Important Market Update

First, this market update which is more intraday in nature, can't be taken out of the context of today's two earlier posts or even yesterday's posts, Wednesday's posts, the Daily Wrap from last night, but by and large, the Russell 2000 Update and the Bird's Eye View posts should be enough to give you the gist.

First the charts I would have included in the last update if I had time...

 Our custom SPX/RUT Ratio in the middle is clearly not confirming prices today and our custom VIX Term Structure is very close to moving below the level of inversion.

Translation, a near term pullback is being signaled just as we thought last night, this morning and all of today.

I stress that this is multiple timeframe analysis and more than 1 thing is happening at once so it is very dangerous to look at these charts without the context of the larger picture which I provided above in the 2 linked posts from earlier or better yet, those and last night's Daily Wrap.

The SPY has short term intraday negative 3C divergences in the 1, 2, 3 and 5 min timeframes, this is the 2 min showing yesterday's accumulation, which I wish would have kept price in the area and kept building, but we knew that wouldn't be the case with op-ex today and the max pain pin, however early next week the market can get back to it.

 The Q's are negative in the same timeframes and this is the 2 min chart leading negative intraday today, again pointing to a pullback as expected., especially after the op-ex pin is lifted somewhere between 2 and 3 p.m. today.

And the IWM is negative in the same timeframes, it wasn't earlier, it was just the TF/Russell 2000 futures, but now, as suspected, it is.

Again, this is a bullish opportunity, but you need the context of the other posts to put it together.

 Speaking on Index futures...

 ES 1 min is negative (SPX futures).

NQ/NASDAQ 100 futures are also leading negative and...

TF/Russell 2000 futures are negative, although they look to be fighting a bit, don't let this fool you.

This is the 5 min TF chart as shown earlier today, this is going to pullback, that's an extremely strong short term negative divergence.

As for the R2K, BofA released some interesting information. You've often heard me say that the Russell 2000 should lead all risk on moves and it tends to lead risk off moves as well as it has the biggest loss on the year, however what we are seeing over the last few days which may be  the reason I stayed away as I didn't have the information, but could see it in the charts, may not , immediately be the risk on leadership we normally associate with the R2K.

As of a week ago, after 5 weeks of consecutive selling in the R2K, Large Spec Shorts sold R2K for a 4th consecutive week, we have been seeing this over the last several weeks and longer actually in breadth indicators, which is why I suspected small caps would see a strong rally AFTER Q3 window dressing was complete.

The Large Spec net short position as of last week was not only the largest since 2008, but at about $8 billion notional, ripe for a very sharp short squeeze which is why the R2K has been rallying while the rest of the market has been wither falling or basing. It looks like smarter money caught these large specs in a bear trap, all of the charts I posted over the last few days show the start of accumulation on October 2nd, right after Q3 window dressing ended, they apparently accumulated enough that when the R2K moved a little, the resulting margin calls came in hot and heavy, that's what's behind the R2K's move, the charts were showing me something that looked like a strong move and still a strong move to come, but it wasn't filled out as it needed to be. A short squeeze is fine for a quick move, but it's not the long I want to go to bed at night with so this pullback is essential to finishing the real support of short term accumulation, the short squeeze can strike the match, but there needs to be institutional support beyond a short squeeze.

Make sure you see the other charts to put all of this in perspective.

I may make some management changes to some short term longs, but all in all this should be an opportunity in the days to come.