Early Market Update

It seems the 3C weakness in the 1 min Index futures from pre-market is taking a toll, so far mostly unseen in market breadth (intraday) as you'll se in the two TICK Index charts, but nothing looks to have changed for at least the first half of the week's forecast for a bounce and $USD counter trend bounce.

My main concern is position management from last week for this bounce (VXX puts/NFLX calls) with the VXX puts at about a +60% gain. I'll update those individually, but just as we saw last week (Friday), on the slightest pullback of VXX there was immediate and unambiguous accumulation so someone with deep pockets is loading up very early and in large supply considering the condition of the averages. As mentioned Friday, typically we'd see 3C distribution in to the bounce in the major averages before or at the same time as we start to see a rotation in to VIX related products, this time that's different and VIX related assets are being accumulated on weakness immediately which tells us 2 things: 1) this bounce is not expected to last which we already knew and 2) the move following the bounce to the downside should be larger than anything we have seen all year as the effort to accumulate protection is much stronger than anything seen this year.

The charts...

 This is the larger picture of the April cycle since our April 2nd forecast on a 30 min chart. The size of the divergences and even shape of the price action is easily identified as a set-up to sell / sell short in to price strength as we anticipated in the April 2nd forecast.

However, whether a matter of semantics or not, from a "staging" perspective of the April cycle, this is the exact same chart as above (you can reference the divergences using the chart above) with the possible cycle stages...

SPY 30 min showing stage 1 accumulation/Base going in to our April 2nd forecast for a completion of the price triangles and a head fake move above them that would see distribution and ultimately fail as a false breakout. Stage 2 is mark -up or the rally section and stage 3 is top/distribution.

The semantics is whether last week's decline was the start of stage 4 "decline" with a counter trend bounce currently or just a wider stage 3 top. I don't think it matters either way as I believe after this bounce that we called last week starting around Wednesday, price will make a new lower low below last week's low. About the same time the $USD counter trend bounce (no question there) should fail and make a definitive lower low after already having made a lower high in its primary trend..

I've explained why the $USD's movements right now are so important, it's not a matter of bounces and pullbacks, it's a matter of a complete trend change in the $USD's primary trend which will cause the carry trade to go from neutral or even slightly profitable to all out losses that will snowball and cause risk assets such as equities and the typical assets bought with carry proceeds (bonds) to fall as a result so this is a VERY important area for the $USD and as suspected since April 2nd's forecast for the $USD as well (same day as the market forecast), it has made every move that suggests the primary uptrend is now well in to the reversal process.

 This is the SY 15 min chart much like the ES 10/15 min chart (or any of the Index futures) which this current bounce is based on as well as the VXX/NFLX positions,  it is still in line and has gas in the tank.

On Friday, my forecast for this week was that we should see this bounce continue until about mid-week (but we will tweak that as the signals come in) and then the reversal process should start somewhere around that area. Normally I'd be looking at exiting VXX puts around that time, but  the way they are acting, I could see a scenario in which they are closed before then.

This is the 1 min intraday SPY (as of the capture this morning) which is still in line and in confirmation of the price trend, however the last two 3C dips are larger so it's getting closer to putting in its first negative divergence as some light distribution is already taking place, but not enough to change any plans right now.

 The 1 min QQQ is also confirming price action so far.

As is the IWM.

This is the NYSE TICK Index and as you can see, since Friday afternoon in to this morning, intraday breadth has been declining suggesting a pullback intraday or consolidation. I don't believe at all that this is anything that will change the expectations laid out last week or above.

The same could be seen in our custom TICK/SPY indicator.

You can see deteriorating market breadth through the morning since last Friday.

Since these charts were captured, here's what has happened...

 TICK fell out of the channel and hit an extreme (selling) of -1325. I believe this is one of the fist definitive signs of heavier distribution. The SPY 1 min 3C chart since the earlier capture above has come closer to making its first leading negative divergence.

Rather than the last 2 3C dips being deeper than the previous ones, at the breadth decline above the most recent 3C dip on the same 1 min intraday chart nearly hit the previous level, once it does it will be a relative negative divergence and once it surpasses the low of a previous swing low in 3C, it will be a leading negative divergence and then the process of migration (strengthening of the divergence in which divergences move to longer timeframe charts-HEAVIER DISTRIBUTION) should start to take place.

I'll update VXX, NFLX and USO.