Opening Indications

Good morning.

The overnight session has been rather tame, until about 7:50 a.m. this morning when ES and the other Index futures took a dive. On top of that, the $USD took a whack on the open sending the USD/JPY as well as ES lower in to the open. However, this is exactly what we were looking for this morning as you can see from the two posts below from yesterday including the charts...

From Yesterday's EOD Update & Daily Wrap

"While there's some minor distribution right now intraday in the IWM, SPY and QQQ, I do not see this as the end of the move.


As you know, our professional sentiment indicator says the market should have some more upside in it, more importantly...

 Our 3C charts with 5 min positives on the week since Monday say there's more upside and this is what today's EOD Update   was tracking. However, very short term as in early tomorrow...

The 3C intraday charts are calling for a pullback in just about everything except the R2K, which is where we may see some rotation as that's the index hit the hardest with small and mid-caps followed by the NASDAQ Composite which was the relative out-performer today."

This is where we are now...

 The SPY 1 min negative divegrence from yesterday afternoon and...

The longer 3 and 5 min charts positive.

The Custom SPY/TICK indicator tells the same story.

I really don't have a clue why the market wanted to pullback this morning other than it was getting a little overstretched away from intraday support yesterday, but thus far all indications are the pullback will end and the move to the upside from yesterday will continue. However it's always at movement like this we get new information, whether building a stronger divergence, the divergence starting to weaken in the longer 3-5 min timeframes or simply a pullback on a little overstretch a bit too far away from intraday support. We can see the signals in advance, but rarely know exactly what smaller ones like this mean if anything.  This goes with the 3C concept that the market almost always picks up where 3C left off the very next trading day, even over a 3-day weekend.

As expected for this week, HYG would continue to lead the market and as we are only expecting a minor interim corrective bounce from the divergences we have, HYG continues lower , re-establishing its leading relationship to the market, typically 3-7 days in front for the last 2 months.

SPY (green) vs. HYG (red) since the start of August's cycle with a big move down today thus far.

I'll send out an update as soon as this morning's decline stats to give us a divergence .