Market Update

I'm going to keep the market averages and Futures updates separate, again because of the chart upload time and the potential for very fast moving underlying trade as well as price.

You'll see VERY clearly in this update why I suspected the Q's would be the under-performer today and also why I believe this is a 1-day oversold bounce event. Remember when I'm talking about oversold it's not traditional indicators like oscillators showing oversold as they can stay that way for a long time, but yesterday using price action and volume we called the exact oversold/bottom around 10 a.m., so I'm using a lot of volume analysis in determining overbought/oversold, not indicators that can show a region, but not an accurate depiction of the actual event.

You'd dop well to learn about the lost art of volume analysis, it hasn't mattered to traders over the last 5 years and they have even outright ignored the screaming red flags of volume analysis as the F_E_D kept QE going, as well as have been fooled in to thinking many price patterns were something they were not because they failed to understand and use volume analysis. Volume analysis will grow more and more important and traders coming up the last 5 or 6 years know nothing about it.

The charts...

 SPY intraday 1 min from yesterday with several small positive divergences, but there's a bit of negative pressure intraday right now. I don't think this is the end of the bounce, but it may be reflecting the beginning of the end if this grows and migrates out to longer timeframes.

As you can see, the initial positive divegrence was never very big, not big enough to support much more than a bounce.gap fill which it is approaching now.

 The SPY 3 min shows the negative from last week and the gap down from yesterday morning because of that heavier distribution. You can see the overall positive / bounce divergence, but here too we are starting to see some damage being done which can increase at a very rapid pace, many times before I'm even done posting an update which is why I'm breaking them up.

 At a simple 5 min chart which should be able to have a decent positive divergence for even a simple bounce, has none whatsoever and the defining feature is a clear leading negative divegrence, mostly last week as we suspected the market was being pinned in place to keep it from declining pre-Black Friday and making bad consumer sentiment , which is now obvious in both weekend and Monday internet sales, even worse.

 As far as the whole, "I believe the move after the October rally will be far stronger to the downside", the 30 min chart above showing the July divergence/decline, the September divergence/decline and the current divegrence is very clear as to how much larger this is and that is what was expected before the October rally even started which was the first leg of our two moves expected (up strongly and down even stronger).

 The QQQ 1 min is nearly perfectly in line. WHERE IS THE POSITIVE DIVEGRENCE?

This is one of a couple of reasons (including Index futures and AAPL's recent charts) that I have believed the Q's would show poor relative performance today.

 QQQ 3 min, again the defining feature is distribution in to something that looks a lot like a head fake/bull trap parabolic move up and an even worse parabolic failure down. 

THIS IS EXACTLY WHY I DON'T TRUST PARABOLIC MOVES, THERE'S THE EVIDENCE ABOVE.

And the bigger QQQ picture speaks for itself.

 IWM 1 min intraday showing some weakness building in, it will have to continue before I'd start calling out short positions to enter.

The IWM easily shows one of the best positive divergences on this 2 min chart, yet it's still only a 2 min chart and a small accumulation area. If you don't have much gas in the tank, you can't go very far.

Again there are some initial signs of some strength being lost already as IWM makes a higher high from yesterday, but 3C does not.

 The IWM 5 min chart is the main chart I'll be watching for timing, as this positive fails, it will be time to start loading shorts, although I have nothing against building or phasing in to positions now.

 And the bigger picture 60 min divegrence is plain.

As for the NYSE TICK , you can see the early up channel busted, which is probably due to the intraday weakening of divegrences. A reasonable +1000 was reached, it's not anything impressive, just a normal move.

And our custom TICK/SPY indicator which shows intraday breadth trends with an early possible decline setting in.

So far everything is as it should be, no surprises at all.