Last week reading the short term charts were challenging to say the least (
and I appreciate all the kind comments Friday for the analysis through the week, you guys apparently found my analysis easier to understand than I did myself), but by Thursday it was getting clear and by Friday was very clear which way the market was heading short term which was the same forecast that had been made the previous Friday, even though measuring from July 2nd's close to July 10th's close, the market didn't move,
literally! The difference over that 1 week period was between +0.08% to -0.01%, for all intents and purposes, despite some 2500 (or more) Dow points in movement, we ended completely flat.
The point is, while I wouldn't say I have a high probability short term directional theory, the charts are AMAZINGLY in sync and they are roundly showing the EXACT same thing I just posted in today's Market Update.
Take a look at the VIX related assets which we closed earlier this morning, Closing Thursday's VXX 8/21 $21 Put (short) Position in the first 30 minutes of trade because it was obvious that we weren't getting ANY kind of confirmation of the gap up.
We also have an EXTREMELY parabolic price move today and you probably know that I don't trust parabolic moves in either direction-just look at a chart of one of the Index futures on an intraday basis last week and you'll see parabolic move after parabolic move fail one after the other , both up and down.
NQ/NASDAQ 100 futures 5 min chart...
besides the non-confirmation on an important timeframe to have in line with the direction of your trade, note the sharp parabolic move to the far right side of the chart.
Again today, even though we had and have the charts to support such a bounce, and as I have said since first calling the probability of a bounce,
"This would be a RISK OFF move, meaning that they'll be selling in to it or shorting in to it, but IT WILL HAVE TO BE CONVINCING". So far with the best 30-day SPX performance of the entire year, the "convincing portion of the move is in place or at least off to a fine start.
The distribution in to higher prices is also OFF TO AN AMAZINGLY ACCURATE START AS WELL.
As for the VXX P/L which hasn't gained anything since closing it at 10:00 a.m. today (thus taking profits and reducing any open risk as there's no point of taking risk in an environment that isn't offering an edge in a time sensitive set like Puts):
At a cost basis of $2.45 and a fill this morning of $3.65, the VXX 8/21 $21 Put position which was open just barely longer than 1 market day brought in a nice gain of +49%Since closing the VXX put over 3 hours ago, the last price is exactly the same as our fill at 10 a.m.
This is the daily VXX chart and the gap area I told many of you (
maybe posted as well) that I thought was a high probability target, but I "could" imagine a move as low as just below recent lows on a head fake move before resuming to the upside which in my view is by far the highest probability so we have another trade in Vxx coming and it should be a larger, longer lasting one.
Intraday, beyond VXX's gap down in this 5 min chart, look how flat price has been since we closed the put at 10 a.m.
Furthermore, remembering that VIX related assets except XIV, trade opposite the market,
we have a confirming intraday (1 min) positive divergence and a nice rounding like range.
Like the negatives in the averages and Index futures, we also have migration of the positive divergence (strengthening) as it moves to strong/longer timeframes like this 2 min leading positive divergence that looks like a rocket contrail.
I left the UVXY short position open for the moment, it is still at a +22% gain with no leverage other than the built in 2x leverage of the ETF. This 3 min UVXY chart is also seeing migration of the intraday positive divergence and thus confirming not only VXX, but all of the market averages as well.
In addition, the VIX FUTURES intraday chart is also confirming SPY, QQQ, IWM, DIA, VXX, UVXY and XIV with its positive divergence since the cash open (
note the leading negative divergences that led to our opening of the VXX put last Thursday to the left).
This is the inverse of VXX, XIV 1 min which trades WITH the market thus the intraday negative and lack of confirmation of the gap up this morning confirms EVERYTHING we have seen so far today,
which is a much clearer intraday/short term picture than last week which was like pulling teeth for a look at what the charts were going to do until Friday.
HOWEVER DO YOU REMEMBER WHEN I SAID THAT WHEN THERE'S A LACK OF GOOD SHORT TERM SIGNALS, THE REASON IS ALMOST ALWAYS REVEALED IN RETROSPECT AND I DON'T ENTER TRADES ON ANYTHING OTHER THAN OBJECTIVE EVIDENCE?
This is the SPX daily chart from Friday 7/2 to last Friday 7/10 from close to close, note the percentage change, -0.01% !!! 3C was not failing to give us accurate signals, it was giving us perfect signals. If you had, like most technical traders, tried to take a position through the week you would have had severe heart burn, anxiety, sleepless nights, likely stopped out several times and NO GAIN WHATSOEVER! On a shorter term basis, we were able to navigate a few trades in there, but we can now understand the lack of 3C signals just as I said we would be able to last week in retrospect, tiger were no signals until late in the week, because there was no movement beyond a massive meat grinder!
Back to the XIV charts...
The 2 min XIV
(remember , trades with the market) is showing the same confirmation as all other assets seen today, a migrating, stronger intraday leading negative divergence.
The 3 min XIV chart which shows the positive divergence leading to today's move is even showing migration or a stronger negative divergence building.
As is the 5 min chart after near perfect confirmation (
green arrows) last week and a positive divergence kicking this move off late Thursday,
the same time we entered the VXX Put position, PERFECT TIMING.
This is the VXX 15 min chart. The main or strongest signal is a leading positive divergence
(white) at a nice base area,
I have little doubt that this divergence continues on the current pullback and the major move in VXX/UVXY is higher which means lower for XIV and the market.
The most recent negative divergence which I showed numerous times last week was the reason for the shorter term VXX short which was opened using puts because of the strong trade probability, but the limited downside profit because of time issues, thus the extra leverage of puts made the nearly +5-% 1+ day gain well worth it... the right tool for the job.
So far the XIV 15 min chart is showing the same kind of positive divergence as SPY, QQQ, IWM as XIV trades with these assets.
The dominant divergence is the red negative divergence with an interruption of the trend (market bounce) at the white positive divergence. I believe we have more upside to go or at least we are not at any kind of downside pivot in XIV or the market yet, but will essentially re-establish or continue the primary trend of lower highs and lower lows we have seen in the SPX since the May head fake/failed breakout as this move starts to unwind and charts such as this 15 min start to show clear deterioration.
So far today alone, we are seeing that deterioration or what I called a RISK OFF bounce, meaning selling in to price strength.
So far, excellent confirmation in multiple assets and multiple timeframes.
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