Knee Jerk Follow Up

In a follow up to this post just after the F_O_M_C minutes were released, Hawkish F_E_D Minutes Cause Knee Jerks with Accelerated Distribution it's easy to get caught up in a strong price move and believe there's something more, however without even looking at 3C and just reading the highlights of the F_E_D minutes, it was an obvious knee jerk move which have their purposes.

I posted the initial distribution in to the move, here's what things looked like just before the close.

 After the immediate reaction to the downside on hawkish F_E_D minutes which basically say what we have already said and known for almost a year now, the knee jerk move higher showed immediate distribution and continued through the close, eventually overwhelming demand and starting a move down toward the close. However most retail traders will only see the move up, it wouldn't be surprising to see them to continue to chase it. Even though I think we are already in the reversal process, this is an extreme version of some of the volatility that should be expected, a nice predictable rounding top is not likely here as they want to keep the idiotic BTD crowd locked in for the first major break to the downside as they'll want someone to buy, it's like Pavlov's dog whistle.

Meanwhile the distribution in to higher prices was having a real effect on stocks.

The initial move on the minutes was an extremely bearish -1500 on the NYSE TICK Index, followed by the knee jerk higher in the channel and as distribution continued you can see the early warning of TICK falling out of the channel.

As I mentioned, an issue I'm very interested in, FAZ long and an XLF move above the range to enter it made progress toward that end. I don't think the break below XLF's range was coincidental, I believe it was the short squeeze, momentum generating move that was needed to break the level as smart money apparently has the same ideas about entering at the same place as I do, actually it's the other way around, I have the same ideas as smart money has.

As for XLF...

 The target XLF head fake move that I have waited for since June/July to fill out the FAZ long is now only ten cents away on a closing basis and $.13 cents away on an intraday high basis.

Patience pays...

And as for XLF, the earlier leading negative divegrence before the minutes makes sense as it forecasted a move lower, the move at "b" is the power of contradiction, this just continues to confirm that the best entry possible in XLF short or FAZ long will be well worth the wait.