Early Market Update

In last night's Daily Wrap I showed the intraday charts of the averages and mentioned the concept of 3C charts picking up where they left off the next day (cash market) even if that was over a long weekend as well as mentioning the typical op-ex pin we see near the close Thursday and handing around the area until about 2 p.m. Data is kind of stagnant during that time as it seems most of the intraday divergences are steering divergences to keep the market on the max-pain pin (where the greatest dollar amount of options will expire worthless. However after 2 p.m., it tends to be a treasure trove.

The question I was interested in last night regarding the 3C concept of picking up where it left off was answered definitively this morning on the cash open.

 The charts looked like this for all of the major averages, a very clear divergence on the intraday chart. Typically (Even over a 3-day weekend), the divergence would play out on the cash open of the next trading day.

 QQQ 1 min with yesterday's short squeeze and clear divergence almost exactly like the SPY above and IWM.

The overnight session saw Index futures push higher with a negative divergence around 6 a.m. this morning and the concept held true right at the cash open (white arrow).

Beyond that, we have what I showed in the A.M. Update which is nearly a full house of negative divergence through nearly every timeframe in Index Futures which didn't make a lot of sense with $USDX futures, but that may be being dealt with right now, not to mention the crossed correlation yesterday. I'm not jumping to any conclusions with correlations just yet, but the Index future charts look exactly how we expected them to look on a bounce in the \"week Ahead" forecast from last Friday as the next trend described...

"I'm still expecting a $USDX led bounce in the equity market as well as the bond market, certain stocks are going to be shorts before others, but this gives us a chance to open or add to any positions we may want to tweak a little.

As I have tried to make clear, it doesn't look like smart money is even participating in this move, thus my own participation level is so low at present having closed VXX puts today.

In comparison to what comes next, this bounce is nearly meaningless like Monday morning's forecast.

The main theme is strong market weakness and any chance we get to open or add to positions we like should be taken. There's simply no comparing the "bounce" charts (of the bounce expected) with those of the distribution and broad deterioration through all of 2015"

 Intraday that 1 min chart above of the SPY is perfectly in line, not uncommon on an options expiration day until they need to adjust the max-pain pin a bit then we might see a "steering" divergence on an intraday chart like this.

However the trend (2 m) is quite clear since last Friday (red on the time axis). You can see the short term divergence Friday which led to there forecast for "early in the week weakness", which I expected would build a bit of a stronger positive divergence at the Tuesday a.m. lows (yellow), that didn't happen. The distribution trend from there is quite clear.

This is the longer 5 min QQQ chart showing why we suspected a bounce this week (with the earlier chart's divergence above to occur first-early in the week weakness followed by a bounce based on the chart above). The positive divergence or accumulation at last week's lows was for a bounce, it was just very "V" shaped and they don't usually hold well or for long, thus the expectation we'd see a wider base and another positive divergence at the lows on Tuesday morning.  The QQQ chart has this positive divergence out to its 10 min chart so we want to see that fall apart as the 5 min chart is doing presently, ALWAYS IN TO HIGHER PRICES. I suspect this 5 min chart will worsen and will migrate to the 10 min chart, especially given the shape of Index futures.

Another hint is VIX assets...

 The near term VXX charts are improving and much more dramatically which is needed for timing (VXX 2 min).

XIV which is the inverse of VXX-short term VIX futures) has deteriorated all week which is additional confirmation of the VXX charts, the market averages and the Index futures.

 This is the longer trend/stronger in XIV 5 min which was perfectly in line or price/trend confirmation at the uptrend at the green arrow. Then a lateral move in price and the first relative negative divergence followed by a stronger leading negative divergence. The 10 min chart is the bridge between this divergence and the longer 15 min leading negative shown yesterday which is the mirror opposite of VXX's 15 min which is not a function of it being an inverse ETF because although the inverse ETF has to match price (inversely), it doesn't have to match volume  which is a measure of demand that 3C uses. In other words, if there weren't actual confirmation of the VXX signal, it wouldn't have the opposite divergence.

VXX 10 min is leading positive and bridging now to the 15 min chart. That's when I want to look at a longer term VXX long position, not to say options can't be used, but there's more trend to capture once the 15 min divergence fires.

 VXX 15 min leading positive.

Which has stunning confirmation in VIX futures.

30 min VIX futures leading positive. The divergence is actually much larger, I just can't get more time on this chart.

I'll be looking around for any interesting signs, usually the first half of Friday's is pretty slow with the op-ex pins, but you never know what you'll find.