Market Update

Here's where we stand so far. From Thursday's, The Week Ahead forecast, the first paragraph started like this,

"It may be a little early for the week ahead post, but there's only so many outcomes and so far today it has looked (including the rest of this week), like there's a bounce set up and in place and a bounce early in to next week looks like the most probable outcome"

Right now, I find it hard to argue with the charts in this, although I'm watching constantly for any changes in character. The thing is people hear the word, "Bounce" and start to get paranoid as so many in the past have led to new highs or retracements; I'd just remind you, we are in a different place now in terms of the primary trend and if you are not paying attention to the primary trend, then things may look random or noisy, they aren't.

 Since our April 2nd forecast looking for a head fake/false breakout to the upside (yellow), our forecast of what happens next has been right on; a move lower with a series of speed bumps at major support zones such as the bounce at the pink 150-day, and what looks like a possible bounce at the blue 200-day, but note that the bounce sliced right through former support at the 150-day (pink).

Take away the moving averages and what the market is doing after barely moving all year, is making the  May head fake move such as we had forecast in early April then putting in a  lower low, then a lower high and another lower low. This is a primary trend down trend establishing itself and as we usually see, there was a head fake move directly preceding it.

So take short term market action in stride and realize there has to be bounces here and there4 to create those lower highs and lower lows that will eventually reveal the top and stage 4 decline in the primary trend since 2009.

As for the near term and now the SPX's 200-day moving average in dark blue (above)...

 Not taking VXX, leading indicators, our VIX Inversion buy signal (For those of you who asked about the code for this indicator, please email me again), just taking the SPY's charts in to consideration, again like VXX's near term signals, the SPY 3 min is leading positive here and we've seen a gap fill already in the cash market this morning.

However there's more to the probable bounce to start early this week than just 3 min charts.

 This is the SPY 10 min leading positive. However once again short term price action and the bigger picture must always be kept in mind, knowing what both are doing not only tell you which way \your highest probability trades are, but the highest probability tactics such as shorting in to price strength so in that spirit, here's the same 10 min SPY chart within its trend or the "Bigger Picture"...

As you can see, every bounce attempt or bounce has been sold in to and the current 10 min positive divergence on the chart above this one doesn't look so fierce when put in to perspective.

This is the IWM 5 min with what looks to be a stop run forming that wider "W" base that I posted late last week with the head fake/stop run already in place and remember we see these head fake moves just before a price reversal as they tend to be one of the best price-only based indications of a reversal's timing.

However putting the same timeframe in to context you see distribution has been much heavier and dwarfs the recent positive divergence. This doesn't mean one trumps the other, it means there's a likely progression of a bounce and a failure to a new lower low, all tradable.

And the 10 min QQQ's positive divergence within context of the larger trend, again it doesn't mean the Q's won't bounce, it just means the probability of anything more than a bunch is very low and the resolution of the bounce is to the downside.

Intraday the current price action/pullback looks about right...

 QQQ 2 min with a positive on the open and a negative divergence at the gap fill with price coming down, however remember those 3 min charts.

Just like the others, the QQQ 3 min suggests the market will find support and that's likely where we'll find additional short term trades to the upside for a bounce, but as usual I want to make sure they are high probability/quality trades before assuming an entry is a wise choice.

As for core shorts/trend positions (short), I am not moving any of those, they are best thought of in terms of the primary trend as it's very easy to lose an excellent long term trend position with excellent longer term returns by overtrading too much and trying to get too fancy in threading the needle. As I have said before, when there's an event that spooks the market that comes out of the blue, the path of least resistance is down, I want my core positions to be in line with that path and to not try to get too fancy trading around them as that surprise event in a market like this can come in seconds. For some of you who have been with me a a while, you may recall trying to get too fancy with an AAPL short and missing a -45% move with no leverage!