MARKET UPDATE

Thus far it's still pretty ugly out there, but yesterday's SPX/RUT Ratio chart in yesterday's post, Quick Market Update near the end of the day had the following to say about this chart from the post linked above.

"Note today specifically that the indicator (intraday) is not confirming the intraday lows... I suspect we have some more downside in the market generally, but should probably see the rate of decline start to soften."

And while we can't know what the 2 p.m. release of the F_E_D minutes might bring, I can't imagine much that is very good (and I'll be watching for leaks as we have already seen the F_E_D caught red-handed emailing out the minutes to 154 investment firms a day and a half before their release), this is what needs to happen to build any base worth trading, if the market should continue to fall, then our shorts simply continue to work. What we need proof of at this point is intention by Wall Street, that means positive divergences. I believe intention is there, while it's not as visible in the averages right now (and it will need to be), it is more visible in Index Futures.

So far...

 TF 1 min intraday Russell 2000 Futures are showing some accumulation of lows intraday, this is not a signal strong enough to trade off, but we'd expect to see accumulation areas near intraday lows and this is showing us that.

 The 5 min charts already pointed out in this morning's first post show TF above with a positive divegrence, it's not big enough for me to consider trading, especially as the market is in stage 4 decline, again, probabilities and high probability/low risk are two different concepts entirely.

Interestingly, the bigger picture I have been guessing was the most probable outcome was a double bottom or "W" base with last week's lows, this 15 min ES chart seems to show that this is probably what we'll be looking at and I think it shows intention.

The Russell 2000 and NDX futures also have the same.

Our SPX/RUT Ratio shows some more probable downside, perhaps volatility will introduce itself at the 2 p.m. F_O_M_C minutes release.

Note the VIX Inversion below, it is only .01% away from a VIX Inversion buy signal, the shorter 1-day signals don't carry much of a move, but they do move the market, it's the ones that are several days in a row that have stronger moves, we'll see if those green bars turn red indicating a VIX inversion.

 I posted that these drops in the VIX Inversion indicator at the yellow arrow are often associated with sell-offs, this one was as of the close Monday, you can see fear levels have risen since.

Also our SPX/RUT indicator short term is pretty close to being in line with the market.

 SPY intraday 1 min with some positive divergent action after yesterday's in line or downtrend confirmation.

 SPY 3 min with a negative divegrence and 3C confirming the downtrend, this will have to show a positive divegrence before I'd be willing to take any swing trades on the long side.

 The 5 min SPY and first part of the base, obviously there's still a lot of work to be done here, I can't say if it will be or not, but as many traders look for confirmation in price which lags the intention shown in 3C, we look for confirmation in 3C which precedes price moves. We are in the right spot, the very spot I suspected we'd be in by earnings as of Friday's "Week Ahead" forecast, I also mentioned a possible head fake move below last week's lows as well, if there's a move like that and strong accumulation, we'll have a more sturdy case for a long swing trade that leads to some short entries.

I'm leaving the majority of short positions in place and will only be trading swings with the 3x leveraged ETF's.

 And the 4 hour chart which looks much worse zoomed out to scale, but I'm trying to show the 4 stages of the August cycle, it's important to know where you are to know where you're going. Early August we saw stage 1 accumulation followed by stage 2 mark up and stage 3 top/distribution and stage 4 decline which was directly preceded by a head fake move or the "Igloo with Chimney" top, the chimney being the head fake move.

 Here's the IWM's 4 stages of the August cycle, as expected, it made a new lower low for the cycle. The white circles are where the stage 1 base was and where mark-up started.

IWM 1 min intraday today, as I said yesterday, downside moves saw 3C confirmation and now we have early positive divergences.

Still from a 2 min IWM chart, we still have  a lot of work to do before there's a viable swing trade.

This also shows where and why we closed SRTY and SQQQ 3x shorts on the 1st and entered TQQQ and URTY 3x long and why we sold them and re-entered the SRTY/SQQQ shorts on the 3rd, making some nice extra money on a short swing, but enough to move my own personal portfolio quite a bit, well worth the trade.

 IWM 5 min shows how much work there is to be done still, but these charts can move fast. I probably would not chase any potential bullish F_O_M_C minutes related move until we have a solid base in place.

QQQ 2 min intraday is working on it...

The 5 min QQQ chart shows how much work is left to be done, but we need the reversal process of trading laterally as "V" shaped reversal events don't hold, a wider reversal process is what we are looking for.

 TICK intraday hasn't been that bad, just a bit below-1000 at the worst.

The August cycle's TICK shows the breadth increasing at the base and fading in to the top and of course deteriorating in to the head fake and decline.

The TICK trend intraday is non-existient so far.

This gives you some idea of what we are looking for, I think we get it.

Yesterday's breadth, demonstrated in last night's, Daily Wrap..., makes a very strong case for the market having "Flamed Out" short term, opening the path for a bounce.