"However I've always advised with 3C and other indicators, "When you aren't sure, go to longer term charts", they reveal more trend and higher probabilities for near term choppiness or volatility in shorter term charts."
However, lets back u a bit to the earlier portion of that post and some others from yesterday.
In yesterday's Daily Wrap I posted some pratical targets based on the gas in the tank for the averages (SPY/QQQ)
"... if I had to pick a target on the upside and the F_O_M_C starting tomorrow through Wednesday wasn't a consideration, I'd say $210-$211 for the SPY....
(For the QQQ) I'd say $107.60 is an easy target and $108+ is likely. "
Incidentally, right now we are either right in the middle of that range or right at the exact price target and on a parabolic move.
Additionally from last night's post just so there's no Monday morning Arm Chair quarterbacking,
"
If there's one concept that has been rock solid it's "BEWARE THE F_E_D KNEE JERK REACTION". I don't believe there's been a meeting that has gone by over the last 5 years in which I haven't warned about that in capital letters. More often than not there's an initial knee jerk reaction, sometimes hours, often days, sometimes weeks, but it's almost always the wrong reaction and is faded so be careful on any assumptions immediately following the meeting or the press conference.
While everyone and their uncle has a guess at what the F_E_D will do, I suspect they take a little and give a little, such as maybe remove patient, but perhaps say that they won't be hiking rates in
June. Don't take that literally, it's just an example, but that would be my gut feeling, that would obviously cause some crazy volatility"
From this morning's post, Levers...
I'm more interested in the levers, HYG, VXX (and its derivatives) as well as TLT as there's been more curve flattening since last night between the 2 year and 30 year.
The very near term indications on the 3 SPY Arbitrage assets are interesting in that they seem to be calling for more near term volatility which wouldn't be much of a surprise as we get a F_E_D/F_O_M_C sponsored knee jerk reaction about 90% of the time they have an event.
However I've always advised with 3C and other indicators, "When you aren't sure, go to longer term charts", they reveal more trend and higher probabilities for near term choppiness or volatility in shorter term charts.
Unless the F_E_D has leaked and that information is discounted in to the charts, it may not matter, as the F_O_M_C is by far the major market fulcrum today which will easily run over anything below 5 min charts and depending on how big of a surprise they may deliver, can run over charts even longer although that's usual;ly less likely or the market finds a way back to those charts after the knee jerk is over."
And kind of summing up the post, while the 1-3 min charts were all over the place, mostly indicating short term volatility to the upside or a knee jerk reaction, the bottom line was as follows:
"The only thing that looks clear are these stronger, longer term signals all pointing to a lower market, I suspect that would be the case even in the face of a positive F_O_M_C initial knee jerk reaction."
Most of the above explains why I was in no hurry to replace recent puts that were closed or the recent
UVXY position that was closed at a +10% gain.
However somethings are just so true, they become concepts. The longer term charts as just seen in this afternoon's closing post, Beware the Knee Jerk- Uncertainty, Meet the Market. are where the important trends lay, as well as the LEVERS post from this morning in which short term charts were in limbo and many leaning short term toward either lost in limbo which would be unusual or a market./F_O_M_C knee jerk bounce/.
I could probably make a convincing case via the EUR/USD and $USD divergence specifically that there was an F_O_M_C leak, in fact the more I look, the more probable it looks. It's not like F_E_D leaks are all that rare, one right now just turned to a criminal investigation, the other was the 154 firms that received the F_O_M_C minutes by email 1.5 days in advance, plus we've caught 3 leaks in the past on our own so it''s not like it doesn't happen. You take a look at the charts if you like and tell me what you think., Market Update and EUR/USD Possible F_O_M_C Leak as well as the charts below.
After all, if the ECB is loosening and the F_E_D_ is tightening, why would the $USD be the one with a negative divegrence hours ahead of the plunge there on a knee jerk move? I remember yesterday looking at the relative performance of the market vs the EUR/USD correlation and the day before and thinking, "This could be a leak", but it wasn't something standing out so much that I'd publish it. This is the gist of what I'm talking about though.
You probably remember that the "gas in the tank" (positive divegrence) in Index futures made that one of two possibilities although I considered it to be less likely, it was still a possibility, that the F_O_M_C Dovish Bone thrown to the market today was part of what was leaked in advance on today's knee jerk move higher.
Take a look at the $USD from the very early signals from today to some longer term charts, remind yourself that the market expected "Patience" to be removed and that's hawkish, if anything based on market perception absent any short term knee jerk manipulation, the $USD should have been leading and the EUR lagging.
This 30 min $USDX chart with a negative divegrence
If anything is to come from today's EUR/USD move, I suspect we may be seeing the beginning of that now as the initial knee jerk move start to wear off and the market comes to the realization that no matter what else was said, "Patience was removed" and now June is on the table introducing for the first time in 6 years, uncertainty from the F_E_D, in a market that is use to the F_E_D promising to protect the Bernankle put through all means for the foreseeable future. That all changed today.
This may indeed be the first evidence of that change as smart money is smarter than to fall for the Dove bones thrown to the market.
As you know, I don't believe "V" shaped reversals hold any more than I believe parabolic moves like today are to be trusted so the EUR/USD and each of the currencies individually would have to put in a reversal process whether U" shaped or "W", either way, we should see it not only in price., but in the 3C divergences in each of the pairs as EUR is already showing distribution in to the knee jerk move.
As for the averages, this gets a bit interesting too, we expect to see some signals along the same lines.
The IWM 10 min chart was already seeing lots of damage so any additional should feed right to this intermediate 10 min chart.
In wrapping it all up, our forecast of a bounce in to the F_O_M_C this week along with rotation out of the IWM and in to the SPY QQQ early this week has been right on as well as our SPY/QQQ targets hit exactly today.
Right now futures are getting a bit ugly, but there's still more assets to look at , but you can see why I waited on the QQQ puts with gas still in the tank, it had to go somewhere and the UVXY long as the short term charts weren't in line, in fact the 1-3 min TLT, HYG and VXX charts were in the right spot to support a knee jerk move higher. The 10-15 min + charts are a different story.
I'll have a daily wrap with remaining observations out shortly.
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