Op-Ex Market Update

Since this still seems to be the prevailing price theme , at least until around 2 p.m. as per our normal experience, this is what I'm updating for the moment, after 2 p.m. as most contracts are closed, I know my broker is calling me every hour around 2 p.m. to ask what I'm going to do, price can make some random move, but the 3C data of the last 2 hours has been some of the best of the week in my experience.


Since the last Intraday Market Update , things don't look to unusual...

 QQQ 3 min intraday with yesterday's positive and price today largely in the area of yesterday's close as is often the case with op-ex Friday's (weeklies included).

The IWM trend from the end of the small bounce base from 1/14- 1/16 and the bounce that I suspected we'd see aggressive selling in to higher prices just as the previous bounce attempt from the 6th of January until the 8th when charts were unusually negative, ending that bounce prematurely.

In any case, near term, the point here is a positive divergence to the far right as the IWM was sitting a bit low in the range for today. Here's a closer look at the exact same chart.

IWM intraday positive today, the negative is from late yesterday afternoon.

And the anticipated intraday SPY bounce as it looked to be sitting at the bottom of the max-oain pin range, since the last update and positive divergence, it has bounced and do you remember the lever that I said would support the bounce? HYG? I showed the intraday positive in HYG which tells me it was being used to help push the SPY/et. al.

This is the SPY in green intraday (part of yesterday afternoon seen to the left, but notice at this morning's intraday lows HYG (red) makes a higher low. leading the SPX higher as HYG is one of 4 assets in the SPY Arbitrage.

And NYSE TICK (intraday breadth), from negative as prices seemed to be getting a little too hot yesterday afternoon judging by the late day negative divergences and the downtrending TICK (I highlighted yesterday afternoon in the red rectangle on the time axis) and this morning's stall and trend higher in intraday breadth as the SPX bounces, pretty much what we expected.

However, in about an hour the op-ex pin should be finished and released, so we'll see what we can find out about that.

Did you notice what treasury yields are doing today? Getting CREAMED! So I'll be taking a look at Leading Indicators, as Treasuries rise and yields fall, this typically has acted as a magnet, pulling equity prices lower, but I want to investigate these closer, look at the Treasury Futures and see if this move looks supported and stable in T's and yields, if so, we may have a new dynamic in the second bounce attempt of January that has effectively been cut short, not quite as short as the first one, but still cut short as our minimum bounce targets from almost 2 weeks ago as the bases formed have barely been hit, I believe in at least one of the averages, the minimum bounce target has not been hit yet.

St the same time I don't want to be too myopic in getting "Lost in the Lines" of short term trade.

Thus while this isn't a full update, I do want to remind you what the Chats look like as we are really still in the October cycle (off the October lows which were also a pretty significant base), which would put us right in the stage 3 top area of the cycle, you may recognize a familiar price pattern for stage 3 tops on this chart and you may notice one thing that is missing....

 This is an example of a smaller cycle to the left, the August cycle with its 4 stages and the larger October cycle and thus far, 3 stages. I tried not to draw too much on the chart in pointing out divergences, it's the cycles I want to emphasize and the current position of the long term (2 hour) 3C chart. As the August cycle is smaller, it's not going to have the same size signals that will show up on a 2 hour chart, we'll look at it closer below in an more appropriate timeframe.

In any case, as was posted on July 31st in an almost emergency Daily Wrap, breadth in the market was deeply oversold, I expected an oversold bounce, a few days later as we entered August HYG gave away the market's plans with positive divergences and the August lows formed a positive divegrence or stage 1 base. Then at #2 we have "Mark-up" or what Dow Theory might call, "Participation" , then at stage 3, distribution and top. We already expected and forecasted a head fake move which gives the stage 3 top the look of an igloo with a chimney, which directly precedes the transition to stage 4 decline. In yellow is the head fake move of September, which happened to see a Bullard "Hawkish statement " about a week after we suspected the head fake move, that transisitoned us to stage 4 decline when Bullard stepped in with a suggestion of it being "resonable" to extend QE as we had already seen a monster stage 1 base at the October lows leading to stage 2 mark up and stage 3 distribution in which Bullard flip-flopped in less than a month and said inflation since mid-October had improved, how you can measure that in a month is beyond me, but it was what the market needed in all 3 circumstances as Bullard went from hawk to dove to hawk, but only after we had already identified the base or tops, which is why I posted the article about the F_E_D not just being a Plunge Protection Team, but The Plunge Protection and Market Correction Team.

Currently in his cycle, the rounding top is there, not so much the chimney / head fake though. I am not specifically forecasting it, just pointing it out and pointing out that the possibility of the last 2 bounce attempts in January might have been trying to establish such a head fake, but saw extremely aggressive distribution.

This is an hourly chart of the August cycle that ended with the September head fake (Chimney on the igloo) highs which coincided not only with our distribution signals, but Bullard's hawkish comments to the day, sending the Dow over 1200 points lower to the October lows.

A typical market cycle progression of the stages.

In any case, this post is a bit longer than I planned so we may have some slightly different looking charts than what w=was captured above.

I'll be looking at some more important indications and updating as well as some specific assets. I just had to make sure we are not stuck staring at an ant hill and miss the train heading our direction.