Futures Update

Hopefully we'll get a little bounce in the area today, whether we do or not, if you are looking at positions as longer term trend/position trades, I really don't think a bounce intraday makes that much difference (going back to weighing the attempt to top-tick the market vs just getting in at a good area and sitting tight).

The TICK Index is flattening out, although at the bottom of today's downtrend after poking below -1000 multiple times.

SPY is putting in an intraday positive divegrence on the 1 and 2 min charts, the 3 min is destroyed on the day which is in line with price movement which has taken back virtually all of yesterday's gains, the 5 min chart is leading negative to the levels of earlier in the week when the positive divgerence on Monday and early Tuesday was put together, which was our "Week Ahead" forecast for this week from last Friday, with decay in to or just after the F_O_M_C.

There are a lot of things not visible on the headlines like "S&P makes all time new high", such as a 16 point advance in the Black Swan Index since Wednesday/Thursday putting it near all time highs since the indicator has been publicly published by the CBOE, meaning there are some very scared deep pockets out there willing to buy deep out of the money puts, and there's only a couple of reasons you do that and "The market is going higher", isn't one of them. Breadth is another one you won't see on the headlines, in fact often you'll be told to ignore it, these are the things that are clearly apparent after its too late.

In any case, the Q's which have remained fairly strong in underlying trade for the week off Monday/Tuesday's positive divgerence are now coming apart a lot faster, a lot of damage on the 3 min chart and migrating to the 5 min. Intraday its 1 min chart , like the SPY is trying to get a positive divgerence going, these are not significant timeframes, in fact we pretty much use them only for intraday signals and price moves, next to a 5 min chart, although the difference doesn't sound large, it's an enormous difference.

IWM which is one of my best performing shorts (other than HLF at present), short via SRTY, is pretty much in line on the downside, no attempt there to put in an intraday positive divgerence.

Finally the Dow is also trying to put in an intraday positive divegrence.

One of the uglier indications today is not only the lack of a short squeeze, but the actual decline of the Most Shorted Index, now looking like this.

I would call those shorts moving lower an important near term trade signal, while I'd call the 16 pint, 2-day gain in SKEW, big trouble on virtually any timeframe.

As for HYG, it's still providing as much support as it can (price only) intraday, I'm pretty well convinced that this was prep work to get the market out of an ugly place as SPX had a solid trend of lower lows and lower highs last week and in to a more pleasant environment for one of the biggest, over-hyped IPOs ever as BABA traded high enough today to eclipse both Chevron and Walmart's market cap.

I'm pretty well situated on my market analysis and what needs to be done now so I'm going to get to that which is individual asset positions, but I wanted to give you a broader overall look so you have a context to place these in as price movement is deceiving. I'm going to start with the macro picture in Index futures and work to the shorter term which encompasses the mini cycle of this week in which the stage 1 base was Monday's divegrence and the first couple of hours of Tuesday, obviously meant to work hand in hand with HYG's support as they have run together tick for tick all week until today. Hopefully this will make you more comfortable with where the market is at looking at it from a different perspective.

 ES/SPX Futures 4 hour chart which is the macro view. The first red divegrence (arrow) was the decline that cost the SPX 4%, 2% down on July 31st alone. The IWM on the other hand was down 8% on the same divegrence. The dip to lows right after that is where the 1 week base/accumulation for the August cycle was put in. This was in my view (you can read the July 31st Daily Wrap and see my opinion of what was coming and why, a full week and a day before it came), bases entirely on a wickedly oversold market that shouldn't have been that oversold (all market breadth) on such a small S&P decline, the August cycle in my view had very little to do with moving price and had a lot to do with repairing breadth. Unlike the 2007 new high in the SPX which marked the top of the bull market to the day, breadth this time around has deteriorated since about the same time 3C has deteriorated in the red box, showing that there was no fundamental market strength, none of the gains in the averages were based on more stocks in the average moving up together, in fact more stocks were moving down during the process. Could this be Alibaba related? I can't say to what length these 5 banks would go to ensure they rake in a fat payday of historic proportions, but perhaps, they definitely don't want an IPO launch in to the preceding downtrend that was in effect,  but everything about the August cycle says, "Ginger Bread House" as internals either didn't hold repairs and failed to make adequate repairs and the fact they actually declined.

 NQ/NASDAQ 100 Index futures look similar, the key is to the far right as the August cycle has led to a new leading negative low, this isn't some errant 3C signal, breadth charts support everything you see above. If you compare price at the white box and where 3C was at the time and compare price now and where 3C is, not only is breadth rotten, but 3C money flows are as well, of course the two go hand in hand, stocks don't decline without money flowing out of them. We are in a very weak position.

 TF/Russell 2000 futures on a 4 hour chart show the right shoulder as I have the IWM drawn in a slanting H&S and the decline from there, it's not far from the neckline at all.

My SRTY position is acting very well, especially on days like this, but more importantly the trend which you'll see below.

To 60 min charts, which are not as strong as the 4 hour, but important in determining where a turn occurs, multiple timeframe analysis combined with multiple asset confirmation.

 This is the Es/SPX futures break and negative divegrence of the Aug. cycle's stage 3 top which stated a downtrend of lower highs/lower lows, the positive divgerence is the anticipated move this week from last Friday's week ahead post. The turn in 3C right now out to 60 mins. shows there's a problem right in the area as we fulfill the upside Chimney/head fake move/target.

 The NASDAQ broke the downtrend like the SPX which were last Friday's predictions, however you can see the first divegrence to the left and a really nasty leading negative position right now, again confirming this is less about price than either breadth or BABA as there virtually no repair in breadth with somewhere around 47% of the NASDAQ Composite's stocks in a technical bear market, HALF.

 And the reason SRTY has been so good to me as the Russell 2000 trend is pretty clear, even with the bounce it fails at the trend line.

As far as short term timing of this week's move, HYG is still key and the 5 min charts, but the Index futures on the week show a lot of deterioration today alone, so it seems next week's trend is likely going to be very different from this weeks and on a longer term basis, considering the 4 hour charts, this is the start or primer in fulfilling the ugly signals there. By the way, this is ES.

NQ/NASDAQ 100 futures are loking similar, sudden sharp ugliness today.

And the Russell 2000 futures showing the same. This should just get worse until prices turn, which means I need to get busy as many assets we are looking at shorting in to higher prices that have long term chart weakness, are going to turn around the same time.