After this morning's surprise news (non-discounted events in Yemen), it seemed a bit questionable whether or not the market would carry on with the original plan we saw surface a couple of days ago, a market bounce which in the bigger picture is really just an increase in volatility leading to the next stage, stage 4 DECLINE.
I'm almost done with a Leading Indicators post that will be out shortly, but the punch-line is the same as yesterday's, they are for the most part supportive, but only on avery short term basis and after that, they have serious damage that should pull the market much lower so we are set up in a good place in which if the market moves lower, our short positions are working for us and if it bounces, we know the highest probabilities are the bounce CAN'T hold and we can short in to that, thus a win/win scenario as long as you don't introduce long risk in the mean time.
Just based on the Sector and group performance yesterday and the Dominant Price/Volume Relationship, a bounce was highest probability, but now we have Bullish upside reversal candlesticks in place, "Hammer" as in "hammering out a bottom", things look even stronger for a bounce. However tomorrow is an op-ex pin day and they are dull and I still think the market needs to widen out its base and there's not enough time to do that.
Either way, it shouldn't matter unless you are planning on trying to piggy back a bounce which I think is exceptionally dangerous and trading against probabilities.
A Star reversal candle in the SPY, increased volume would make it more effective.
A bullish Hammer in the Dow, again higher volume would make it more effective, but as I said above, we may not have enough time today to finish a wider base which may have to wait until tomorrow afternoon after the op-ex pin is lifted around 2 pm and possibly in to Monday.
Intraday, it looks like we will pullback a bit toward the goal of widening that base area...
Today's intraday NYYSE breadth has improved from very negative -1250 to trending up, but recently breaking the trend and moving more toward the pullback intraday I said I though we needed to widen the base area to make it suitable to sustain even a short term bounce as a "V" base isn't sturdy enough for the kind of volatility we should expect.
The intraday SPY is just starting to turn negative enough to turn prices down and hopefully toward this morning's intraday lows where it should accumulate and create a stronger short term base for a 1-3 day bounce.
SPY 5 min is in line with the downtrend as much of the divergence was run-over, but it's leading positive today.
DIA intraday is also negative so it should turn down as TICK suggests.
However the DIA 5 min not only shows the larger negative divegrence sending prices lower from the last bounce, but a positive divegrence intact now for a decent volatility based bounce.
Intraday the QQQ is also going negative to turn back down.
However it too has a 5 min positive divegrence still intact.
I'll be honest with you, for the kind of volatility we need to continue after the last 2 days, any bounce could look very scary and very strong, but it's the volatility that matters, the bounce will fail, just keep this in mind should this thing get off the ground so emotions don't overrule logic and probabilities.
IWm is more or less in line intraday, it need to be as it has had the worst looking charts for a bounce.
This is about as good as it gets on a 2 min chart, but note the clear negative sending prices lower. We should see another negative in to higher prices.
Leading Indicators are coming next.
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