Market Update

In the earlier Market Update I posted the general feel of the market today, not including the NASDAQ which was, "I do see some underlying activity that shows some softness in underlying activity ".

To that end, it seems some of that softness is coming home to roost now. Yesterday we saw a clear Igloo/Chimney in the SPY after the Q's created the same last week. Today we have the same in the IWM now, I think this is an important market development as I would expect all of the averages to put in the same warning flag around the same time so one day after the next, each average has put that price pattern in.

Lets get back to the update....

 The SPY intraday weakness has continued on the 1 min chart, this continues as I type.

To give a little more perspective on how sharp this particular chart actually is, let me zoom out the intraday chart a bit.

This should give you a better idea of how sharp this intraday divergence actually is which is quite sharp this early intraday on gains that aren't all that impressive.

As you know, when a divergence is strong enough, it migrates to the next longest (stronger) timeframe, that is what is happening in the SPY right now as this 2 min leading negative divergence has taken shape. I did see this earlier at the last update, but it wasn't significantly interesting at that point to be worth the post, it is getting more interesting now and is worth the time to post.

 The Q's are still struggling, still largely in line at this point, weakness could build in pretty quick from here so we'll keep an eye on that.

The IWM has continues on the earlier trend I posted, not much new there except the IWM joining the SPY/QQQ in the Igloo/Chimney price pattern.

Please forgive my horrible drawing, I can't draw a straight line, but I think you'll get the point.

 IWM with a Chimney, not a large one, but it has joined the other averages and like them, it too has a sharp leading negative divergence (in the intraday timing time frame) at that chimney which is what we look for in this price pattern.

 Additionally, that divergence HAS migrated out to the 3 min chart as it has formed, but is close to a new leading negative low, which is already a worse signal when you look at the relative level of 3C vs the relative level of price.

Now for the broader market.

Last week the TLT/Bond divergence which I'll remind you at the bottom of its importance, shows the 1 min intraday small negative divegrence which made me think we'd see a small pullback in TLT today, that hasn't happened yet and may be run over.

1 min short term TLT

This is why TLT is important as a broader market signal/measure...

TLT's 2 min trend, but beyond that...

10 min TLT.

The reason this is important, it goes back to the relation or  correlation between bonds/yields and the market

This is the SPY off the Jan 29-Feb 2 base and TLT topping at the same time (red). Now it's easy to see the flat TLT trend rather than down with the very strong 3C positive divegrence above, in other words, a base for TLT to move up from. Note the inverse relationship with the SPY and as TLT makes a respectable base and divergence, look at the SPY with its Igloo/Chimney and negative signals in the exact same area (to the right).

Thus intraday/short term timing charts become more and more important.