaks of those on TICK, it can be an early warning indicator of intraday moves.
If I add to IWM calls I'll let you know, soon we'll be adding to shorts, but I think the momos and IWM/small caps have to move first.
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