Broad Market Update

This update isn't too much different than what has been posted intraday and the daily wrap posts from this week for the most part which are pretty close to on target from Friday's "Couple days" of upside left before turning sideways and starting the reversal process and pivot, although each average is a bit different. The important thing is that the signals are what they should be and that looks pretty darn good which is one of the reasons I went ahead (even though this is early in the reversal process) and added back my core short, FAZ which allowed me to keep the initial 8+% gain and avoiding a rough -11% drawdown which would have eaten all gains, plus this allows me to re-open the FAZ position which was my intention all along at a much better risk/reward area.


The key of course is the broad market... Hopefully the Daily Wrap posts as well as the cumulative market updates have already laid down the broad strokes.

 The increased downside leading negative divergence's rate of change is right at the expected area, this week (see Friday's "Week Ahead" post).


This is the intraday chart after the minutes were released (SPY) with the distribution in to the knee jerk as shown last night and as we move in to higher prices today, again there's distribution. By this time the pattern oif selling in to higher prices should be very clear as the upper standard deviation channel of VWAP has been the target zone.

This is migration to the 2 min chart specifically since yesterday's SPY knee jerk move after the minutes.

The Q's trend is right where I want to see it and where Friday's forecast for this week assumed it would be by this time in the week, much like the SPY.

The migration to the 2 min chart also shows the same trend, again starting this week.

The larger picture has been the 10-15 min positive divegrence charts, as you can see the deterioration that has been a bellwether  is turning dramatically lower on a strong timeframe at the exact place expected to see it.

The IWM has been lagging badly, it wouldn't surprise me to see some relative outperformance soon. This is yesterday's selling in to the knee jerk.

The IWM 15 min chart shows the major divegrence from the top of what I've been calling its right shoulder to the far left. Even for a bounce/rally, the move is well within the context of a normal retracement in a H&S pattern or any other downtrend, it's really not special in this regard for the IWM.

The most important signal for the immediate future is the divegrence going relative negative and this week leading negative.

Combine these charts with the Index futures and we have a pretty solid case that we are at a pivot area or an actionable area.

 ES 30 min chart from in line to leading negative, again most of this is during this week where it was expected to really deteriorate.

The same for the NQ 30 min chart

And we have clear signals as far out as the 60 min Index futures like this NQ.

The point of the above information is that we are now at the second pivot or an actionable area and the larger and more important of the two pivots (the first to the upside off the base and the second forming now to lead the market /IWM to a lower low which would see several major averages break significant moving averages).