Market Update

I'm glad I closed that XLF call this morning, that leaves me pretty much with most exposure on the short side. I will show enough charts that it should be clear why I'd like to add some calls back, but this early week pullback is a bit bigger than expected and I think the XLF calls would have had a hard time with theta decay as the larger the downside reversal process is, the larger/longer the upside reversal process will be. This way I'm pretty much aligned with short term as well as long term probabilities and I have the choice to add bounce longs if and when I see a strong set-up for them.

The USD/JPY carry cross has been largely responsible for leading the market today since just around the European open and it has a negative divegrence right now.

 USD/JPY 1 min since 11 p.m. EDT to present vs ES (purple), note how ES follows USD/JPY just around the European open.

So looking at the USD/JPY...

 There's a positive divegrence in the early a.m. hours as Europe opens and a negative divegrence now.

Additionally...

 The $USDX has an intraday negative that should pressure the USD/JPY lower and...

The Yen has a positive divegrence now that should push it higher also pressuring the USD/JPY lower and ES/the market along with it which is what expectations were Friday based on closing 3C signals.

The 10 year Treasury futures have a 5 min positive divegrence which should send them higher near term which would be in line with a market moving lower.

QQQ 2 min intraday has worsened as the day has gone on, leading negative. You could almost fade the market with a put, but it's a little too speculative for me.

QQQ 3 min is leading negative, much of the intraday damage done today.

However don't forget, the near term pullback expectation is only a small move, perhaps a gap fill and then some, the larger swing move still has a strong base and 15 min positive divegrence, this is why I'd be looking to add leveraged longs or short term calls on a pullback so long as there's good confirmation.

IWM 1 min is seeing a lot of intraday damage.

As is the 2 min and 3 min above so the divegrence (negative) is migrating to longer timeframes meaning it is getting stronger, but still very much within the realm of a pullback, not anything much more than that.

Remember the IWM 15 min leading positive divegrence and a complete base of over a week.

It's also worth remember the big picture and this IWM 60 min chart leading negative so even though the 15 min chart above suggests a strong bounce, ultimately this is the direction of highest probabilities which is down.

The SPY 2 min intraday is also leading negative so we have good cross asset confirmation.

 The 5 min chart has a small negative, this is about what I'd expect for a pullback. If the 5 min chart were worse, I'd consider a fade or downside trade, but without that I'd say just be patient and let the trade come to you.

 SPY 10 min still has a nice base and positive divergence in the Swing trade area so it should still move up near term, but again...

Don't forget the highest probabilities, this is a 4 hour SPY chart in a massive leading negative divegrence, thus I'd continue to use any short term price strength to sell or short in to.

Other than that, there's really not much that we didn't expect Friday other than this divegrence for a pullback being a bit bigger than initially expected, but that's usually the case with the market, "Take whatever seems reasonable and triple it".