Definitive Change in Character

With the volatility we are picking up, for example...

Look at the size of the candles in the yellow square from earlier this year on the head fake move above the 2015 range. Then look at the size of the candles in the box in red. This isn't even including the huge swings in volatility in the Futures market which runs through the night rather than just 6.5 hour candles as seen above. I'd say last night's price movement was much more volatile than what we see on the daily candle today which is what I was expecting and hoping to see.

While this has happened and while I don't want to get too carried away on the first overnight session and first day outside the quarter, there are some interesting changes in character that seem to be at work already.

 That interesting change of character seems to price targeting of leading divergences like this morning's intraday SPY 2 min, it's one of  only 2 or 3 chart that can respond fast enough to the market being open this little time at the point I captured the charts and you can see price marches right down to the 3C leading divergence to what we'd call "in line" or price/trend confirmation.

 The same has pretty much occurred in the SPY 1 min, but has also shown the very first, and very small divergence possibly ending some of the morning downside volatility.

Once again, do you see why I never supported going long this move when we expected a bounce? I referred to it as, "Introduced Risk", the only way it became risk is if you introduced it by trying to trade the bounce which was simply not a high probability trade, not one that could be depended on for numerous reasons (weak base, weak divergence and in the midst of a stage 4 decline so trading against probabilities as well).

The 5 min QQQ gives a better broader picture, as we had seen through any higher prices, distribution of them immediately. We have last week's positive divegrence for the bounce expected early this week (Monday), even though we didn't get the small pullback intraday Monday that I suspected we'd see, but once again the market was reacting to fundamental news it had not discounted as there was no way for it to know about it until it hit.

The chart not only shows the distribution and it being the correct signal, but again targeting of the leading negative divegrence and VERY quickly. This is probably the biggest change in character, how quickly price reverts back down to the leading divergences, I was actually very surprised this morning thinking to myself, "This is something I haven't seen in a long time and even then I don't think it was this accurate".

 The SPY 10 min chart shows the same, the two distinct bases rather than 1 larger "W" with distribution at both of their highs and volatility picking up.

IWM 1 min leading divergence was targeted by price and reverted right down to it this morning.

I don't use 3C for target levels, it doesn't tell me that alone, although it can give some clues. This appears to be no support in the market and price moving down to the weakness that distribution the last days of the quarter (the first days of this week) created.

 QQQ 2 min leading negative sees price move right down to the leading negative divegrence this morning.

The change in character that I believe has entered the market to a much stronger degree than previously seen is FEAR, which is the strongest emotion in the market and has some of the fastest, strongest moves you'll ever see, both on downside moves and counter trend rallies.

Looking at a bigger picture QQQ 30 min chart, there are no positive divergences at the base areas like the one starting the 11th of March or last week, this is because they were not strong enough accumulation events to even show up as a blip on the much stronger divergent signals of a 30 min chart, but the distribution showed up just fine.

As bad as this looks, this is just the details of where distribution occurred.

If we look at the same exact chart closer to being correctly scaled from the positive divergence of the October lows, the 3C signal looks something like this...

 The white is the October lows accumulation, the yellow is the obvious 2015 range that had to be broken to the upside creating a bull trap before we'd see any real downside and the leading negative divergence through that bull trap is what I suspect we will soon see the market move down to just as we saw it this morning on shorter chart.


Fear has been introduced to the market and that's exactly why I was hoping to see volatility pick up as an indication of the fear cycle of a stage 4 decline which in this case has been more on a swing basis, but we may very well see this play out on a primary trend basis before long.