A.M. Update

Not a whole lot has happened  from my perspective o the charts since Friday's close. The charts suggested early Monday weakness in SPY and QQQ with some better relative strength in the IWM, but also starting to turn sour on an intraday basis as their longer term charts which show both sides of the Crazy Ivan shakeout on either side of the IWM's 6 week range are pretty clear such as...

IWM's range which started our entire theory of this move and the reasons for it over a week ago the previous Friday with both Crazy Ivan shakeouts below and above the range.

 IWM 5 min below and above the range with accumulation below and distribution above.

TF/Russell 2000 futures with the same accumulation below the range and distribution above the range, the Crazy Ivan dual shakeout.

As I said, from Friday's close the QQQ and SPY look to start off weaker than the IWM, I think it could still use a little more convincing looking breakout, but as I also said last week, the percentage change might have accomplished the same effect with the best 3-day move in the market in 3 years with the prior week seeing the worst weekly move in the market in 3 years, that's the type of volatility seen at turning points between stages 1 and 2 (bottom and mark up ) and 3 and 4 (Top and decline).

 QQQ 1 min finishing Friday on a weak note like SPY suggesting it picks up where it left off on a weak note, but it wasn't just intraday...

Migration of the negative divegrence is spreading... QQQ 2 mn as of the close on Friday and we are seeing this out to 7 and 15 min charts in the futures were all of the action started.

There's also some slight weakness premarket in the USD/JPY ramping pair.

1 min USD/JPY negative divegrence off post European open strength.

I expect to continue to see the ramping levers deteriorate like HYG, USD/JPY, VIX to repair and TLT to repair with the market averages and Index futures to continue the distribution cycle they have started since popping above the range, but the IWM still looks like it needs a more convincing breakout, at least that's what I imagined over a week ago when first fleshing out the theory.

Not quite the solid, clean breakout I imagined.

In any case, just as the break below the range created short squeeze momentum up, the break back under the range should hit stops and pull shorts back in, don't forget the week prior we saw the Dow's worst weekly performance in 3 years, things are moving and changing fast which is why I posted the volatility article last night.

I laugh when I hear this is a F_E_D rally or the F_E_D to the rescue, we suggested days ahead of time that the F_E_D knee jerk effect would be the perfect cover and we had already seen the signs of this move 4 days earlier and had already predicted it 5 days earlier, unless the F_E_D meeting leaked before it even started by 2 trading days or 4 days total?

In any case, it's what happens moving forward, it is a shortened holiday week, volume will be light, the chance of high volatility are very good. The chance that the market breaks below the range before Jan 1 would wreak havoc on the market and return us to that ugly downside volatility of the prior week, moving toward the lower low below the October low, but for now, 1 step at a time... the levers, the averages and the short sale assets, that's what I'll be watching.

Have a great trading and holiday week. I'll be back shortly after the open.