Daily Wrap

In my view, there are two narratives today accounting for the market movement, the official which goes something like this...

The "Greek Deal Rumor" narrative...

At #1 a rumor that Greek creditors have started crafting a staff level accord (a Greek deal has been reached). At #2 Greek PM, Tsipras says a deal with creditors is "close". At #3, the German government expresses surprise by Greek reports of progress in negotiations and at #4, German Finance Minister Wolfgang Schaeuble says Greek talks haven't gone far yet.

The timing of the comments and the market reaction to the comments seem "odd" and unexpected.

In addition, to pull this move off today, there was a squeeze of the Most Shorted Index not once, but twice.

Today's 2 short squeezes of the Most Shorted stocks today (SPY). Note the second squeeze took place just after we closed the VXX puts, but had waited before entering any assets that would count on market downside as the charts simply were not confirming in enough timeframes to justify such a trade which worked out well considering the market action right after jump started by  a second short squeeze.

In addition, the EUR/JPY carry was apparently latched on to by correlation algos during the cash market to get the move underway as well.

ES in Purple vs EUR/JPY in red/green candlesticks. Note the correlation didn't start until the cash open at 9:30.

The $USD/JPY would not have been the obvious choice because of the $USD's recent strength, but if you recall one of the reasons I suspected the $USD put in such a strong counter trend rally was to reduce the losses or cost to close out the carry trade (USD/JPY specifically).

After making a new counter trend rally high (remember the previous 7-days of counter trend rally in the $USD have been the strongest since 2008) in the $USD today, it started to weaken.

 Daily chart of the $USDX with a strong move yesterday, but a weaker Harami /Doji Star candlestick today, suggesting the counter trend rally in the $USD is losing steam and may soon move to new downtrend lows.

However before it did...

 This morning's new high in the counter trend rally followed by weakness the rest of the day and Yen weakness... 

Took out the USD/JPY $124 stops perfectly.

In fact, the USD/JPY after our recent monster, strongest 7-day rally since 2008 in the $USD counter trend rally, took the USD/JPY within 7 pips of its highs from 8 years ago.

In other words, if you follow the Greek narrative/rumor, there are quite a few inconsistencies.

However the second narrative is simply following the exact same narrative that was laid out for this week's action in last Friday's The Week Ahead... forecast...

"One of the things that seems to stand out the most is the Igloo/Chimney top and reversal process....We have the Igloo top in place, the last head fake move or Chimney looks like it will take place next week, beyond that everything starts turning very negative. My interpretation is that we will get a head fake move, this is where we should have good entries in assets we have been waiting on for signals like NFLX , perhaps transports, Financials almost for sure."

"It seems to me that soon after the $USD counter trend bounce may start to fail. While there are some positive Euro signals that would naturally come with a $USD decline"

"....this is the clearest signal I have seen that the carry trade unwind that the bouncing dollar has fascilliateated at smaller or no losses should being to unravel again and that makes sense as the head fake chimney move in the market/equities would be in the exact right place for the start of a $USD decline from the counter trend bounce and the selling of carry assets like stocks and bonds."

"Therefore I'm looking for the chimney on the igloo tops I showed in the last post, that's also the entries for numerous trades we have been patiently waiting for to set up. I think the switch from a head fake bounce in equities to a sharp decline will be a very fast one so I wouldn't expect the same lazy market we have sen this week."


The Igloo/Chimney concept has been a steady one, even today's move was expected to be a part of that which was posted in last night's "Daily Wrap". Even the concept of the head fake move which would require a strong market move seems to be in play.

The Euro strength signals were seen clearly today as it was the EUR/JPY that altos correlated to and today's intraday and daily chart weakness in the $USD is starting to become more obvious as seen above.

As for the Igloo Top ((with a head fake Chimney" shown in the previous post on Friday, here it is...

"The 10 min SPY and this week's reversal process (yellow) with the "Igloo reversal process top" and a deepening 10 min leading negative divergence. I still would like to see 3C make a new leading negative low as I have drawn in on the 10 min chart in red."

This is the same rounding/reversal process or Igloo Top we see right before the final head fake move so often that we have named the price pattern "Igloo with a Chimney" as that's what it looks like.

