Broad Market Update

So far everything is going according to expectations. As I said yesterday, the USD is one of the strongest signals for a near-term bounce that I have, although far from the only signal.

Today I might not be able to make the same statement. However I think it is critical to understand the nature of our expectations for the USD and how those affect other assets and more importantly the repercussions of where we are right now in the USD which I think very few people realize the nature of this inflection point and how pervasive it is and how much influence it will exert across multiple asset groups. 

They have posted probably half a dozen or more USD articles this week, if you don't have a basic understanding of our expectations, then yesterday's post, $USD Update & Market Repercussions is an excellent place to start. Given the USO post today with USD connections, a second post from Wednesday would also be insightful, USO / Oil Update, the Carry Trade ($USD-Broad market too).

I can't update the market without updating the US dollar as well. Or perhaps better said I cannot stress enough the probabilities of our expectations for near and larger term market action, without touching on the US dollar.

As for the normal "Market Update" 3C charts of the averages...

DIA

 2 min 3C chart with yesterday's head fake/stop run move we anticipated and warned to look out for in this post from yesterday, Market Update (I post it because the concept as to how to identify an intraday flameout works in any asset and all timeframes so it's a useful concept for your tool box).

*This is the chart from yesterday and commentary from the 1 pm Market Update if you just need a quick look without reading the entire post as I will be showing yesterday's action in context of a head fake move.

"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."

Back to the DIA...

 This three minute chart shows the deterioration this week in three she end price as well as the head fake/ stop run we warned about above which as you can see was accumulated as expected. There has been no V shaped reversal to the upside, which would not last very long, if even intraday. Today we continue to work on the reversal process for this bounce.

 This is the five minute DIA 3C chart showing the forecast since April 2. I believe the distribution in three she is clear. Using this chart in the context of multiple time frame analysis, you get to see the positive divergence for our anticipated bounce, but also its probabilities vs. what has already occurred-massive distribution. In other words I am using this chart to put the expected bounce in context.

 As for the longer term view using multiple Time frame analysis you can see the extent of the damage done at the April forecasted area in which we saw Head fake moves above the various triangles in the averages. The importance of this is we new technical traders would chase it and SmartMoney would sell into it. This is a pivotal area for the market.

SPY

 The SPY 5 five minute chart with a relative positive divergence to the right which shows accumulation of yesterday's Head fake / stop run.

 We even have a relative positive divergence on the 10 minute chart. From left to right, note 3 she confirmation of the uptrend into distribution at the top and a bounce in the works as I already touched on today and in the past, price's affinity for loitering in the area after an initial break. To put a finer point on it, call it a new short seller's shakeout after a day like yesterday.

Most traders chased price.

I didn't want to close UVXY (long) position earlier yesterday unless we got a head fake move below the morning lows which would make it worthwhile to take the gains and re-enter the trade at better prices which is what we did.

UVXY 10 min

 As UVXY trades opposite the market, the yellow trendline and move above it would correlate with the same point at which the market made a stop run/ Head fake. You can see clearly that taking that trade off the table and booking the profits was the right thing to do via the 3C chart's signal above.

As you know we also opened an additional trade on the move, Trade Idea: Extremely Speculative (Options/Puts) VXX

SPY...

 60 minute chart needs to no commentary. This is the highest probability resolution of any upside move from here, a failure and simply a bounce.

QQQ

 1 min with an increased leading positive divergence today. You can see the clear accumulation of yesterdays run of the stops under the other trendline.

 QQQ 3 min showing a relative positive divergence.

 However at the five minute chart 3C is at a new leading negative low with no positive divergence indicating a bounce so it is not that strong as it has not migrated to the five minute chart. We should return to making lower lows as soon as the bounce is over.

 As a reminder of the damage done to the market, a 30 minute QQQ 3C chart. Note where price and 3C are at point "A" compared to point "B". If there is trend confirmation 3C will move higher with price. We have higher prices at point "B" than at point "A" with much lower 3C signals at point "B" indicating extremely strong distribution through this area.

 The same as seen on the 15 minute I WM chart.

As for index futures, ES (SPX E-mini)...

 This 10 minute chart of ES should put everything in perspective for the local area, but I did want to show the positive divergence for our bounce. I just want you to keep it in context of the larger signal on this chart.

 This is a close up view of the exact same 10 minutes ES chart and positive divergence.Once again it is showing accumulation of yesterdays stop run just as the averages above. If you have not read the two articles linked (near the top right side) on the member site,"Understanding the Head Fake Move", you are missing a lot of context here and a lot of great concepts such as the head fake move which we used yesterday to enter VXX Puts which are well over a +30% gain today using May monthly / in the money Puts!

 This is the 10 minute chart of $USDX and one of the first signs that we would see a market bounce soon. It too, much like the market is building a broader base with a stronger 3C positive divergence/ accumulation.

 However, just as we made a market forecast on April second we also made a $USD forecast on the same day which anticipated a large bounce to the upside (green at "A") to be followed by an even larger decline (red at "B") to the downside. At the yellow areas, We have simple, corrective, counter trend bounces just like we are expecting now.

However to put this in broader context, the $USDX (futures) daily chart.

 First the daily chart with 3C showing significant distribution as the trend has changed from upper to lateral in a triangle-like formation.

At #1, the $USDX failed to make a higher high for the first time in this trend, that was followed by a lower closing low.

I suggested that the intraday low at the yellow #3, would be an ideal area for the USD to put on a countertrend bounce.

Almost everything about the USD and the market are interchangeable as if they were one. This is that, "Beauty" or "ballet" in the market that I posted about last weekend and we rarely see but it is one of the most profitable times in the market.

Here are the posts from last weekend on the subject:

Important Market Update Part 1: The Forecast

Important Market Update Part 2: The Forecast Plays...

This is a close-up view of the exact same chart above showing the triangle-like formation which is exactly what we forecasted on April 2. The broad market averages were forecast to develop very obvious triangles and for a head fake move above those triangle to break out and fail. This has already happened and the head fake move has been confirmed.

We will use the bounce to sell in to or to sell short in to as well as manage any trades put on such as the VXX  puts yesterday.

Everything continues to go according to expectations.