The shorter timeframes like 1 min through 5 min show for the most part, near term activity or expectations, although they can grow in to larger divergences as they migrate to longer term timeframes.
A 60 min chart pointing in one direction means that a signal on a 5 min chart has the highest probability of resolving toward the highest probability represented by the 60 min chart.
Lets assume we have a market moving down or starting to move sideways after moving down for a significant period (like the Russell 2000 since the July 1 highs) and we have a 60 min chart posting a positive divegrence, meaning 3C is rising in to lower or flat prices, this is a positive divegrence telling us that the lows in price are being bought by smart money. Most traders assume large price moves on volume are evidence of smart money buying or selling, but after a decade of un-learning the dogma of technical analysis which I once taught and learning to trust my indicators through real experience, as hard as that was for me, I know that by the time price moves, smart money was in position long before that move occurred so retail ends up chasing prices at exactly the wrong time.
I've had an insider's look at a large Wall St. firm's research reports, I can't say who or how because I'd endanger my source's job, even though this was over 5 years ago.
I thought I had the Holy Grail of trading and I acted on the research reports and recommendations that were disseminated to the trading desks and guess what... I LOST MY BUTT! I couldn't understand how this large Wall St. firm could have got it so wrong. I abandoned the research reports I use to spend hours scouring, trying to understand their lingo and went back to what I was doing. Then about 6 to 8 months later as I finally got around to cleaning up my bachelor pad, I found the old research reports and decided for poops and giggles just to take a look at what happened since I lost my butt taking trades based on them and to my surprise... Nearly EVERYTHING they had said came to pass or was in the process.
What did I learn? I learned we all view the market from the tinted glasses of our own experience and for retail traders like us, who can easily enter a position and exit it on the same day, I never gave too much thought to how different that same process was for large institutional firms. I found they often had to do the opposite of what they wanted to do at first, to get to where they wanted to go, that's because we as retail traders, even some of you larger guys managing millions, it's still not anywhere near the level of these large firms which I compare to Oil Tankers that take a mile just to come to a stop, whereas we, trading in 100 lots are like a jet ski. Often they'd have to knock a position down to buy it on the cheap with plenty of supply available, otherwise they'd just push price against their position and because they're so big and there's only a limited amount of liquidity per day and because the last thing they want to do is have another firm catch on to what they are doing (Warren Buffet and others have pulled a play that the SEC allows which lets them get away with not reporting certain positions on their quarterly 13-F if reporting it will disturb their effort to continue accumulating or selling the position) or even worse, a Parasitic HFT Iceberg hunters discover their order and front run it costing them tens of millions of dollars.
The bottom line is institutional money has to enter and exit positions in ways much different than what we understand and that was what I was missing in looking at the reports, the time component.
The point is, a longer term chart's signal suggests that this is the highest probability because it is the largest flow of funds so a positive divegrence on a 60 min chart with a negative divegrence on a shorter, smaller underlying flow 5 min chart likely means the 5 min chart is calling for a pullback, but the probabilities represented by the 60 min chart say that the pullback will resolve in higher prices, thus making such a pullback a high probability entry at lower prices and lower risk.
That's the nuts and bolts of multiple timeframe analysis with any indicator. Keeping that in mind...
We are going to look at the 3C charts for Futures, here's a quick legend...
ES= S&P E-mini futures
NQ=NASDAQ 100 futures
TF=Russell 2000 Futures
ZB= 30 year Treasury Bond Futures
VX=VIX Futures (not the same as spot VIX which can't be traded).
However, the longer 5 min chart is where near term probabilities over the next day or so are and why I expect a near term pullback in the market, but especially the outperforming IWM/Russell 2000.
Today I believe the SPY and QQQ were higher to cause the most number of options to expire worthless so the writers, largely Wall St. can keep the premiums and the buyers have worthless contracts.
I picked up some QQQ calls yesterday because I thought the Q's have done the most work on their base recently.
I believe we see a downside move early next week that finishes the work on the base that was occurring late this week, I think it would have been done today if not for options expiration which needed higher prices to cause all of those put positions to expire worthless.
I believe after that, we are going to see a sharp counter trend upside rally next week and perhaps longer, we'll confirm, but that's probably where I enter more positions as I am looking for solid objective evidence before increasing long position exposure, but I think those are the probabilities for the week ahead.
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