Quick DIA Update

Despite all of the market breakages this morning, I don't think they are as much conspiracy theory as some would have us believe. The signals from yesterday showing negative divergences in to yesterday's bounce gains is what we have expected since first identifying even the possibility of a bounce so yesterday and its signals really are not surprising, although the change in character for bounce behavior, while not surprising, is noteworthy.

The DIA has had the best looking underlying charts and thus far the best relative performance so it also is not a surprising that of all of the averages RIGHT NOW, the DIA looks closest to an intraday bounce.

I'll update the broader market just after this as it requires a lot more charts being captured, but those charts do NOT look like these DIA charts which are only dealing with the intraday DIA.

 This 10 min chart represents the most recent base for a bounce starting around the 25th,  as you can see as per the 3C "First Divergence/Target" concept, the DIA has already surpassed that area where the first positive divegrence was noticed so if you had gone long DIA right where the first divegrence was noted, even though the process of finishing the base wasn't done, a majority of the times price , upon reversal , will surpass that initial divegrence area and the trade would be in the green.

While I'm not recommending this as a trading strategy, it is helpful in trying to determine minimum targets for a divergence.

The real divegrence or the strongest part was last Friday as our week ahead forecasted we'd see the bounce likely Monday after an initial quick pullback to the lower end of the base area which didn't happen as futures ran higher on surprise PBoC news over the weekend and then overnight Sunday/Monday a.m. before the market open.

Also note the damage done yesterday alone on this 10 min chart, quite a bit as 3C is leading negative and below the bounce/base positive divegrence, giving us more evidence of what we expected to be to the highest probability-  selling in to the bounce.


Now for an intraday perspective as that's really what this is about...

The 1 min 2-day trend shows the damage from yesterday, but looking a the intraday chart on an intraday basis today reveals something you can already see at the white arrow.

The same 1 min chart zoomed in to intraday/today with a recent positive divegrence on the afternoon dip.

 The 2 min chart zoomed out shows similar damage as the first 1 min chart above, but zoomed in to intraday trade shows the same positive divegrence at the same place, the DIA wants to move higher here. Remember Dow 18k is in the area and it's a strong psychological magnet.

 The 3 min chart intraday shows the exact same thing as the other two, thus my alert for a DIA bounce, although for me it's largely informative than actionable, but everyone has different trading styles and risk tolerance.

And finally coming back full circle as we started with the 10 min chart above, the 5 min DIA also shows a positive divergence, not as developed as the faster timeframes, which is to be expected as this is a stronger timeframe, but it is there and that tells me the probability of a bounce is decent.

On an brief side note, if you look at the 2008 market decline, you'll notice not only did large caps hold out longer, but they held together better, despite the fact they still declined, they had much better relative performance as long only funds are going to flock to the "Cleanest Dirty Shirt"/