Market Update

*The latest 3C readings are at the bottom f the post.

This is such a beautiful day, and it's really nothing more than a drop in a bearish bucket, as I've seen numerous bearish breaks that wipe out months of longs in a single gap down, in any case, it's kind of hard to care right now whether there's a bounce or not if you've been adding shorts in to strength as we have planned since early August.

My SRTY position is up +18% , FSLR( a newer short entry) is up 7%, IYT up 3% (which is just a start for these longer term position trades), FAZ is in the green (the position was just recently added back after an August 1st exit at a gain and re-establishing the position in late August ( so it's just getting rolling again), HLF is over a 32% gain with no leverage, FXP which was entered Sept. 9th, at the bottom,  is over a  +23% gain, the position we have been building in SCTY short is at a +22% gain, our long term NFLX short is near an 8% gain, our recent partial position AAPL short is in the green, FB short is at a +11.25% gain (short), DE is at a +8.25% gain (again short), and out Tracking Portfolio is is in the top 3% of over 600 competing portfolios.

So it's a little hard to get excited about a bounce when we are in the very early stages of stage 4, in other words, most of these assets and the market in general haven't even broken their tops yet.

However, just as was talked about since Friday and this morning as there was some surprise that all of the overnight bad news didn't translate in to a strong market today, the which is exactly what we were saying about Wednesday being the start of a chance to accumulate because if you are dumping the worst performing assets and need them off your balance sheet, but would also like to play an oversold bounce on those worst performing assets, you have to wait until the quarter is over, which was at 4 p.m. yesterday.

The numerous and very visible technical breaks in the market create an opportunity to accumulate huge supply on the cheap...

 The SPX breaking its 100-day moving average is a sell signal and a stop out area creating a lot of supply that can be accumulated on the cheap.


The Dow breaking its 50-day average is a widely followed sell signal, again creating plenty of supply on the cheap,  no one ever wonders about who's on the other side of the trade in these circumstances.

 The NDX breaking its 50-day and the Russell now in a 10% correction of the July highs, already under all important moving averages translates in to lots of supply on the cheap and no one questioning any entity that may be accumulating it by taking the other side of the sell orders.

Our Transports short just broke its 100-day moving average.

I think you probably get the idea, SUPPLY, SUPPLY, SUPPLY and cheap.

Still, although I really would like to see some near term swing trades just to compound and roll over gains, it HAS to be in a situation in which I trust the market for a counter trend move as stage 4 of the August cycle is firmly established.

Looking around, here's what I've found so far.

Leading Indicators...

 Whether applied to the SPX or the IWM, the SPX/RUT Ratio Custom indicator is not confirming a new low here.

Professional sentiment is on the rise, they are likely accumulating on the cheap getting ready for a counter trend move.

Yields reverted back to price rather than price up to yields, but that's to be expected as Treasuries are the flight to safety trade today.

 Although HY Credit has some serious Q3 holes in it that are going to end the trickle of corporate buybacks that are left as the trend dies last quarter, it is still putting in a short term positive divergence here. Again, this is a circumstance in which you can't consider this chart alone, you must consider the larger, much more negative HY Credit picture, that's where the long term probabilities are, this is where the short term, smaller bounce probabilities are. If you put both together, you can make some nice trades that work in your favor both short and long term.

 HYG is supportive of the market despite recent weakness yesterday .

The 3 min HYG divegrence is still intact.

Intraday as we approach some of the lows, positive divergences start popping up.

 There's migration on  HYG's 2 min chart as well showing this is building,  but not before they created lots of supply on the cheap as they have much larger positions to fill than typical 100-lots.

 The Custom TICK Indicator shows the market internals today, this has actually improved SIGNIFICANTLY since being captured.

 SPY 2 min in the positive position, still the 5 min chart is the Maginot line, divergences must hit at least 5 min before considering changing anything from the current longer term positioning for a shorter term trend trade.

 SPY 5 min trying..., still not there.

DIa 3 min trying intraday

QQQ 3 min accumulation intraday

Still the 5 min is far from screaming for a long swing trade here.

 IWM is most interesting with 1 min intraday above.

Migration to the 2 min chart...

As well as the 3 min chart and,..

The 5 min chart. If there's 1 asset I might flip for a swing trade it would be SRTY for URTY for a swing trade and then back to SRTY for the trend trade.

This is the latest NYSE intraday TICK capture, on the downside trend we hit more than -1500, but we have a little break of that channel...


I also want to see index futures post at least a 5 min positive divegrence before I consider changing any positions for a short term long swing trade.

Since things move so fast, the most current 3C chart signals are as follows...

SPY: the 2, 3 and 5  min have positive signals, they aren't nearly strong enough to consider any changes there yet, but they do seem to be accumulating weaker prices, although it seems there's a lower destination in which they really start to pick up shares on the cheap.

DIA: 1, 2, 3 and 5 min are all in positive position, thus far the 3 min chart has the strongest divegrence, it's still not enough to convince me the risk/reward ratio is worthwhile, after all I can sit on these shorts and ride out any potential bounce and still be fine, a swing trade here is just to roll over some additional profits/compound. I'm not risking long term positioning for anything less than a very strong reason.

QQQ: While there's some sign of a 5 min positive, it's the 2 and 3 min charts here that are shining so far, still not enough.

IWM: The 1, 2, 3 and 5 min charts are probably the best looking of all of the averages, they are positive, but  THEY ARE NOT JUMPING OFF THE CHART . They need to be at that position in which they are nearly impossible to ignore before I'll change any longer term positioning for a swing trade.