Opening Indications

Here are the charts, most of which you probably saw yesterday, they left 3C in a pretty bad place for this morning and as usual, 3C/price action almost always picks up the next regular hours trading day right where it left off at the previous close.

Russell 2000 Index futures had the worst overnight 1 min 3C intraday chart,

 TF- Russell 2000 Futures 1 min 3C chart overnight and in to the open, leading negative.

This isn't surprising as the IWM saw distribution in to the afternoon short squeeze gains, I can see the squeeze in our MSI (Most Shorted Index) as well as last night's Russell 2000 Advance/Decline line, the rest of the market was not a part of the squeeze,  but as we have seen for almost 2 weeks, the Russell 2000 had been the major under performer, it just hit the upside target that I posted about 13 trading days ago now (almost 3 trading weeks) and took a very long time just to break the minimum target.

Smart money rarely distributes in to anything but higher prices and demand, not only because it's the best tactic, but in the size they trade, it's really the only tactic unless you want to go AAPL 2012 and all try to sell at once and see your asset nearly halved (-45%) in 8 months off new all-time highs.

 The IWM 2 min chart is also clearly showing distribution in to the higher prices, the more detailed 1 min above this one shows it specifically in the afternoon where the short squeeze picked up the most momentum.

As mentioned yesterday, the Q's were in line, 3C price/trend confirmation, but then again the NDX/QQQ barely moved yesterday.

The 2 min trend shows the reversal process as the change in price's trend visible as a Rate of Change in price falls off, also shows the stage 2 3C confirmation of the move up and stage 3 distribution/top or reversal process which is the same as a topping procedure.

The DIA started this morning already in leading negative position, also note the distribution like all of the other averages, right at the European close AGAIN (orange arrow)!

The SPY also started today in leading negative position, once again the European close brought on more distribution/selling the last 2-days (this week), the close for Mon/Tues is at the red arrows, note the change in 3C leading to and after. This was evident most of last week as well.

And the 2 min SPY chart left the SPY opening to a leading negative divegrence today.

The MSI is seen yesterday afternoon supporting a Russell 2000 short squeeze. There was an attempt to continue a squeeze on the open that failed almost right away.

As for the entire cycle from our after the close July 31st call for a bounce based on horrible breadth indications, the stages are present just as they should be, a week of accumulation at the stage 1 base, then mark-up at stage 2 and distribution/top at stage 3 as the ROC in price is clearly making a turn to the right, typically a rounding top, stage 4 is next which you'll see below.


Other than breadth, a couple of days in to the base, HYG made it clear it would be a lever to support the market after all, it has been rallying on half the average volume for almost a week and has put in 3 consecutive new 2014 record lows in volume (excluding holidays) the last 3 days. In other words, they knew the market would need HYG's help.

HYG 2 min from stage 2 mark up/confirmation to stage 3 top which is almost always larger than a stage 1 bottom, we are now in to the 8th day in HYG, the equity base was a trading week (8/1-8/8).

 HYG's 5 min 3C chart showing the end of stage 1 base, stage 2 mark-up/confirmation and stage 3 distribution/top as HYG has the cleanest lateral top.

Normally, with such clear resistance, this would be one to watch for a head fake move which normally would be a favorite put set up, however I'm not too fond of the volume in options here, however it should translate over to the broader market as well.

And the 30 min chart showing a complete cycle including stage 4 decline.