Market Update

Friday numerous posts talked about the gap down and the losses middle men like market makers, specialists, HFTs that are essentially providing the same service by front running the middlemen with their speed, weren't likely to let the gap down, on broken Bloomberg Terminals and several news items/regulatory items from China that were, "unforeseen".

As of Friday, I had suspected we'd see some attempt to fill the gap early this week, but once seeing the internals in the Daily Wrap as suspected from TICK data intraday , as reposted in the A.m. Brief earlier this morning and how near term oversold we were on a 1-day basis, this kind of a bounce was a near guarantee, gap or not.

From Friday's Daily Wrap

 "SPY 3 min with a relative positive divegrence suggesting some attempt in to early next week to fill the gap from today, possibly more if there's a stronger base built, but the market is in a very dangerous spot right now based on the trend and signals."

I did suspect the market would try to build a little larger lateral base that was more than just the Friday "Flameout lows"...

 Example intraday divergence in QQQ (3min) Friday at the "FlameOut" (Short term seeing capitulation event) lows in the afternoon at the white arrow/positive divegrence.

I had suspected something a bit more like this Friday afternoon coming in to the early part of Monday, a move toward the "Flame-out" lows/support for a small "W" base which would give more support for a gap fill and then to move in to the gap represented by the orange area.

Either way, the result is the same as the overnight Chinese PBOC RRR cut and Chinese stock market regulator comments meant to walk back Friday's comments, eased the losses in Chinese markets and were of help to US futures.

 IWM's flameout area Friday afternoon with accumulation of the stops that were hit. This 1 min intraday chart is in line, which is no surprise for right now as we fill the gap.

You can see the same Friday "Flameout area" divergence and generally in line intraday today for the SPY too, which is what I talked about at the end of the Daily Wrap Friday,

"Overall, the market is at a deep 1-day oversold point so our forward looking analysis for early next week doesn't look so far off, a 1-day oversold bounce and INCREASED VOLATILITY sounds very reasonable here, that should be an excellent entry for positions, options/puts, etc.

However, I think if anything, this week demonstrates just how deteriorated those pilings that support the pier (market) really are, just a bit of impact and you might be surprised how fast and hard they break.

Have a great weekend!"

This is the kind of opportunity I was talking about... From Friday's Daily Wrap

"AAPL wasn't pretty today...

And is now very close to breaking below its triangle's apex, this "should provide some upside next week on an oversold basis and a Crazy Ivan head fake"


AAPL this morning...

And of course this morning.

The general base area is not very strong, it's more of a "V" shaped base of Friday's intraday lows which were a capitulation event occurred on a break of clear intraday support, so it's just looking at assets, following the short term charts, etc.

TICK shows a mediocre move internally, although coming off a very 1-day oversold event, again see Friday's Daily Wrap, although we knew it would be likely a big 1-day oversold event, the Dominant P/V relationship was one of the strongest in over a month, the Sector performance was just decimation, in fact, decimation is 1 of 10, this was more like 9 of 10, even 10 of 10.

TICK is mediocre, you can see the capitulation event Friday to the left in the afternoon and today in the yellow between -500 and about +1000, not really any strong/extreme readings.

The SPX is approaching that same resistance area that I was talking about last week as an ideal head fake area because it is so easily seen in the most watched asset out there.

A break above that trend line/resistance area would set up the best head fake move, based on the concept alone it would be an 80% probability, but there are so many things going on fundamentally that the market can't discount such as China Friday and Greece is looming as they are initiating capital controls today, obviously we've reached the end of the line, so it's hard to say if the market has enough gas to get it done, conceptually I would say it's a slam dunk because of how obvious resistance is and it's the SPX and we're not far off, but after seeing how weak the market has been all year and how many ramping levers need to be engaged just to hold at VWAP, well you've seen it.

There are already signs in leading indicators that we are seeing weakness build in this early in an oversold move (1-day oversold, not like RSI/Stochastics oversold events, these are breadth, much more accurate, much shorter too).

I'll be continuing with the watchlist and monitoring market events, but so far this is exactly (less the double base intraday) what we expected for today. We'll see how much gas there is in the tank and how fast it's burning through it.