Market Update

Yesterday I drew quite a few example charts in this broad market update, IMPORTANT Market Update which contained the overall market's pinching volatility and shrinking range (I drew in numbers relative in size to the moves the represented),  as well as two examples of the reversal process that from day to day see the market act directionally, but when viewed as a process, usually only visible after it is complete, you can see the "Rounding" top which is one of two examples I drew yesterday or the otherwise tighter range or a reversal process. I also included the Market averages' example of the weaker than expected price trend of the last week and a half, from the actual post below...

"Here's the gain of approximately 2% in the SPX since the April 2nd forecast for a triangle-based volatility squeeze sending the market up in a highly directional move that is common to volatility squeezes whether price pattern based like the apex (point) of the converging trendlines of a triangle or whether from a Bollinger Band squeeze of volatility. As I said on April 2nd in the forecast, "It's the promise of a highly directional and future volatile move".

I'll admit that from both a forecast point of view and the opportunity to use higher prices to enter new or add to existing positions, the move has been very tame and not the upside breakout I anticipated. I'm still not sure or have a strong feeling whether this is just not completed yet, although all of the indications are suggesting we are in the end-phase or whether there has been such a change in the market's ability to rally based on the lack of institutional support as strong distribution has sent institutional money out of stocks broadly speaking, whether evidenced by SEC filings, 3C charts or breadth indications which don't lie and cannot be misinterpreted, they are like math, hard numbers, not opinion. Every move we have seen this year has failed far earlier and begun to see distribution far earlier than previous moves as recently as the last quarter of 2014."

This is the chart of the overall shrinking ranges through 2015, making short term trades very difficult, also from the same post linked above and the comments about this chart posted above.

Approx. size of each move's range and shrinking swing volatility from the same post linked, IMPORTANT Market Update

And one of several scenarios re: the reversal process, again see the rest in the post linked above.

Drawn in example of 1 of 3 scenarios in a reversal process, the point being they can be dangerous to try to trade short term.

Also as clearly posted in yesterday's updates and very clearly in the DAILY WRAP from last night, the 1 min charts of the averages either in line or positive such as these...

SPY 1 min in line as it was yesterday.

QQQ 1 min in line with a small intraday negative divegrence, but the point is in line or stronger as of yesterday pointing to near term upside today just like the daily closing candlesticks for the averages as well as short term leading indicator indications.

And IWM 1 min intraday.

Again, the point was, for a reversal process, the chart's strength on a 1 min chart gave a high probability upside move after yesterday's largely negative activity, which would be needed to create the choppy range associated with a reversal process.

However, additionally, there should be broad weakness in any thing other than VERY short term intraday charts such as posted yesterday in 1 min charts. Even as of yesterday, just about anything 2 minutes or longer was negative, in line with the short term bounce higher today, while also indicating broad weakness in the area, also indicative of a reversal process/top/pivot point.

Here are the 2 min charts of the same averages as posted yesterday.

SPY at 2 min leading negative

QQQ 2 min leading negative

IWM 2 min leading negative.

You really can't get any closer than that, 1 min very short term intraday strength for the next day (today) followed by broad weakness starting at the very next timeframe. Note there was NO positive migration in the 2 min n charts AT ALL today.


As for the intraday NYSE TICK (market breadth intraday), it trended as would be expected for a bounce higher today off yesterday's Hammer (bullish) reversal candles, even though they are weak in size and volume....

The TICK just after I posted the warning in Quick Intraday Market Update around 2 pm.

 The trend / Channel is perfect for the market action today, however like yesterday's short term "flameout" at morning lows , this afternoon saw something similar, but opposite which would best be described as a Channel Buster in TICK at the yellow area, which as you know with larger channel busters on 60 min or daily charts, nearly always break to the downside of the channel after breaking above, very similar in concept to a Crazy Ivan Shakeout.

And since there has been no improvement.

You may recall earlier today based on both the VIX action and the HYG support, I said I THOUGHT THAT I'D FIND THE SHORT TERM MANIPULATION OF THE SPY ARBITRAGE ACTIVE TODAY IF I HAD THE TIME TO CHECK ...

Well I checked...

 Approximately half of the SPY's move today is directly due to the manipulation of VIX/HYG and to a lesser degree TLT...the SPY Arbitrage (+$.60).

However, even though short term manipulation of the most common market levers has lifted the market today as anticipated yesterday because as I suspected yesterday, the market simply doesn't have the strength relying on institutional support alone... The Es/SPX E-mini CONTEXT Model based on numerous risk assets smart money trades vs the SPX, there's a deficit of nearly 50 ES/SPX future points on the day alone as you can see by the CONTEXT model below.


CONTEXT for ES.

Thus, the analysis of even the simplest indications of the averages 1 min charts vs anything longer than 1 min, is being confirmed by the models above as well as the 3 main indications I have been following, the 15 min. charts of the averages, the 7-15 min charts of Index futures and Leading Indicators which I'll up[date soon as well.

I'd say we are very much within the reversal process.