Market Update-A Rock and a Hard Place

I've already heard at least a half dozen references to the PPT (Plunge Protection Team) at work early this morning (3 a.m.) at the European open, while the official PPT is a US entity (a real entity created by executive order), the European Central Bank "may" or may not be playing their part as well.

While I don't really have an opinion on the PPT and the overnight futures stick save as they (SPX Futures) were falling about 20 points before the European open and the Reuters piece about the ECB buying Corporate bonds that sent futures rebounding (this wouldn't be the first time Reuters did something like this), only to have the Reuters rumor shot down by the Financial Times, I do have to admit that after last week's "Maybe we should consider QE4 " and "Maybe we should hold off on ending QE3" which was essentially retracted 2 hours later by the same F_E_D president, it does smell a little fishy.

In any case, that puts the market in an interesting place...

 The market was accumulated on the way down, now the SPX is a good 100+ points off its lows and above the trendline resistance of a Broadening top as well as being above the 200-day moving average they were clearly trying so hard to hit yesterday to only fall about 2 points short.

Speaking of shorts, sentiment is still overwhelmingly bearish, a lot of retail traders have been waiting for the SPX to cross the 200-day to short it, this isn't the kind of sentiment shakeout move I had in mind, but perhaps a new round of shorts being drawn in may change a few things, that's what I'm trying to determine now.

 This larger SPY 60 min chart shows what a solid base (August) can lead to. Eventually it led to stage 3 top and stage 4 decline, but a nice rally and we have a pretty decent one going here, but the base in this case doesn't have anywhere near the stability of the early August one.

Take a look at the same 2 bases again, one is a reversal "Process", that's a stronger base capable of holding and a lot more trustworthy, you can sleep at night knowing it's not likely to suddenly shift 50 points in the morning on a gap down.

The current "V" shaped base is an "Event, not a process, that's why I suspected we'd see more of a "W" base with a pullback which would make for a very stable base that could support a face ripping rally that would easily change sentiment from bearish to bullish, this one is a bit harder to trust.

The problem is we have about 2/3rds of the tank of gas we need, but only 3 tires as opposed to the last base in August with a full tank and 4 tires. The move above, right now is a TRUE counter trend bounce and I doubt too many retail traders will fall for it, they'll be looking to short it and that's not where Wall St. wants them.

There's some early deterioration, a bit in the IWM, but not quite enough to move to a fade trade (short the averages)...

As you can see the 2 min IWM is in line still, this can change in a hurry, but that's what it is for now.

Surprisingly the QQQ is showing more weakness than I'd expect, especially given AAPL and the way it looked yesterday, this needs to be watched carefully and we have some other problems in some leading indicators and in HYG.

I think the next position will likely be a full size short and we'll have to determine whether that decline is going to see the constructive pullback the market would have been better off with as the early overnight futures were headed that way. This is kind of a hobbled market that has support, it has the gas in the tank and you can move on 3 tires I guess, it's just not trustworthy, that deep "V" reversal is one of the scariest bases out there.

So watch that 200-day and action around the SPX's trendline pointed out, keep an eye on the NYSE TICK and I'll watch on my end, the downside trade just got a lot easier to take when it's time...