Market Update

So far everything is still on track for a move described last Friday in the "Week Ahead" post as well as the after hours Market Update. The overnight Index Future action was pretty poor, but as expected, as soon as the cash market opened we were right back to yesterday's accumulation range. If I had to guess, I'd say we get 1 more chance to enter shorts on this bounce (although there will always be other bounces, this one likely offers the last best, low risk, excellent entry opportunity as recent entries like FXP have shown, a good entry is a good start and lower risk).

Using the SPY first as a general model and quick reminder...

 SPY 1 min intraday this morning with a positive divegrence at the opening lows, sending SPY higher and back to the accumulation range, maybe a bit too far as some light "steering" distribution or supply was let out to likely bring the SPY back to a very specific , lower range where accumulation is occurring.

 This is about the size of the divergence on a SPY 5 min chart, note there was none on Friday, it was really the breadth dynamics that hinted we'd see one early this week, but today makes the second day in a row in the same area, this isn't coincidence or random walk.

For a call option position I'd still want a price concession to lower premiums, preferably a sharp dip below red trendline support with positive 3C signals so I'll be setting some alerts for the major averages for a possible very short term, very speculative long piggy back play using call options, likely next week's expiration.

 As a reminder, this is the 4 hour 3C chart, by far the strongest underlying trend of anything above and the highest probability resolution. When Appaloosa said last May that they've been selling everything not nailed down for the last 15 mins, it's in charts like this that you can see their actions and these charts have preceded the breadth charts which I mentioned last night as being so bad that nearly half of the NASDAQ Composite is in a technical bear market and 40% of the Russell 2000, that didn't happen overnight, it didn't happen during the last 3 weeks or so of the stage 3 distribution area of the August cycle, this is an underlying theme that has been quietly carried out for a couple of years now while minimal new highs on no volume and no follow through keep the "Buy the Dip" long crowd drooling over the market with no idea of how fast things will collapse and just from experience, I'll tell you that even when they do collapse, this crowd has a near impossible time accepting reality and getting out, most won't get out until the market is near a bottom which can be a very long ride down in this instance.

 IWM intraday this morning also showing a positive divegrence at opening lows and a little pullback initially, there likely is a specific accumulation range.

 IWM 5 min is the divegrence for the move mentioned Friday for the "Week Ahead", judging by the size I'm guessing it will be used in conjunction with a F_O_M_C knee jerk reaction to the upside, of course as I always warn before these, "Beware the knee jerk moves up or down, they are often wrong".

 The Q's intraday show the same accumulation SAVE on the open this a.m. and a slight puling back from higher prices, keeping prices in the accumulation band.

 The QQQ 5 min has tracked the stage 3 reversal process top well, we saw this starting to move up last week. The bigger picture is still very negative, but this is like a interim move.

A closer look at the same chart...

5 min QQQ, most of the divergence is yesterday and today only.

TICK this morning is mellow at +/- 750 thus far.

And the overall SPY/TICK trend is obviously a big improvement over last week, despite breadth indicators collapsing even more last night, but the pace at which they are doing so has dropped way off since Friday.

 The Most Shorted Index (vs SPX) is still not showing any kind of serious squeeze, we'll see if it helps out.

And finally, as we thought last week, the sponsor of the move continues to be...

HYG with a 3 min leading positive divegrence over 4+ days now. HYG has led the market, 3C has led HYG. Once we have a bounce, I'll be watching HYG's 3C chart for distribution as I think they'll want to spend as little time as possible in HYG near a deeper stage 4 decline.


Off to individual assets...