Market Update

Hopefully the developments taking place now will make my day a bit easier as far as positioning which I want to do in to price strength, although bigger picture we are still in a great overall area for short sales in many assets, especially SPY/QQQ/DIA and Financial related shorts.

As we already know, yesterday's late day divergences suggested weakness this morning, our forecast for this week suggested about a 1-day bounce in which the SPX saw the best daily gain in 7 weeks yesterday, this (in our forecast for this week last Friday) was to be followed by the Dominant Theme for the week, "DOWN".

Whether we get this bit of help or not, there are always opportunities, this just opens up more opportunities.

This is what I see thus far after what is being reported as 200 to several thousand stocks sold this morning on a massive sell program. The danger here for the market (not for those of us already largely short) is that fear breeds fear and a massive sell order can create the AAPL effect, that time in 2012 when all hedge funds stampeded for the exits at once. This is why I said yesterday morning, "The market needs to bounce today", if it had not, the probability that we were reaching that kind of mass institutional panic would have sky-rocketed. No matter  how smart smart money, they are still restrained by the size of positions and how quickly things can turn on them.

As all longer term analysis has shown, we are clearly transitioning to the next stage, 4 decline.

 Our custom SPX/RUT Ratio is showing its first positive divegrence I believe of the week, although on a short term timeframe, it's along the lines of what short term charts are starting to show.

Such as the DIA 1 and 2 min inrrtraday positive divegrence

 QQQ intraday positive divergence.

 SPY intraday positive divegrence

 Whether this week's SPY 5 min positive divegrence can hold up or not at this point remains to be seen, it will depend on how strong, long and fast the intraday charts develop, however I would not count on this as anything more than very short term as has been the forecast since Friday for this week.

The TICK which took a beating at -1500 and worse for a god part of the morning is trending higher, although in a very wide range still hitting -1000 and yet to break to +1000, however the trend has changed.

And the same TICK trend is visible on our custom indicator showing yesterday;'s late afternoon deterioration and this morning's as well as the upticks taking place.


Higher prices simply make for better entries, however nothing has changed about the major component of the forecast which was confirmed by breadth not moving at all last night on the best 1-day SPX gain in 7 weeks. This market is ready to pivot to the downside and just as we wanted to enter long/piggy back trades in early August before the trend up, this is likely our last chance to enter shorts (in size-again, there's always an opportunity somewhere), before the stage 4 decline that HYG is leading sets in.