Right now I'm trying to decide or discover whether we are seeing deterioration in the averages or whether they are pulling back to form a larger base and a larger positive divegrence, the difficult part is averages such as the SPY look more like deterioration and the IWM looks more like a larger base, the Q's to an extent as well and the DIA actually looks like it may be trying to form a larger base.
Here's the IWM as an example...
For most assets for the intraday chart to pullback, the 1 min chart will go negative, this is like intraday steering and has little influence on what is ultimately happening, but those divergences can migrate to longer charts like 2 and 3 minute and still be able to build a larger base, it just depends on how much it takes to turn them . The IWM's 1 min is leading positive despite the Post F_O_M_C pullback.
Take the Q's for example...
The 2 min QQQ has gone leading negative, but if it starts to move positive as price moves lower to the accumulation zone, we'd see longer charts like the 5 min chart below actually improve.
QQQ 5 min still in line. However if this negative divegrence on the 2 min. chart gets stronger it will eventually show up as deterioration on this 5 min chart.
The IWM is not acting like this...
The 2 min chart is in leading positive position as well on the price pullback.
And the 5 min chart is leading positive.
Charts like the DIA are also holding up pretty well...
DIA 2 min still leading positive and the SPY...
It has seen a little more short term damage on 1 min charts, but the 2 min chart is still holding up.
We'll have to wait and see if a bigger base is actually built, but as I said before, this is not a game changer, if anything it's a bit of noise at this point.
My main interest is in deciding when to enter some larger core short positions, I'd like to enter them on price strength and if we are going to get a small bounce, that's helpful, if it looks like we are not, then I want to get in to those positions ASAP, XLF is one that I'm focussed on now and NFLX will be within the next day or so I believe.
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