Quick Market Update

If you were able to do the hard work, and that means shorting in to price strength, the chimney head fake moves, last Monday's market strength, if you were able to do that knowing the 60 min chart was the highest probability resolution to the downside, then you are sitting on positions now (or have been and should be relieved) that just need to be managed for the most part.

We saw a lot of Igloo/Chimney tops the week previous to last and were looking for early strength last week early in the week, Monday, so if you did the hard thing which is always the hard thing as the market never makes it easy (usually your emotions are the best reverse indicator when they reach extremes and you feel like all hope is lost, that's usually when you want to be taking action that directly contradicts everything you fear).

Otherwise, we are in stage 4 decline of the cycle from Feb. 2nd.

I can search for the actual post, but I can tell you exactly what I said before the February cycle/bounce, I said that the 2015 range (which was horrible price action for the start of the year, no Santa Rally, no January effect) would have to be taken out on the upside in a head fake move before any downside price action that would actually hold would take place as the range was becoming or was at that point, that obvious that it's virtually free money for smart money and it's a fantastic set-up for the smarter portion of smart money like Dan Loeb, Carl Icahn, etc. to sell in to.

If we go back to the original post which I can find if anyone would like to see it if you don't recall, let me know, the range on the upside had to be taken out on a head fake before we'd move to the downside, there's just too many goodies and opportunities above such an obvious range.

 Daily SPX 500 with the obvious 2015 range, the head fake move we called for BEFORE it started and as a cycle, it's now well within stage 4 as it has retraced the entire move and then some.

The idea was that the upside head fake, just like on an intraday chart, would create a bull trap. Have you seen bullish sentiment lately? Job WELL DONE. Now a move below the range which was the forecast back in January after a head fake move, is the target, this not only creates a larger short term stage 4 decline, but likely a primary trend stage 4 decline since the October lows broke the trendline and made a lower low.

This is how a bull trap's momentum works. once prices move inside the range and below, the bulls who chased there head fake above the range are trapped, that's the entire point of the strategic exercise, although there are tactical considerations as well such as selling in to strength or shorting.

Only after the fact do we see the forecast was correct, but the data that showed the probabilities was in place BEFORE the fact.

The simple fact is, YOU GET PAID TO TAKE RISKS. Often those risks are going to be diametrically opposed to every emotional cell in your body screaming you don't believe it and this is not how it's suppose to be. If the market is moving in a comfortable way and you don't feel that conflict, you are on the side of the bag holders and enjoy the good feeling while it lasts because it will turn on you.

The obvious question is, "Then why not just trade around all of it?", some people can, emotionally very few people can disconnect themselves from price action to see the bigger picture, it feels to good and it's too difficult to counter with objective data, it's a lot easier to listen to the talking heads on CN??BC telling you you are doing the right thing. That's not objective analysis, but it is human emotion and that's why these price patterns repeat over the centuries, because human nature, even in a world of HFTs programmed by humans , NEVER CHANGES. I suspect that's also part of the reason that most people who make money in a bull market lose it ALLL in a bear market, denial.

Quickly...I don't have great intraday signals, but VXX is looking even better (UVXY too) and XIV is looking even worse. There are mixed intraday signals among the averages.

Remember why I wanted to close the puts before the market turned lateral today? Well it has turned lateral inviting a change of character intraday, I'm not worried about it and maybe it's strong enough that I can replace the AAPL and QQQ puts with the longer expiration which was the point of closing them earlier before this lateral trend developed.



 ES/SPX futures 1 min shows a pretty clean positive divergence since the cash open at the white arrow, this is one of the better looking intraday charts.

The lateral price trend is most probably a small intraday base being worked out for an intraday bounce, rising volatility doesn't mean that everything is smooth and easy sailing for your shorts if you watch price action too close, if you back away a bit and don't micro manage, you should be just fine, but Wall St. makes its money by taking yours so they'll shake the tree every which way to make as many apples fall as possible because your loss is their gain.

 Es 5 min had a clear divergence that led to lower prices and it is clearly in line and confirming the trend since on this chart, this is what I'm interested in and I don't need to micro manage positions, intraday volatility is largely noise and it doesn't interest me beyond how I can use it to my advantage or if not, then just sit back and maintain my cool. "SIT TIGHT".

 NASDAQ 100 futures 7 min also shows the same negative divergence at the same place and the same downside confirmation, beautiful and exactly what we want to see in stage 4.


 Russell 2000 futures and the head fake or early strength from last Monday,  remember the concept that head fake moved DIRECTLY PRECEDE a change in trend? There it is.

Otherwise, 3C is in confirmation of the move to the downside, exactly what we want to see.

And the ES 60 min. I know this is hard to take as objective evidence when CNBC is saying, "All time new high" and "This time it's different", but it's not. I've shown this chart for at least 2 weeks, now you can see that it was right on. Probabilities!

So I suspect an upside intraday bounce, but other than that, I see strength in VXX and UVXY and weakness in XIV, this looks like the UVXY long will be fine even among an intraday pullback, other than that, there's just a bunch of nose, other than the price trend also looking like an intraday bounce.

I'm sticking with the highest probabilities above on the 60 min chart, we'll look at it again in a few weeks and you'll see it was telling you the entire time where te probabilities were, it's just that they are never emotionally easy to take on.