I can see how the market would be a little tepid and roughly pegged in place in front of the Greek delivery list of their reforms and certainly in front of tomorrow's 1st of 2 day Yellen/F_E_D congressional testimony, but that doesn't mean there aren't still things happening below the surface, some are interesting as they gather some early momentum, some are interesting from a conceptual point of view as you can use these concepts in any kind of trading in any timeframe and just about any asset.
First the averages, they all pretty much picked up where they left off at Friday's cash close.
The SPY ended on a sour note (3C) on Friday afternoon, it picked up where it left off on the cash open today. This small intraday divergence is well past by now (since this is a 1 min chart capture), but it does show that sort of "pegged" price action or non-action in waiting to see what's going to happen next.
However one thing I found interesting was last week we had the Q's forming the rounding top with a head fake or the pattern that looks like an "Igloo with a Chimney". If you think about the psychology of it, it's not hard to understand, when bulls see price losing upside momentum and starting to roll over, it would make sense that they start pulling back on positions, no longer being useful as a buyer or raher PROVIDING DEMAND, so you can understand why that "chimney" shows up, it erases the unease they start to feel as they see price's ROC die down and start to roll-over.
I don't think it is coincidence that one of the best price timing markers we have is this head fake chimney which usually directly precedes a reversal in trend (this works inverted also as rounding bottoms with a head fake stop run below the rounding bottom).
While we had this pattern in the Q's last week, we didn't have it in the SPY yet, now we do.
I'm not sure if I would have discovered this pattern with out the 3C divergences that almost always accompany it. The price pattern is seen very often at key pivot points or inflection points, but if you don't recognize it as a recurring event, it's easy to overlook.
Breaking down the Q's Igloo with Chimney price pattern...
After 2 prior failed bounce attempts in the market for 2015, we had a descending triangle (bearish according to TA, but these patterns get manipulated so often because they are so predictable and well known) in place. You may recall as the base for the 3rd bounce formed between 1/29 and 2/2, our first initial upside target was ABOVE the descending triangle which happened and we had to re-draw the trend lines that gave us a rectangle range that stretched across all of 2015 to that point which makes a very juicy head fake target, it gets traders to move, creates demand, makes it easy to sell in to.
I don't know how many of you watch mixed martial arts, but if you do, you know when two fighters are grappling on the ground, there's often a series of small blows to the ribs or other areas that are meant to cause movement to create opportunity, none of the blows are strategic as in ending the fight, but tactical as in creating the movement necessary to reach a strategic goal and win the fight, that's more or less what a head fake move is and the Chimney on a rounding top of the "Igloo with a chimney" price pattern is akin to the same idea.
"I w/ C" = Igloo with Chimney.
The Q's ended the cash market Friday nearly in line, but VERY parabolic which is why I liked a small spec position,
Trade Idea: Short Term Spec Puts...QQQ.
Intraday, as of this capture, the Q's also are pretty much in line and not too exciting.
You've probably heard me say in reference to 3C signals, "When in doubt, go to a longer timeframe", there's often something going on and sometimes you have to reduce noise and small signals to uncover a trend.
This was the Q's at the time of capture on a 3 min chart when I started this post, this is the same chart right now (which of course will still be a bit old by the time you get it)...
Not only has there been deterioration in to Friday's parabolic move, but in a brief period of time this morning, it has increased substantially in what looks like an otherwise quiet market.
The IWM ended Friday's cash close with a negative intraday signal and picked up where it left of this morning....
again on a slightly longer chart, you can see there's more going on here than what meets the eye. These are the kind of things I'm watching and keeping tabs on, you'd be surprised how quickly a nasty surprise can creep up in a market that otherwise appears to be quiet, this is why I always warn to be aware in a dull market.
As for some of our expectations, HYG's charts are continuing doing what they have been doing and it's getting to a scary point for HYG.
The intraday trend has been negative in HYG, but as you can see, the rate of change or decay in 3C has stepped up significantly and this is with HYG already in a bad primary trend position.
The 30 min HYG chart and its primary downtrend. At each of the tops you can pick out the 3C negative divergence, now look to the far right at our current HYG move.
As for Oil, we had a trade set up we were looking for...
USO Update
You can check the update above or those from earlier in the week, this divergence tells me USO is likely to break below its consolidation/rectangle, so far it has added to that today.
You may recall, a move below lower support (potential head fake) is what I am looking for, it will need to show accumulation and I think it can, the point is however, we are moving closer and closer to that probability, as well as a nice potential trade, but I wouldn't jump just yet, let the trade come to you, lets confirm we are seeing what we expect to see.
These are some of my favorite trades, they come to you on your terms, you pick your battleground.
As for Gold...
We had been looking for a pretty serious pullback and that has occurred and is still occurring, but something is starting to change,
GLD Next Set-Up
Again, this is a "Let the trade come to you" situation. It looks like GLD is starting to feel around for a bottom. I have stronger 3C charts than this, but I don't want to give the wrong impression as I think we still need to see more lateral trending/base-building as well as 3C signals in more timeframes, but I think we are getting close to a nice trade here at a nice discount and much lower risk.
I'll be looking at some more things in the market and keeping an eye on some of the charts above, but also opportunities that may be setting up. You may recall I saw several inverse ETFs last week making some impressive moves on the 3C charts as we expected Financials to rotate in Friday and FAZ to pullback. There are quite a few of these along with the individual stock names.
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