Important Trend Market Update

I have a few more data points to go through, but since the April 2nd forecast for a volatility-induced upside breakout (largely from various triangle price patterns in the averages and a high number of individual stocks, which we have seen and the forecast that the 3C charts would give clear negative signals out to the 15 min charts (condition 2 was the Index futures negative on 7-15 min charts and condition 3 was Leading Indicators leading negative, which many are as I have been showing), I think we can start to deduce what the market holds in store over the next week, although I have some additional charts to post, Leading Indicators, etc.

Today's gap down was on what I'd call a fundamental surprise event, the breakdown of Bloomberg quote terminals (these are widely used in institutional circles, apparently more for communication which makes sense given divergences tend to cluster) than the actual data/analysis. The number of comments from traders today reduced to having to use telephones to facilitate deals and their feelings about that shows just how much they talk to each other over the Bloomberg terminals and how reliant they are on them, as most described the lack of terminals, which didn't see full service restoration until around 11 a.m. this morning.

A fundamental event is a surprise to the market, one they weren't prepared for, otherwise I believe the SKEW Index would have been much higher as they hedged positions (SKEW is at a mediocre $119 far from the Black Swan hedging we have seen in the recent past). These events are discounted on the Fly, Black Friday was a fundamental event, the tragedy and market reaction of 9/11 was a fundamental event, etc. The market had no way to discount them and had to do so on the fly.

We do have a gap which I suspect holds large losses for middlemen/market makers/Specialists, HFT algo trading firms that have been filling that role, etc. so other than the fact that the market has been RELENTLESS about filling gaps the last 5-6 years, I suspect this one needs to be filled as well otherwise some large , unhedged losses will be taken by institutional money and they don't generally like that.

The DIA's short term charts as well as TICK seems to show their attempts to work on a gap fill, although the premiums from the max-pain pin which should have been somewhere around yesterday's close, are likely a total loss now.

 TICK has been unable to get anything going today, as mentioned earlier, each uptrend attempt failed, the capitulation event failed to materialize and the tight "U" bottoms that the market attempted to move up from didn't offer the support as we suspected or outright knew in advance. It's a bit hard to interpret whether today's overall TICK index will create a 1-day oversold event and chance to bounce in to today's gap and allow middle men, algos, etc. to recoup losses from higher inventory in the cash market as there was little that could be done as they were flying in the dark with the Bloomberg Blackout. I've read many comments from institutional traders that they were reduced to catching up on administrative work today, obviously overly reliant on the Bloomberg terminals, but not so much for quotes as you can get that nearly anywhere, but the deal facilitating that the Bloomberg terminals allow as they have largely been reduced to institutional Chat programs which you'll see if you read the comments of institutional /Wall St. traders.

I do find the Chinese events interesting given the FXI analysis since last Friday suggesting a top and something ugly coming.

 FXI-China FTSE 25 parabolic move. With all of the warnings to the general public recently by Chinese regulators and the number of illiterate housewives suddenly become leveraged Stock Operators , taking out loans to enter the market, etc., I wonder if the Chinese were leaking data or upcoming regulatory changes in advance and perhaps trying to deflate the bubble being created, it's an interesting story on its own, but as you see, FXI started to see sharp upside gains in yellow and then simply parabolic in red. I never trust parabolic moves in either direction, they tend to end badly.

FXI 3C 15 min around the area of the parabolic move, it seems someone was in the know in advance, leaks in China are common place.

As for the US market...

 Remember the reversal process, last night's Daily Wrap showing a bearish candlestick pattern in the SPX of a "Tweezer Top" as well as several other signals like SPX Bearish Harami?

If today's SPX daily candle ends something like what I've drawn in above over the green arrow, a Hammer , we already have the increased volume; then I suspect a gap fill to recoup unforeseen /unhedged losses in a market that's near obsessive/compulsive about filling gaps (which is a shame as they are/were fantastic information) anyway. However, I think now more than ever, a certainly more than anytime this month, it's important to back away from the charts and take a wider perspective view of the market and of what we expected when we forecast the Triangle/volatility pinched-based move to the upside on April 2nd which has been right on with last Friday's Week Ahead forecasting a top in the market and a reversal process, which was elaborated on with numerous examples Tuesday (all links can be found in last night's Daily Wrap post).

