S&P Quick Look

If I didn't already know what I know about the 3C charts and path of highest probabilities and expect a cycle bounce (which we first sniffed out the hints of July 31st, closed some shorts and looked at some long piggy back trades the next day, Aug. 1 and entered some a couple of days later during the base building) I'd be very suspicious with this ultra-low volume move, lack of follow through, dispersion of the averages, bond yields and on and on, but none of this is a surprise, this is the kind of behavior we've been calling a week in advance as the cycle moves through various stages, it still ends the same way no matter what the details are along the way, it fails.

Interestingly the Dow was only about 16 points from a record close yesterday. Many may not remember it, but the 2007 top ended with record new high closes in the Dow, S&P and Russell 2000.

In any case, the head fake move is such a solid staple of reversals, especially highly visible reversals, it's hard to discount it even on a long 3-day weekend with a "potential" Russian incursion in to Ukraine and escalation by all parties involved from the US to Europe, NATO, Russia, Ukraine, the UN itself. Years ago I'd probably have said, forget any chance for a head fake move and take whatever you can get in the area, but I've just seen it come through too many times in too many circumstances in which it should not have.

Looking at the SPX and it's beyond dismal performance at +2000, from a purely technical standpoint, the first test I would have expected would have been to the breakout point at 1991.

Interestingly...

 On a 30 min chart, it's the 50-bar moving average I'd be watching if I didn't already feel (not to be over-confident) I knew how this script ended before it even began which was clearly the case as I laid out the reasons for closing my Financial short, FAZ on Aug. 1 with the expectation of adding it back at better levels above the former XLF highs before a new leg to the downside as this clearly set-up cycle runs its course. Here the 50-bar 30 min average breaks and tests...


 1991 this morning...

A failure of 1991 (from a purely technical point of view without 3C insight), should send the SPX down to the 50-day, at least this is what technical traders are looking for on a failed test,  however as I said above, I'm not ready to write off an upside head fake/failed breakout move yet, they are the downside momentum jump-starters and the best entry, lowest risk with best timing that we have and they are high probability.

 The 1 min 3C SPY positive from yesterday is already destroyed, but the divergence went out to 3 mins.

Here's the 3 min chart, so while we sit around the test area, I'll be watching for signs of strong distribution or shoring up the averages to make that head fake move.

Really this Ukraine situation was not part of the planned cycle, it just fell in at an interesting time in which we have a 3-day weekend and investors will be loathe to hold over the long weekend as long as tensions in Ukraine remain elevated and even worse, uncertain.

We'll keep an eye out for any moves that give us a hint as to whether a head fake move will be cancelled which I doubt or perhaps even pushed off until next week which would be my second highest probability and canceling it altogether would be my lowest probability.

Just for giggles, here's the MSI this morning and the TICK data through the entire cycle.

 Absolutely no help whatsoever today, the entire market is in a risk off mood right now.

The recent TICK data shows yesterday afternoon and this morning hitting TICK extremes of -1250.

And my custom TICK/SPY indicator shows (even without 3C), the deterioration of this move. Remember TICK is the number of advancing NYSE issues less the number of declining issues. As the rally has moved higher, the advancing issues have fallen way off and are now favoring the declining issues, which is what you'd expect to see at a reversal process pivot. 

The only thing left for timing and entry's sake is a head fake move to the upside. Perhaps the Dow provides the incentive?