Market Update-BROAD

This is a bit longer than the normal intraday market update, that's because I want you to see what I see. I want you to understand the tone of the "bounce". I want you to see where we are with the 10 min "Gas in the tank" chart scenario and how quickly that changed once you gave the market higher prices to sell in to (yesterday), which should also tell you the message of the market.

We'll start with the SPY and I included some SPX futures (ES), I didn't do that for all of the averages as there would be 100 charts here.

Once again, like yesterday, the TICK Index is showing weak intraday breadth and this channel that was captured several minutes ago looks like it is getting ready to break to the downside. This was one of the give-aways in yesterday's market, breadth was weak, the averages were all over the place.

 The 1 min SPY has been in line with price movement most of the day which is not anything unusual given the near neutral percentage gain.

However the longer the chart timeframe, the more we reduce noise and the more trend we uncover. I mentioned several times yesterday that migration of yesterday's negative divergence had reached 3 min charts and was getting uglier. 

This is a 3 min SPY chart leading negative and adding to the leading negative downside today (3C distribution area).

 It has been the 10 min charts I have been keeping my eye on as they are the bellwether of change. You can see the SPY's "bounce" divergence or what I refer to as the "Gas in the tank" for a bounce and this was part of the reason why the Week Ahead forecast from Friday the 8th included a bounce for last week or at least starting after early week weakness last week. There's some slight deterioration today and yesterday, but it's not jumping off the chart yet. You will see other averages that are worse.

The market is the strongest influence on any given stock accounting for about 2/3rd of its directionality, thus I want the market in an area in which I feel the timing of a downturn is imminent before I introduce too many Trade ideas, such as Transports which we saw setting up nicely yesterday, but we could also see that they were not there yet (see the transports trade set up from yesterday and the Daily Wrap).

 The larger, much stronger trend is found on the SPY 15 min chart which never went positive. The 10 min chart above did go positive and that's why it suggested a bounce, but a bounce fails and the 15 min chart which is stronger and higher probabilities is the chart that tells us that the 10 min chart's bounce will fail. If the 10 min chart is "paper" in "Rock , Paper, Scissors", then the 15 min chart is "Scissors". 


Because we are reading the charts in terms of multiple timeframe analysis, it doesn't mean one chart is right and one is wrong, quite the opposite, it is exactly as it sounds, "Multiple timeframe analysis", so the faster/shorter term 10min chart tells us the probabilities are high for a bounce which was reflected in the May 8th Week Ahead forecast, the 15 min chart tells us what happens after and tells us what has happened during this bounce as Wall Street doesn't set up any cycle without a reason.

The reason here and "message of the market", can clearly be seen in the divergence on the 15 minute chart through the bounce area. DISTRIBUTION as was expected before the bounce even started.

 This is the ES/SPX futures 3 min chart, this is showing the 3 min damage done yesterday that was evident on the charts of the averages, meaning the newest divergence starting yesterday at the 1 min chart and migrating to the 2 min and then 3 min was telling us that the market was weakening significantly. There's a simple reason for this. What was different about yesterday (especially for the SPX and Dow) compared to the last month?

If you said it was the first time we saw higher prices and thus something to sell in to, you hit the nail on the head.

 ES 5 min trend also telling us essentially the same thing the SPY 15 min chart is telling us about the underlying condition or message of the market during the bounce area.

 This is another excellent example of the concept above under the ES 3 min chart,

"What was different about yesterday (especially for the SPX and Dow) compared to the last month?"

You can literally see the range (yellow trendline) and the reaction in 3C as price crosses above it. This is the kind of confirmation we look for to verify a head fake move or in this case "A False Break-out".

So far so good as that chart is a strong timeframe and shows an exceptionally strong leading negativee divergence just as price crosses above 2015 resistance.

 Again getting back to multiple timeframe analysis and the highest probability big picture resolution, this is an ES / SPX futures 30 min chart, stronger than any above with a much clearer trend as there's less noise with small divergences. The exact same area our "Gas in the tank" bounce divergence formed in the major averages, it formed in Index Futures (around May 6th/7th which led to the May 8th Week Ahead forecast).

Overall there's a large relative negative divergence at the longest red arrow, the shorter ones are pointing out local divergence and the overall deterioration is telling us the message of the market.