The important thing to ask is, "Did the market do what we forecast? And did the indicators act as we suspected?" 

The answer to both is YES as the forecast of April second, just like the VERY ACCURATE $USD Forecast of the same date has played out EXACTLY as we forecast. 

Now consider the second half of the forecast, which assumed a rally BEFORE it even happened, assumed the indicators would fall apart and distribution would be heavy as it was and this before it even started. The second half of the forecast, just like the $USD's similar forecast of UP and then a larger move DOWN which has already started with the "UP" portion complete, again forecasted WELL before any price moves in the direction (the $USD was actually down on that day) as you can see in numerous posts the last several days has had a tight and leading correlation with the market in general.

IF our forecasts about everything else from 2 weeks ago have been this accurate, why should we assume the next step or second half of the forecast would be any less so?

Intraday DIA divergences...

 After a negative in to late yesterday, today has seen a 2 min leading positive in line with the overall selling even t of flameout in the market, just not seen on a single 15-60 min candle, but rather lasting all day. The closing candle and whether it's a bullish hammer or similar candle is very important as it suggests a gap fill like the chart above, this is VERY helpful to TRADE POSITIONING and I doubt Wall St. takes those losses even beyond the high probabilities of a gap fill in normal circumstances.

 DIA 3 min is showing migration or strengthening of the positive divegrence from the 2 min chart. The TICK chart shows PLENTY of assets/shares to accumulate on the cheap as reading are solid below -100, -1250, -1500 and even more than -1700.

\However as I said, it's time to step back from the day to day analysis and look at the bigger picture as we did on Thursday, April 2nd just before the April 3rd, Good Friday holiday.

 SPY 5 min positive at the April 2nd forecast, the note says "Forecast for B/O (break out) Move Higher"

Look at the 5 min chart's reaction and signals at the base area and since the move up, currently horribly leading negative. This is the larger perspective view beyond a short term gap fill bounce probability. This is the TREND.

 SPY 5 min showing the distribution area with the April 10th "Friday Week Ahead forecast (last week) for market topping this week" And Tuesday April 14th "Forecast for reversal process"

Just look at the 3C chart for a moment, even beyond my annotations.

 10 min chart since the 4/2 forecast and trend up, with a clear and VERY accurate 3C signal in to the reversal process this week.

 Remember the one of 3 conditions of the averages all showing 15 min charts, the "gas in the tank" to go negative. SPY held out longest and confirmed the trend, but that has ended. The white area and green triangle represent the confirmation of the trend, the Yellow area represents the Reversal process with a leading negative 15 min 3C chart for the SPY, the last average to go negative.


 3- min SPY charts with two "W" bases and positive divergences and the negatives at the end of the trend they supported both earlier and right now.

 Charts such as the QQQ 30 min had given us the probabilities and most probable outcome of the bounce forecasted on April; 2nd well before it started, based on this stronger 30 min chart's leading negative divegrence, we already knew where the highest probability resolution of the move lay, WHICH IS WHY IT MADE THE MOST SENSE TO USE THE PRICE STRENGTH TO SELL IN TO WITH LONG POSITIONS OR SHORT IN TO AT THE APPROPRIATE TIME FOR EACH ASSET.

The red on the time axis represent the year 2015, note the largely lateral price trend through the year,  A HUGE CHANGE IN CHARACTER VS THE 2013/2014 PRICE TREND.

 IWM 30 min leading negative through all of 2015 with a bearish Ascending Triangle that has come to an apex.

And the DIA 15 min chart, as forecasted and expected, the chart went negative and is at a new leading negative low. You can see the positive divegrence before 4/2 and why this formed part of the basis of the forecast.

The point being, although I have said "We are close", look at these larger trend based perspectives, I think you can see how close we are, not only how close, but in any prior circumstances, we'd already have broken to the downside as this is one of the worst divergences on the charts as we had expected based on larger negatives already in place.

I'll add additional analysis,  but I don't think we need it for the trend perspective, just for pivot/timing or near term perspective. Price and the charts did exactly what we forecast 2 weeks ago. EXACTLY