Market Update

I thought I'd give you a baseline of the charts in multiple timeframes (multiple trend analysis) so you can get your bearings and you'll see that we are in no position whatsoever for a new breakout leg higher as many of the bulls anticipated upon seeing the large triangles in the market which they intrpretted as consolidation/continuation price patterns. Remember my note on Monday about CNBC running a piece and having JPM on just for good measure to point out these triangles and their "Bullish" characteristics with the wording, "They may" lead to a new leg higher". The articles and interview were of course completely biased as CNBC is not in the business of market analysis anymore than Roy Crock considered McDonald's to be in the hamburger business. Roy Crock insisted he was in the Real-Estate business as Mickey-D's owns some of the most prime located real estate around the world. CNBC is in the Ad selling business, therefore, they aim to please their customers. You are not their customers, you are their viewers; JPM and the like are their customers so always keep that in mind when listening.

For instance, Cramer is Goldman Sachs Alumni. When we called a top in oil in 2008, the very same week Cramer was telling his Mad Money viewers to buy oil on the next bad EIA report (put a bid under oil) as a "Contrarian" trade. I never understood how potentially millions of viewers all doing the same thing at the same time could possibly be considered, "Contrarian", but that's one of those keywords that make people feel like they're on the inside.

When I think of Cramer, I think of who he goes to lunch with, the average Goldman Sachs employee earning approx. $400,000 a year (on average) and/or the much higher ups who are in a position to provide plenty of perks and lifelong security, even make you the PM of a foreign country or Central Bank (Greece and the ECB- Papandreaou/Draghi), in fact here's a list of who's who around the world who were once GS employees, alumni. It truly is, "Who you know" and it's quite shocking.

So does Cramer's loyalties lie with GS or the average, nameless, faceless viewer of CNBC? I know where mine would lie and that's just common sense, that's not to disparage Cramer in any way (only he can answer the question).

I can tell you that oil fell about -80% in just over 7 months from there.

In any case, as we pointed out on April 2nd, the market's triangles were not coincidental, they were not naturally formed, they were quite specifically engineered as 3C divergences were found at every high and pow as they pinched in to the apex as of April 2nd and moving forward as they became more recognizable.

 The triangles formed purposefully and ironically they coincide with the F_O_M_C (yesterday) nearly perfectly. The most common, easily recognizable price pattern in all of technical analysis just starts showing up everywhere with CNBC and others making a point to point it out for anyone who somehow may have missed them (Monday morning).

Moving along...

 This morning's stop run builds up some inventory for a short term bounce, but the very tight "V" reversal is not to be trusted as you can see from the l;last one. This is no different than building a house, if the foundation is not strong, the house is only as strong as the weakest link and won't be supporting multiple levels/stories.

Thus if the market has any hope for something more than what we just saw this morning, it has to build a wider base here.

Something at least like a small "W" base-be on the look-out for another head fake stop run below this morning's lows on the formation of a second low and wider base.

It just so happens that TICK turned down allowing for the market to give this a shot...

NYSE TICK this  morning.

I'M VERY EAGER TO GET TRADE IDEAS OUT, BUT TO DO THAT, WE NEED A BOUNCE WITH SOME MORE LEGS THAN JUST THIS MORNING'S LITTLE, WEAK ATTEMPT AND FOR THAT, THE MARKET NEEDS A BROADER BASE.  I believe there are decent probabilities it will form that base, but to give you an idea of the all encompassing big picture including intraday charts (and you'll see why I'm eager to get trade ideas out ASAP)...

 SPY 2 min "Relative" positive divergence, which is the weaker form between relative and leading.

 SPY 3 min stronger relative positive divergence and starting to move toward leading as price pulls back right now.

Remember smart money accumulates on the cheap and sell at elevated prices, many technical traders have this all wrong.

SPY 5 min with a relative positive divergence and perhaps something better as price pulls back. The dominant feature however is the negative divergence at the highs and will remain as such unless/until the SPY puts in a stronger positive.

 QQQ 1 min relative positive which is adding a bit of strength on the current pullback, not quite there for a replacement chart.

 QQQ 2 min with a relative positive and of course the dominant feature and highest near term probability resolution is the leading negative at the highs. This shows you how smart money uses price strength to sell in to quite clearly.

 QQQ 3 min is adding to this positive divergence on the current pullback. However once again the near term dominant feature of the chart and highest probability resolution to any near term bounce is the leading negative divergences.

 QQQ 5 min shows NO positive divergence. The concept of "Migration of the divergence" in which a strengthening divergence moves to longer term timeframes is not in effect here and the 5 min chart is the line in the sand between intraday chart signals on the 1-3 min. timeframes and the 5 min chart which is the earliest timeframe to show intraday institutional activity.

I drew in the leading negative divergence on the time axis below.

 And the highest probability//strongest chart of the bunch, the 30 min QQQ. I doubt it needs any commentary.

 The IWM has been the best relative performer in 3C charts this week in the averages and futures, thus my gut feeling it shows the best relative performance on any bounce attempt.

The current chart on the intraday pullback looks slightly stronger now.

IWM 2 min relative positive, which also has a very slight bit of improvement, not enough to make it worth capturing and posting a new/updated chart.

IWM 3 min relative positive, again what looks to be some possible improvement, but not material enough to warrant a new updated chart.

IWM 5 min which again like QQQ shows no positive migration of the divergence and the 5 min chart is at best, "in line", more realistically leading negative with a clear distribution area at a parabolic move, THIS IS A CLEAR EXAMPLE OF WHY I NEVER TRUST PARABOLIC MOVES UP OR DOWN.

And the highest probability 15 min IWM which was already negative on April 2nd, telling us what the outcome of the forecast was most likely to be. This chart has only gotten worse as smart money has distributed in to price strength through the April forecasted move in price.

There is NO mistaking this divergence and this is the kind of divergence I tell members to look for, the kind that screams or jumps off the chart. The kind that you don't have to look for. I never ignore these divergences, they are our true edge.

Of course all of this was already put down to the highest probabilities on April 2nd and before, well before the triangles even finished forming much less breaking out. The ES 1-day chart which has seen continuous deepening deterioration as the strong 3C timeframe leads to a new negative low through 2015.

This is our base case, we'll see what develops from here. I'll be spending my time going through watch lists, but it would be most helpful to get a bounce in the market here to open up trade set ups in which they come to us as we DON'T chase trades. Like the wolf or predator, we let the trade come to us, we chose the time and place and we decide whether the expected/anticipated conditions have been met and then take the trade at the best entry level, the lowest risk level and the best timing. Anyone entering broadly based market correlated trades before now would have simply been whiplashed around through lateral chop and volatility, that's not a good use of dry powder. At the very least, it's opportunity cost.