As of yesterday, I was trying to figure out whether the 5 min SPY chart was showing 2 separate events or 1 larger base, the implications would be pretty dramatic as to what kind of bounce a larger "W" base could support.
I think I've pretty much cleared up the question and it appears that it's not one larger "W" base, but rather two separate events...
This is the 5 min SPY potential "W" base I was looking in to yesterday, whether there were two separate bases or one larger which could obviously support a much bigger move.
Just looking at this chart, there appears to be too much distribution from last Thursday (the day we saw some very strange activity in the market ending the bounce prematurely). Typically when building a larger double bottom base, the distribution to send prices back toward the lows is very small, just enough to get the job done as they are accumulating, so they don't sell more than they have to. The distribution event at first left gas in the tank for the Jan. 6th base, but subsequent negative divergences are pretty much on par with going flat (emptying the tank).
The second bottom, if it were part of a larger "W" base would be stronger and leading positive well above where it is, so this appears to be a second and separate scenario. At both bottoms the market had oversold conditions, the first was worse then the second, but after 5-0days of selling, we could see oversold conditions in last night's internals.
Still this wasn't a strong enough answer which is why I kept looking.
If the 5 min base were a stronger "W" bottom, it would have migrated to the 10 min chart and 3C would be much higher (where the orange arrow is).
Also the distribution wouldn't be so big as to show up on a 10 min chart for something that is meant as a steering divergence.
Looking a the detailed 2 min QQQ, we see two accumulation events and a distribution event, but as to whether they are one event or two...
We have the same issue with the 5 min QQQ chart, but even more pronounced. The second divergence would have all of the accumulation of the second divergence as well as that of the first as well, leaving 3C much higher at the second bottom, it's really no higher at all.
The same is true of the IWM, but this makes the case even more strongly. The accumulation from two bottoms would accrue to make a much stronger current divergence.
On the 10 min QQQ chart, there's not even so much as a relative positive divegrence between the two bottoms, in fact it's still leading negative suggesting any bounce we see has the highest probability of a failure, thus the reason we want to short in to price strength and underlying negative divergences at the right time.
The IWM 10 min chart shows the same thing. There would be enough accrual of the accumulated shares between the two bottoms that we'd have at least a relative positive divegrence.
The ES chart also shows the same thing.
I think that puts that to bed.
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