Market Update

It looks like the earlier post or the last post about the market gaining a foothold is becoming more and more true.

However I'll be the first to admit fault with this, chasing small moves like this that are against probabilities to keep the positive gains coming in. In cases like this, I strongly believe you let the trade come to you, you stick with the probabilities and not try to catch a quick move in the market that is against probabilities like a long. I learned a very painful lesson in AAPL after having made the case for months when AAPL was the stock that could do no wrong. I was positioned short and decided to try to trade around a small divergence, against the probabilities and a sudden piece of fundamental data that had not been discounted sent AAPL sliding lower, ultimately almost cut in half in 8 months and I missed almost all of it because of tinkering too much so it's something I struggle with and often have to relearn the lesson. On the other hand, sitting still, letting your shorts work and taking advantage of a bounce to trade with the probabilities and short in to it makes much more sense.

Right now my personal portfolio on the whole is up +3.72% today, thus if a bounce materializes as I still suspect it will, I can use it to my advantage, but if it doesn't, I have no risk, just gains.

In any case, additional information is showing up suggesting the market is getting a foothold as well as suggesting that this morning's move lower was indeed a piece of fundamental data that had not been discounted because the market didn't know about it, I have charts that suggest that is the case which I'll show you.

According to GS and JPM, ECB full on monetization/QE has been discounted in to the market months ago, meaning anything less than full QE will have a negative effect on the market because they've already priced it in. Of the 3 plans the ECB floated today in an apparent trial balloon, I suspect plan #3, which creates a scenario in which the ECB does not violate its charter, one in which the Germans are less likely to block and one the market will not like, was the fundamental reason as the market "discounted"new news on the ECB QE front. Plan 3 puts the burden of monetizing debt/QE on the individual EU nations' central banks rather than the ECB, which raises a whole host of issues as sovereign nations, like what if France, Germany and Spain refuse to participate? Where's the QE, where's the juice the market is addicted to? I see this as the most likely as it won't be challenged in court, it doesn't violate the charter and perhaps in some way it moves Draghi closer to his grand design of forcing sovereign nations to give up more of their freedoms to form a Capital Market which Draghi described as,

"This means governing together, going from co-ordination to a common decisional process, from rules to institutions."

This is obviously more than likely the brainchild of the vampire squid, GS as they effectively run their own , larger nation from behind the scenes. Ever notice how many European leaders are or have recently been ex-Golman employees? Like Draghi himself?

In any case, I suspect that would be enough to send the markets lower as EU sovereign bond spreads widened on the unwelcome news. 

Or perhaps it's the fact that the month everyone anticipates the ECB to launch QE, they are still putting out different options as trial balloons, making it obvious they are no where near a decision that can be implemented in January as the market has already discounted.

In any case, intraday, take a look at the reaction in VXX, XIV and VIX futures.

 VXX 2 min intraday going negative in to the move this morning and early afternoon, suggesting the market is indeed going to try its hand at the bounce we have seen indications of as weak as they have been.

XIV, the inverse of VXX (short term VIX futures) is confirming with its own positive divegrence intraday as well.

And the VIX futures themselves show absolutely no hint of any divegrence before the market decline (VIX ramp), thus I suspect this was fundamental information that had not been discounted and the market move was part of the discounting of this new information.

The QQQ 2 min has a decent intraday positive divegrence which is leading, still short term.

The IWM has the same. A reversal to the upside from here would leave a "V" bottom, while not impossible, it's unlikely, a reversal is most often a process, not an event so I suspect a move back toward the intraday lows and a "W" base as drawn with the yellow arrows.

And the 3 min SPY which was in line with the move lower last week still has it's larger positive divergence, although still small and still only a 3 min chart.

 Today's NYSE TICK trend showed us real damage being done with -1500 hits on TICK, but as you can see, the downtrend has been violated, early warning of a likely upside reversal, although I still think another move toward intraday lows to widen out that "V" base is likely.

HYG, one of the most common levers was also brought in with a 1 min positive divegrence this morning at the lows so I suspect it is here to save the bounce.

As for the major averages, almost all of them have taken out all post F_O_M_C gains, those that haven't are about as close as you get to doing so.