Early Update and Summary

Well it's good to come back and know that everything is still working.

For this morning's A.M. Update ,

"There is some very short term intraday 1 min weakness in the futures, but I wouldn't expect this to change anything above for the moment, especially not with the State of the Union tonight and the ECB on Thursday along with the BOJ rate decision tomorrow.

1 min  ES chart is the most extreme, NQ and TF are closer to in line. Maybe a little early , small gap filling, but I still expect we bounce as we have been expecting as there's a base big enough right now to sustain the bounce finally.

The real question os the quality of the bounce and how long it can sustain and those are answers we can only start to understand once we see the underlying reaction in to higher prices, bounce prices."

And that's exactly what we saw on the open.

Here are the charts and just a quick summary recap to get everyone on the same page...

 From the A.M. Update's negative NASDAQ 100 futures 1 min intraday divergence suggesting early/opening weakness or a gap fill which you see to the far right... to the longer bounce chart of the SPY 3 m min below.

SPY 3 min.

You may recall last week I looked in to this quite a bit as it would be a pretty big difference in expectations of a bounce, whether this base was a singular base or the second part of a larger "W" base which would look like this...

One singular , larger double bottom "W" base or two separate events.

If this were an east call, I wouldn't have had to spend two days last week looking in to it, but my best assessment is that it's two separate events, the first being a failed, truly oversold bounce and the second, being the first one failed, being the continuation of what the first one was to do before being cut short a week ago from last Thursday on the 8th.

 As for the charts beyond 5 mins like this QQQ 10 min, which is part of what I/ considered in trying to answer that question, there's no hint of a larger singular base on this 10 min chart, which is exactly where it should have shown up. Instead there's a leading negative divergence on this 10 min chart and if we keep going out further to stronger charts and higher probabilities...

like this 15 min IWM chart, we see the same thing, just worse and worse (bearishly so).

I know some of you are trading long for a piggy back trade, some of you went flat, some are just staying in position and being patient as I have chosen to do, but remember what the market looks like around you rather than getting too caught up in these charts.

 Although it may not feel like it on a day to day basis sometimes or on a weekly or even monthly basis, this is a wide, choppy, lateral zone which is not the easiest place to make money trading, not to say it can't be done, but this is the least favorable environment for traders and it's getting tighter and choppier.

From a daily chart's perspective, there's a very clear change in character from a clean trend up to a choppy lateral trend which looks a whole lot like a Broadening Top or megaphone top, note the changes in character in volume as well.

This is one price pattern that doesn't have specific volume confirmation, in fact Broadening tops are known for random volume patterns; it's really the change in character of volume which tells us the most about the change in price action and the overall market.

As for that choppy lateral range mentioned on the chart above, taking a closer look and you have a large bearish descending triangle. This is not a true consolidation pattern (descending triangle), it's far too big to be a consolidation pattern and would be in the wrong place in any case, but it's not a bullish price pattern either, especially where it sits toward the far right side of a mature Broadening top that has already run shakeouts on both sides of the price pattern (October lows and December highs.

My guess would be that any bounce we see from here, would penetrate the top trendline which would set up a breakout/head fake move and we already expected a target above that area last week when mentioning some targets that would be above the 2015 highs or at least the January 8th and 13th highs.

Again, it's how things react in to movement that tells us the most, we haven't reached that point, but I did want to remind you of what the recent trend has been, if not for 2015, then for a good portion of 2014 and all of 2015, choppy markets are dangerous, especially within a larger, known topping pattern.

Right now the intraday price action on the downside is completely in line on the charts of the averages and Index futures, there's no positives intraday building in to them at this point and TICK is already showing some prints below -1400, so it's real as well. I'll let you know if anything changes.