Once again, note the increased downside ROC in 3C as a leading negative divergence to the far right and ask yourself again, "What was different about yesterday than any other day this year for the SPX?"

 This is a daily chart of the QQQ with several notable things including the fall-off in volume we have been touching on in the Daily Wrap each night. A support area at the white arrow on a bullish reversal candle with increasing volume on that day as well as local resistance and yesterday's/part of today's move above it, once again a derivative of the question above, "What was different about yesterday?"

 The 1 min QQQ shows what was different about yesterday, as I answered the question above, it gave smart money higher prices to sell in to. When I say sell in to, short selling comes across the tape as a sale, so it can be wither or both.

 This is a larger trend view of the same QQQ 1 min chart and it has near perfect 3C correlation or trend confirmation because not much happened until prices moved higher, then you see 3C diverge with the QQQ unlike anytime in the past 2 trading weeks.

 The QQQ 3 min chart as mentioned the divergences migrated out that far yesterday alone. Again while I point out smaller divergences with the least obstructive notation possible, you should see an overall trend of confirmation with some smaller divergences both positive and negative. However there's a definitive change in character recently as our bounce gives the market higher prices to use.

 This is the same exact chart with no drawings to distract.

 And this is the QQQ 10 min "Gas in the tank" positive divergence from May 6th/7th and now we are seeing the first sharp deterioration since yesterday's move. This is the chart I talked about Friday in the Week Ahead. As this is the chart that you could say, "sponsored the bounce", it needs to see deterioration and then we know we are as close as we can be to a downside pivot and want to be much more active about positions.

 IWM 1 min, showing the "Bounce " accumulation on the exact same date as the charts above, whether the averages or Index futures, May 6/7 and the distribution trend with a leading negative divergence as price breaks above a clear range on the chart .

Smart money rarely sells unless it's in to higher prices which is something Technical Analysis Dogma has completely wrong.

 IWM 2 min with a negative and then leading negative divergence yesterday. Again the same question, what was different yesterday?

 IWM 3 min trend again with more confirmation of the accumulation for a bounce May 6 and 7th and the distribution once the IWM breaks above the local range.

The IWM 5 min chart is now seeing migration from the 3 min charts, it is one of the worst looking 5 min charts and the question I'd ask you to explain why the IWM 5 min looks worse than any of the others, "What was different about the IWM yesterday compared to any of the other averages?"

If you said it had the best relative price performance, you are correct. the IWM gave Wall Street something to sell in to in a much bigger way than the other averages.

 Still, the IWM has its "Gas in the tank chart", it's at 10 mins like the QQQ, it has a similar base and accumulation for  a bounce at the same time, although a bit larger. This chart's "gas in the tank" base is stronger than the Q's as you can see a small "W" vs the Q's tighter "V". We want to see this deteriorate.

As for the same concept I showed you above, the IWM 15 min chart which is stronger and a longer , bigger picture timeframe, is the roof on the 10 min chart's bounce. This is the highest probability resolution for the bigger picture and the chart that sponsors the next trend or pivot we are looking for.

Remember the May 8th "The Week Ahead" forecast was as follows,

"I believe  we will see early weakness on Monday. HOWEVER THIS PART OF THE FORECAST IS NEAR MEANINGLESS COMPARED TO THE REST SO I WOULD NOT GET TOO HUNG UP ON THAT.

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.

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, but increasing at an exponential rate since the April 2nd forecast of triangles to be finished and a false breakout above them...the deterioration there is beyond anything I've ever seen."

Take a look at the example chart below since the Week Ahead forecast of May 8th...

You can see the Friday May 8th The Week Ahead forecast, then the expected "early weakness on Monday. HOWEVER THIS PART OF THE FORECAST IS NEAR MEANINGLESS COMPARED TO THE REST"...

Then the bounce to the upside that our May 6/7th divergences sponsored, but here's the point.

Regarding the "early weakness" in the week, it was called, "meaningless" compared to the bounce. And then ...

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

What we are seeing on the 15 min charts that has been there is essentially "part" of the reason that I said that in comparison to the move (downside) that comes after the bounce, the bounce would look nearly as meaningless as the "Early week weakness".

THAT WAS THE MESSAGE OF THE MARKET AT THE TIME OF THE FORECAST, EVERYTHING WE SEE ABOVE SINCE THE FORECAST IS CONFIRMATION OF THAT MESSAGE OF THE MARKET.