Financials/ FAZ MICRO/MACRO Market Proxy

This is not only along the lines of last Friday's "Week Ahead", but more specifically as new data allows for new updates, since last night's Japanese GDP, the very strong move down in the Nikkei, nearly -3%, largest 1-day move since August and last night's forecast of a "dead cat bounce", which is actually fitting together with Friday's Week Ahead charts....

Looking at the long FAZ (3x short Financials), this is one of the assets mentioned on Friday that I didn't want to enter Friday afternoon because it looked like it had a small pullback in it, thus I'd wait another day or so (early this week). Here's a look at FAZ, a minimum upside target and perhaps the dead cat bounce timing from last night's post.

As I said, I wanted to look at some of the assets that went in to Friday's Week Ahead Forecast.

First from the Macro as that is VERY well established in almost every asset calling for a strong move lower.

 The 60 min charts across the board are calling for a large move, upside for FAZ, downside for the broad market, Financials specifically.

This is a personal position I have been holding and will continue to hold as the larger than expected (but glad to see it), rounding base is capable of supporting a large move up in FAZ, 3x short Financials.

The leading positive divegrence is well beyond the divergences (some of which I posted in Friday's post The Plunge Protection and Market Correction Team) that we saw at the October lows leading to the advanced warning of a VERY strong "Face ripping" move higher ; suggesting a much larger downside move than the October move up.


Note also the near perfect rounding bottom. Usually we'd expect to see a "Chimney"- imagine this as an upside down Igloo with a chimney on the right side; that's the typical head fake/stop run/timing move.

 From where I see strong divergences in FAZ, the concept of 3C surpassing the price area where divergences were first seen would suggest a move well above he white trend line, we have seen this concept many times before work and the moves are significantly higher, this tends to be a minimum target.

This is the divegrence late Friday I saw in many assets which formed the basis of the early part of the "Week Ahead" post from Friday.

 Intraday the 3 min FAZ chart has seen some weakness from the divegrence late Friday, but not much as of yet.

Corrective moves can come in the way of price contraction or in the way of time (consolidation).

 This is FAZ's intraday 1 min chart,  this is where I'll be watching for the first signs of this turning positive and it would be the last place I'd probably buy FAZ as I don't like chasing price.

XLF, Financials which FAZ is based on is the long version of Financials, the 2 min chart can be seen offering some strength this morning from the gap from overnight Nikkei Weakness and USD/JPY.

This is why I mentioned the 3C divergences picking up where they left off (Friday to Monday) despite the large move in futures/Nikkei/USD/JPY last night and the forecast of a dead cat bounce and price to recover which was called just minutes after the lows were put in last night.

 XLF 3 min is not positive, it has gone negative and stayed in line with the price decline from the pivot.

Looking at the same chart in context of the entire October rally, this is the 3 min chart and how deep it is negative.

Now you have some idea of the macro vs the micro market wide, what I'm looking for, and the size of this divegrence and what it portends, a move larger than the October rally.