Important Market Update

I'll try to keep this as brief as possible given intraday action develops fast.

As you know, I was expecting a head fake move/false breakout above the SPX-100 day moving average, this is where I hoped we'd get enough market support for watch list shorts that have been either flat or not doing enough to make an entry high probability or more importantly low risk which a bounce in them would do.

Yesterday I said a bounce / head fake move off a sharp "V" base would likely not stand very long, perhaps not even a day which is why or part of the reason why I suspected we'd see a slightly stronger "W" base. This is not for the kind of head fake move saw in May love the SPX's nearly 6 month triangle, this is a smaller shakeout related to the SPX 100-day.

Now I HAVE to consider whether this is the move itself and we are not going to see any "W" base for a slightly longer move.

 The SPX with 100-day moving average. Note the head fake/false breakout in May and since prices have been moving lower for nearly 3 trading weeks, that's because these head fake moves are one of the best price-based timing indications of an expected reversal, we see them nearly 80% of the time before a reversal in any asset and any timeframe.

The move above the 100-day is also expected to be a head fake move, in this case it's what we call a "Crazy Ivan", shaking out traders below the 100-day and then above the 100-day as it squeezes shorts and entices new longs in to a bull trap, IT IS FULLY EXPECTED TO FAIL.

For the sake of a decent or long enough bounce (regardless of the percentage move) to set up watch list trades at higher prices, I have expected a "W" base to form rather than this "V" shaped base seen above on the SPY 60 min chart as a "V" base is a reversal event rather than a  process and is rarely stable e to hold very long, I even mentioned it would likely have trouble holding through a day and perhaps fail on an intraday reversal.

The charts right now that suggest to me that it is failing beyond the earlier post, Intraday Capitulation include (as an example, not exhaustive list):

 After the earlier "Churning" indications from the earlier post, Intraday Capitulation, internals have been more positive than negative, but the trend has been flat, not a great sign for the market's move today.

The SPY intraday chart continues to deteriorate which is what we would have expected to have seen on both a head fake move and if we had a gap up and were going to see a move lower to a larger "W" base. Honestly I'm leaning more toward this being the move as the short squeeze was used up, it wouldn't be reloaded to the same effect a second time.

The IWM intraday chart continues to deteriorate

As does the QQQ chart, but just to show the move has no confirmation, this 3 min 3C chart of the Q's shows the move as nothing much different than the $USD counter trend rally we saw a couple of weeks ago-strongest 7-day move in more than 7 years that was never confirmed and failed as expected, just this would be on a smaller scale. The point is, the 3C chart's negative divergence looks the same no matter what asset or timeframe for a counter trend move that is destined to fail.

As far as migration or the strengthening of the divergence, we have that too in all of the averages...

 SPY 2 min at a new leading negative low intraday.

However, the chart that would have to turn for me to start entering positions for the longer trend trade positions we were looking for on such a move above the SPX 100-day would be the 5 min chart's positive divergence that built the last 2 days (below)...

 Here's the positive divergence and the chart is in line right now, we'd need to see migration of the negative divergences continue and move to this 5 min chart which I think is unavoidable.

Take a look at the same 5 min SPY chart in context and remember what I said above about the QQQ chart and the $USD counter trend bounce which is now over...

The SPY 5 min, the positive divergence at the sharp "V" is very small, again this is very similar to the kind of counter trend corrective bounce, it just had the benefit of a short squeeze.

In watching the charts develop and being a bit patient here, the difference would be between short term , quick trades and the longer term, much more profitable trending trades as originally expected to be entered above the SPX's 100-day as it creates a Crazy Ivan shakeout/bull trap.

Furthermore the failure of the market back below the 100-day as was originally forecasted on April 2nd and has played out almost exactly as forecasted (the market triangles develop, there's a breakout above them that fails, the SPX moved down on the head fake move and is temporarily supported at the 100-day and then slices lower and sees the same at the 200-day below, then moves to a new lower low below the October 2014 lows) would be an excellent incentive for the Treasury Flight to Safety trade sending TLT higher. PIMCO didn't exit such a large treasury position overnight in such an illiquid market, that happened over a period of time and that's likely what set up the TLT break below its long term trend line and the current counter trend trade set up we are looking for.

I'll keep you updated.