Market Update

I'm watching for a couple of things, one would be an intraday bounce as there's congestion in the area, I've had several emails this morning that people are disappointed they missed this morning's move, I'd say "think bigger", your going to miss a lot of moves, you're going to get positions wrong, but there's always opportunity in the market. I believe chasing price is very dangerous, let the trade come to you.

We do have congestion in the area so there are some areas that the market will likely find some temporary support and even go for a gap fill, but also keep your eye on the prize. I like to think of the market in tactical terms as in what is the highest probability primary trend and then tactical terms which is more intraday, entries, exits, etc. and these are almost always going to be like yesterday when the market is going against a position like UVXY which is up nice today considering, but we had a reason to enter it, it wasn't just because it was low. Granted, this is not an easy way to enter a trade, but chasing it which may be more emotionally appealing, can be disastrous even if you were right, what matters is can you hang in there.

As you've probably heard many times here, Jesse Livermore considered one of the greatest traders of all time made this point in saying "Give me time, not timing", which is synonymous with the "Sit tight" theme.

In any case, as I'm watching intraday trade, I'm also very cognizant of the highest probabilities trade that stretches beyond a morning or beyond a day or a week.

From the Week Ahead post Friday (excerpts)..."I can't see how the week ahead doesn't make good on the very negative charts/price patterns in this area, the usual question though is where do we start the week. 3C charts typically pick up right where they left off, you've likely seen it again and again. ... From an intraday 1 min chart perspective and this is where the chart picks up where it left off...How this closes will depend on what I'd expect for Monday morning, at present it looks like some early strength Monday morning or picking up in the area."

Here's what we have thus far using SPY as an example...

 This is Friday's late divergence
(positive and the market picked up on Monday where it left off (positive), but closed yesterday and throughout the day with negatives, thus this morning picking up where the divergence left off, negative. In addition there was a parabolic move which I don't trust, this morning you see why.

Right now the SPY is in line, but it's coming to one of those areas of congestion, actually breaking below it right now, but that would be normal Technical Analysis that expects support levels to hold and if they don't , then the market must go down, this isn't our experience as Technical concepts are used against trades.

This is several support levels broken, but the one to the far left is my focus right now, it too was just broken.

A "V" reversal or bounce as you can see from earlier hasn't worked out well and they rarely do, if the market were going to try an intraday counter trend bounce, I'd expect to see volume rise significantly (stops taken out) and a wider non "V" shaped pattern.

However this is only a very short term intraday perspective.

 You saw Market Breadth last night, it has been for lack of a better word, "Horrendous", for the % Stocks > their 40/200 day moving averages not to move through this entire period of February and the other as far back as November is not good news for market bulls.

The intraday breadth on the NYSE TICK has been around +500 and -1000 with -1400 hit. Have you ever heard, "Stocks need volume (or QE) to advance, but they fall of their own weight"?

This was very true before QE, now that QE is done, it should become true again, but in this case I'm substituting Volume for breadth, the same concept applies.

 On the break that just happened as I started this post, the intraday charts are still in line.

SPY intraday and ES...

ES in line since yesterday's and last night's negative divergences sending it lower and confirming.

I'M NOT SAYING THE MARKET HAS TO BOUNCE INTRADAY HERE AT ALL, I'M SAYING I'M WATCHING FOR IT. 

As you know, I expected weakness strong weakness this week after some initial price strength Monday.

 The thing not to lose track of are the different timeframes and what each is telling us. This 10 min chart is telling us major damage was done the last 2 weeks and a lot of it in a flat range where we often see strong (positive and negative) divergences.

This chart was and is telling us that stage 4 is likely upon us now, which you can probably tell with the increased number of trade ideas and positions opened recently.


 As for the cycle, this 30 min chart is telling us it's very hollow, Remember the phrase, "Stocks can fall of their own weight".

This is almost exactly what we see in the SPX futures...

S&P E-Mini futures 60 min for this February cycle leading negative like SPY above.

I don't think this is coincidental at all, especially after last week's Things just got real interesting for HYG / HY Credit and yesterday's price move in HYG which is what really matters, the divergences on the HYG chart just tell us price is likely to move as the post linked above from last week was acutely pointing out.

As for the longer term, the October cycle is still in effect until a lower low is made, incidentally October was the first primary trend lower low in the market so an additional lower low below October will likely signal the Primary bull market is shifting to a primary bear market of stage 4 decline for the primary bull market. The charts here are supportive as well.

This of course is also backed up in S&P Futures on a primary trend...

 ES daily. to the right you can see that price is above all "Deceiving" as the indicator shows essentially pure distribution in to the February rally, but also makes a new leading negative low (3C from the left side of the chart to right).

To give you a better idea, here's the same chart without any drawing on it, hopefully you'll see what I mean...

ES

So any intraday updates I "may" give for a bounce, although I believe we are moving to stage 4 decline, bounces always happen, has nothing to do with the sub-intermediate, intermediate or primary trend, all very ugly.

As you may have heard here before, there's nearly as many up days in a bear market as down days, even though it drops at least 3 times faster than a bull market rises.