Quick NFLX/Market Overview

Just like the beginning of April as there were some conflicting signals, I went through my watchlist of assets until I saw a repeating pattern over and over again and that gave a new clarity to the averages, thus I used AAPL as the proxy example for the broad market.

I think if you read the earlier Market Update and Leading Indicators post, you'd probably pick up on the VERY short term positive intraday support the market desperately needed and received and the big picture of this move since early April, which is to say the market is in VERY poor condition since with just about EVERY one of the 3 major indications I was looking for to turn, already having done so.

This is nearly perfectly in line with the Internals from last night and what they not only said about the tone of the market. Again, there's a very near term bit of strength or at least enough to hold on and I suspect it's just there hoping to trigger a stock of limit orders above the March SPX trendline resistance and let retail do the work, allowing pros to sell and sell into that move, I think I've covered and shown it enough that you know exactly what I'm talking about as we tagged resistance there once again in the SPX.

All of this seems to fit well. Now lets add the averages and a representative asset on our watchlist like NFLX(or transports , APPL, Energy, Financials , etc. could be used, that's why NFLX is representative of the watchlist trend).

Then I look at the SPY for example, while each average is slightly different, I'd say we can use this as an overall proxy for the market in multiple timeframe analysis because I think it's important to know what is worth while, which battles are worth fighting, which aren't; where patience should be shown, where action should be taken or already taken.

 The near term intraday 1 min chart is darn near motionless. There are a few positive divergences that see price move a bit and then distributed as in yesterday afternoon ion to this morning's open or this afternoon at 2 p.m. lows in to the close. On the whole the near term trend is not telling us much and this tends to scream as a timing indication when it's ready and there.

 The 5 min SPY trend since the accumulation in to early April and the leading negative divergence at the reversal process right now tells us a lot about what has transpired in to higher prices since early April, it doesn't answer the question of whether there will be a head fake move above the SPX's resistance trendline from March because there's not enough accumulation in SPY to suggest a move like that is a probability, yet we keep tagging the resistance trendline of the area. We have a reversal process, typically a head fake would come next, it would be the best price based timing signal for a downside reversal and the best entry area for shorts/puts and some longs.

The strongest probability we have for a head fake move is the concept itself which I generally estimate as occurring 80% of the time before a significant reversal in any asset and any timeframe, the more watched the asset, the more significant the head fake trigger, the more probable the move occurs which would tell us it should be a near certainty, there's just no divergences to support it so it's almost as if the pros are just hoping price triggers limit/breakout orders and let retail carry the ball as you saw in the Leading Indicators post, Pros in HY credit aren't hanging around.


 The 15 min chart was the line in the sand, it was in line or confirming price since the early April move as it was positive in every average except the IWM, so looking for this chart to turn negative was one of 3 significant signals, it has done that and the price trend has turned lateral in a reversal process as that occurred.

This would tell us that the April trend/move/forecast is at the end of its rope, it's just "How is it going to finish? Head fake or not?

As we knew before the April trend even started, it would see distribution and eventually fail, those probabilities are all over the long term charts, whether futures with long term charts and highest probabilities...

 Like this extremely strong ES/SPX futures 1 day super leading negative divegrence or the confirmation of the probabilities this chart represents in any bounce like the April bounce on a 60 min chart...


ES 60 min showing the probability (positive divegrence) of a bounce and the 1-day chart telling us the probability that it fails and sees heavy distribution which the 60 min chart now confirms ...


Or whether using the averages themselves like SPY...

 SPY 6 hour leading negative divergence similar to the ES 1-day chart.


So in looking at watch list assets just like early April to try to gain a new perspective by seeing if a trend repeats on various different charts, I se the same thing today and NFLX works just fine as a proxy for the watchlist...

 The 3 min NFLX has a small, short term positive divegrence mostly built in to today's pullback of 1.22%, suggesting a near term bounce.

This may also suggest the SPX makes a strong enough near term bounce to effect the head fake move, all it has to do is trip the limit/breakout buy orders, retail will chase it and do the rest.

 The 15 min NFLX chart shows the deterioration since the earnings gap up and is nearly there for a decent looking short entry, but not yet SCREAMING, perhaps on an upside move we'd see the distribution that would qualify the divegrence on charts like this as "Screaming" or jumping off the chart.

The 60 min NFLX chart NEVER confirmed the earnings gap up move by 3C making a similar higher high with price, instead it's telling us that this move has been used by smart money to sell / short NFLX in to price strength .

So we know the probabilities for just about all of the timeframes, what needs to happen and what looks likely to happen in the shortest timeframes, what looks sure to happen in the big picture.

In my view, it comes back around to placing the right emphasis on fighting the right battles at the right time using the right tools. I'm not interested in try to day trade a probable head fake move, I'm interested in using the highest probabilities to short in to such a move. That's just an example of how I view the information and put it together for my own risk tolerance, time, trading style, etc. However I suspect that once the pieces of the puzzle above all start fitting together in multiple timeframe analysis and multiple asset analysis, we're all likely looking in the same direction.