Market Update

Lots of damage, but the IWM wants to bounce, likely needs to bounce after a 4% loss last week, there are probably more than a few market makers underwater. Yellen's comments today for all intents and purposes took the legs out from the market, but the initial reactions you see aren't how Wall Street works, they're too big, positions are too large, like the 117k Gold contracts dumped today all at once ($2.3 billion), that's not how Wall St. does business, they are quiet about what they are doing. Make no mistake, that dump of gold was intentional and was made to be seen, no firm would ever make a dump like that all at once unless they were trying to accomplish something and I'll show you after the close what that was.


I considered closing (briefly) my SRTY long (3x short IWM) and taking out a piggy back long in URTY (3x long IWM), but there's so much damage that the market gets unpredictable, like AAPL when it broke down so a call with a defined risk to act as a hedge works perfectly and leaves my big picture positions alone, I suspect I'll be very glad I did so very soon.

As for the IWM, like I said since last week, it has looked the strongest of the averages, it also took the worst beating and more today on Yellen (4% down last week wiping out all of 2014 gains), there are likely some market makers and specialists caught with inventory they need to dump at higher levels and that's likely what this is all about, but a rising tide lifts all boats as they say , just not equally. All of the ETFs of the major averages (except the  IWM, but close) put in short term "bounce" reversal candles today, most in the shape of a hammer, what is important is that all were on increasing volume, short term oversold from this afternoon.

As far as the IWM...

 IWM 1 min, this isn't a heavy accumulation signal as it's only 1 min, but it's right at and after the volume surge which despite what technical analysis tells you, is more often than not a short term reversal signal.

The real strength in the IWM is out here on 5 min charts which today only added to its divergence.

Even at the 10 min chart we have something akin to a short term or small double bottom.

This is why I was considering temporarily closing the SRTY which is one of my core short positions along with SQQQ and FAZ and opening a URTY, basically to trade, but I don't think this is the time to trade. Yellen's testimony was pretty much about as shocking as you can expect from her and was a lot more than anyone expected, most thought she'd carry on with her dovish drone, but she actually went for the legs of the market. Without the momentum stocks, there's not much left and they've already been sold off pretty hard this year which is why I have been saying it would be the momentum stocks like NFLX, FB, TWTR, P and AMZN along with IBB (NASDAQ Biotechs) which is exactly what she went after today, social media and biotechs, AMAZING.

 The 15 min IWM is not that impressive, in fact it's not bullishly impressive at all, if it had been I may have gone with URTY long, but being there's not a 15 min divergence (positive)of any significance and being the market is so torn up as you'll see below, not to mention the SKEW which remains in the red zone meaning traders and these are not retail traders, are buying deep out of the money puts and you don't do that unless you perceive a high risk of the market suddenly dropping and making those deep out of the money strikes worth something. Thus I'd be pretty remiss to be gathering the data for a market decline that I believe will be historic and then missing the trade.

 As for the 60 min IWM, well the chart tells the story, but it gets a lot worse than this even as price is nearly at the same level as March or recently was, while 3C is at a new low for the year, that might be acceptable and not a red flag if the IM was trading at $100 like last September, but not here.

The other averages got a little coat-tail ride from the IWM and from the intraday min-selling climax, but I wouldn't even open calls in those on spec terms, the 5 min charts are damaged and significantly so for 2-days. It use to be a Wall St. sponsored bounce ( and we know it's Wall Street sponsored because we could see them building it last week) would move up for 3-5 days after hitting a short squeeze before you'd see the first signs of distribution, this was on the first day, actually right off the open.

Looking at SPY 5 min just for context, 3C is already lower than the accumulation area from last week. Price was recently (this morning) near the highs from the start of the month, however compare where 3C is (between points A and B...compare both price and 3C's location at the relative same area).

 This is the Russell 2000 Futures, "TF" intraday 1 min, they show the same 1 min accumulation as IWM right after the Yellen inspired, "Don't fight the F_E_D sell off", but to overcome that little hiccup, price just needs to be pushed higher a the Buy the Dip mentality is deeply ingrained in retail traders' minds, but they don't even understand why buying the dip worked and why what caused it to work is no longer there.

It amazes me that traders just think the market will keep rising because that's what it has done, that they don't recognize it was the F_E_D who pushed the reach for yield and it's the F_E_D who is now exiting the market, obviously aware of the bubble they've blown , but trying to be careful not to blow it up too badly.


As for those 5 min leading negative Index Future charts like Russell 2000 futures...

 Today the Russell 200 caught DOWN to the divergence, short term anyway.

Here's the real problem and why we are past the narrow rocky outcrop...

 4 hour Russell 2000 futures with 3C at the lowest low o the chart, but the R2K isn't alone even though it has been the weakest performed recently...

This is SPX futures, note where 3C is.

And NASDAQ futures, not where 3C is.

So for now, I think the IWM call position is a smarter bet than dumping a core short to try to make some extra trading profits.

I'll have more in the daily wrap in just a bit.