Quick Market Update

So far since Friday's The Week Ahead post, we really aren't far off track early a.m. / early week projections,

"As for early action next week, it looks like early weakness on Monday, although I think it will regain some strength in the later part of the day or some time afternoon-ish."

Of course this is just very short term intraday forecast/expectations,  going a bit further from the same post, 

"While I do not think we are done with our bounce we have been expecting and are really only a few days in to, I think we are seeing more aggressive than normal selling like we saw on the attempted 1/6 bounce that was prematurely but short on 1/8.

I suspect it probably won't take too much longer (in to next week) for the bounce to start to fail, leaving us some good opportunities to set up some nice short positions or add to.

I am still waiting on a few leading indicators to give clear signals , but this can happen very quickly."

And...

"Finally I think the IWM/Russell 2000 outperforms the other averages early in the week as it has not met minimum targets and has some better looking charts relative to the others."

So far we aren't too far off. I'll use the SPY as a broader look thus far although not too much will have changed this early on some of the longer charts, it still gives some feel for action.

 This is the intraday , late day weakness in 3C last Friday and that weakness picking up where it left off this morning, but based on the charts, I didn't expect it to hold too much past noon time. You can see an intraday, small positive divergence at the SPY lows this morning and pretty much in line since. We have been seeing negative divergences in to HIGHER PRICES, there's not much point in selling in to lower prices from a smart money point of view and as we had already known and as you'll see below, this bounce cycle was set up in advance, clearly suggesting (based on short and longer term charts) that it would be used to sell in to. Thus, with the SPY barely green or vacillating around the unchanged mark, there's not much to sell in to intraday.

 On a longer 3 min basis, you can see the failure of the bounce off the lows of the 6th, which started with some unexpected negative divergences on 1/8. The next small base area is a small "W" bottom on the 14th through the 16th and this is what we are currently tracking as I have suspected that these two bases are separate events with the second one forming because of the first one being cut short. SPY has not even made it to our minimum target on the upside posted over a week ago which would be the intraday highs around the 8th (minimum target projection).

The point being, you can see the small stage 1 base (white), in line (green) as the SPY has not crossed above the minimum target which is where I'd expect to see stronger negative divergences pick up and for the first time since this second small "W" base has formed, we are seeing a small negative divergence starting to unfold as we approach the minimum target area.

 This is a closer look at the same 3 min chart above and the first negative divergence starting to form since the "W" base's positive divergence.

On the slightly bigger picture (with a multiple timeframe analysis perspective), the 5 min chart shows the negatives off the first base/cycle from the 6th which went surprisingly negative prematurely on the 8th and our next base area from the 14-16th, yet look at the slightly longer term perspective with a much deeper negative divegrence on a 5 min chart, which also happens to be where I consider there to be a big difference between the 1-3 min charts and the stronger trend charts (starting at 5 min).

 The 10 min chart shows a bit more history with the negative divergence at the rounding top area from December, remember our forecast for a failed Santa Rally and a failure in the "January Effect".

The divergence on this chart is a much stronger one and is what I believe will be the next short term trend as soon as we go negative on the current cycle started from the 14-16th "W" base.

Of course I think we'll need to see the SPY at least take out the minimum target area before we see that happen.

Also remember last week the weakness we were seeing in some of the obvious ramping levers, HY Credit, there was some VIX futures strength, Treasuries and yields of course and don't forget about last week's very sharp and sudden elevation in the SKEW Index (or Black Swan Index). Other leading indicators have not given a clear negative signal yet which is not surprising given where we are at in this process (specifically the latest "W" base- 14th-16th).

As for the Q's

 On the 1 min intraday, they too saw early A.M. weakness and a similar intraday positive divergence like the SPY 1 min above and are in line as of this capture as they have not crossed in to the green on the day (above Friday's close).

The 3 min chart on the Q's like the SPY, which has been where the positive divergence for the small "W" base has largely been seen, is also starting to see the first negative divergence, but in this case the Q's have at least crossed above the minimum target that we were looking for over a week ago.

 IWM intraday is leading and showing a negative divergence in to higher prices above Friday's close, the relative outperformance in the IWM/ is what we expected to see from Friday's, The Week Ahead...

"Finally I think the IWM/Russell 2000 outperforms the other averages early in the week as it has not met minimum targets and has some better looking charts relative to the others."

So far this morning, that has been the case. Note the small intraday negative divegrence in to higher prices which is what we had expected to see on this small cycle.

Intraday breadth is not exciting, pretty much contained to a very mellow +/- 750.

Until I see enough objective evidence to suggest otherwise, I think we still are in the bounce cycle and will try to make higher prices, but I also expect they will be sold in to and likely, as posted Friday and as has been the expectation since before the bounce even started from the "W" base, roll over to offer some new opportunities and set-ups that come to us, rather than chasing anything.

I'll be posting some broader analysis as the a.m. trade burns of and we get a better feel for Leading Indicators.

I'll also be covering AAPL considering earnings tomorrow after the bell. That's coming...