Market Update

As I said Friday and really pressed home yesterday, it's important for the market to create a positive divegrence that can stand here and "maybe" work off some of the deeply oversold tensions in breadth indicators, in the overwhelming number of Industry groups that were red yesterday, and the Dominant Price/Volume relationship showing a huge number of individual stocks down on the day, way, way above anything approaching an average Dominant relationship and this is something we saw Friday as being important in the near term.

This might sound strange from a bearish perspective and a bearish portfolio already set up, all out collapse would seem to be favorable, but there are still some great looking shorts that need a little boost from the market to get in to entry position and I'd like to be able to hit those as well as know when the corrective move from deeply oversold is ending so we have a better gauge on when the market is really collapsing rather than breadth continuing to just deteriorate and wake up in the a.m. with a huge gap down, without having had the opportunity to position in a few assets we have been tracking for a while.

I'll also try to do some trade management as several positions are dropping so hard they are bound to bounce, our HLF short immediately comes to mind.

As for the market this morning, it made the right hand turn from down to lateral yesterday and has largely maintained that this morning. I'm noticing large caps like the Dow are looking the worst as far as underlying 3C trade in this very small, specific area so that's important.

The Most Shorted Index has been of no help at all, no short squeezes...

 MSI vs SPX...

Today's TICK has no trend other than lateral which is appropriate with a bias to the downside-1000

However the SPY custom TICK indicator isn't showing lower lows which gives the market a little room to maneuver here.

I do have an intraday breadth count for the averages, but it takes up so many resources for even a small index like the NASDAQ 100, I may check it out if it looks like there's more downtime today as we continue lateral in this positive divegrence attempt.

 This is about as good as the DIA gets right now on a 2 min chart, the head fake from last week is seen in red, it's massive compared to the current small positive divegrence trying to develop.

I suspect more large caps are going to start breaking down joining the small and mid-caps that have led the destruction thus far.

 IWM 3 min positive has a decent divegrence going, I did take on a small IWM call position for a bounce so I have some confidence in a bounce and small and mid-caps are the most likely to bounce.

The 5 min IWM which I sill think looks the best of the major averages.

The QQQ 5 min positive next to last week's distribution in to the head fake "Chimney" move.

 And a more detailed 2 min QQQ divegrence, obviously these are not strong divegrences, but the market is not buying strong, if anything it's buying oversold positions for an oversold correction, not position trades.

 SPY 5 min positive next to last week's head fake negative, there's no comparison and that was just a minor head fake move last week.

 Here's a close up of the SPY 5 min divegrence.

I'm looking for a slight bounce here to help with a FAZ entry as the SPX has a good portion of Financial representation.

As for HYG, it's not holding up anymore, it's pretty much in line with losses after trying to provide some support yesterday it just gave out,  However, this is EXACTLY what we expected to see, HYG lead the market to the downside even during a corrective bounce early in the week. This is good news from our larger perspective for the week.