Early Update

This morning's price action is surprising considering the typical op-ex behavior, but not very surprising considering everything else that has developed including most recently some very ugly negative divergences in to yesterday's close. Last night's Daily Wrap concluded as follows:


"I think you can probably sense it through my tone, but I feel we are very close to a pivot and downside reversal in the market so i'll be looking at many more assets, like NFLX and AAPL mentioned today.

I'll check on futures in a bit and see if there's anything starting to standout there.

Tomorrow is a monthly options expiration so look for the max pain pin somewhere around today's close until at least 2 p.m., after that we should have some good data, but I suspect things are going to head south and very soon."


If you are a currency trader, this week has provided plenty of volatility...

 EUR/GBP

EUR/USD

As for Index futures, they have been rather flat overnight with some slight bumps to the upside on positive headlines, more "source" rumors, but you can see how the market has opened...

ES overnight and in to the open.

As I said yesterday, there were some deep negative divergences in to the close, not just in the averages, but in a lot of places including HYG.

 As to the Igloo with Chimney top pattern which is so effective as a timing indication, with the chimney almost always directly preceding a reversal, this looks to be one in the Q's.

While not as well formed, the IWM also shows signs of one.

The idea is that the rounding top may cause some longs to doubt their positions and take some off the table, the chimney or pop above the rounding top commits them, whether they already took some off the table and add it back seeing a break higher or whether it keeps them in before the building doubts cause them to take action. Then suddenly price tends to drop, locking longs in place in a bull trap. After that it's just human nature to not accept what's happened and rather to engage in a litany of cognitive biases such as, "well the market has been up for "X" days, this must just be a small correction, maybe I'll add here to my long" and that's how it starts.

There are a few trades I'm quite interested in, some we have already recently added to, some not yet. I want to take a quick look around and make sure that this looks like a high probability pivot as well as which assets are the best looking at this moment.