In yesterday's Daily Wrap the "Igloo Top" and yesterday's price action was the very first thing I wrote about.

This is the QQQ chart I posted last night in the Daily Wrap with commentary below...

 "Look at the QQQ chart above this one from Friday and the normal rounding over , "Igloo top", today it was significantly deformed due to massive market weakness, not just on the day, but severe damage done."

And this chart followed as to what I'd be looking for next that dates back to Friday's Week Ahead, the "Chimney" head fake price action...

"Normally we would look for the head fake "Chimney" on the right side of the "Igloo" rounding top formation, in this case it would look something like this...

Igloo and Chimney in yellow, the chimney being a head fake move that fails and leads to a fast downside move, but also gives us an opportunity to enter swing / trend shorts at better prices and lower risk."

Since we entered the VXX and TLT puts yesterday for a move up in the averages today, one description has been constant, "A strong move, an impressive move, but a short lived move" and that it be followed by a sharp move down once the Chimney/head fake was complete.

Today the first 2 conditions of that description were met leaving us with this new price pattern as of the close...

This is today's QQQ 60 min chart, compare to yesterday's expectations posted in the Daily Wrap above. Note the shape of the chimney drawn in yellow where we had no price as of last night and note the trajectory of price at the green arrow. Is this not exactly what we forecasted Friday so far as well as the first thing written about in last night's Daily Wrap ?

It makes a lot more sense to me that to get this move on yesterday's very small base, the market would need help such as the two short squeezes intraday in the Most Shorted Index as well as the EUR/JPY carry correlation with the $USD making a new high that hits the USD/JPY carry trade stops at $124, allowing the carry to be closed at less of a loss or no loss at all, which is why I suspected we'd see a stronger than usual $USD counter trend bounce before it even began well over a week ago!

In addition, certain Leading Indicators are breaking down as we had expected to see and my watch list of stocks that I said last Friday I'd be looking to enter on the Chimney/head fake move are closer, but not quite there like the VXX position from yesterday was or the GLD position I suspect entered today, which was also part of the The Week Ahead forecast from Friday...

"It looks like Gold will move higher, but whether this is a temporary bounce as we initially saw before a wider pullback is now up in the air as gold now seems to be discounting inflation expectations which could continue sending it higher.

I haven't changed the forecast for crude, a pullback followed by a stronger move up."

You saw the GLD charts today...Trade Idea: Swing GLD Long And the Crude "Pullback" is expected to be a large pullback as covered last night in USO / Crude Update, toward the bottom of the range before reversing its primary trend in a trend trade higher.

As for Crude tonight on the API data...

Not a great reaction to the inventories.

As for Leading Indicators...

30 year Yields in red vs the SPX had been moving together, but suddenly today there was a massive change between the two. I'm obviously hoping Yields climb back up with the TLT put, I suspect they may with the completion of a head fake move in the market. Remember though the larger trade idea in TLT/Treasuries has also been a counter trend rally, although it seems less and less necessary if the $USD counter trend rally ends which should lead to a renewed sell-off in treasuries.


Pro Sentiment "had" been in line for a while, but had recently been falling apart at a fairly steady pace, that all changed recently...

Our Leading Indicator "Pro Sentiment" had been roughly in line through the earlier part of the year and started deteriorating at a predictable pace, then just fell out of the tree. These are the kinds of Leading Indicator divergences that I have been looking for.


As I often say, "The first lever they turn to in order to ramp a market is almost always HYG", today and yesterday were no different, the market needed the help of HYG to pull off this move that seems very well orchestrated if we could see it last week in advance...

 HYG (blue) in line with the SPX (green) intraday until last week and especially at Friday before yesterday's decline, but notice HYG in line again as it is used to help lift the market along with the EUR/JPY and two short squeezes intraday.

However, it's not the short term intraday divergence we are looking for as a Leading Indicator in High Yield Corp. Credit, it's the trend...

HYG has also fallen out of a tree vs the SPX recently.

And it's not only High Yield Corporate Credit...

It seems smart money has been very eager to get out of risk assets especially in to last Friday. High Yield Credit which is an institutional risk on asset has made new multi-month lows today.

"Credit leads, stocks follow"

As I said today, I wasn't ready to enter any shorts because it seemed the signals were not consistent enough and looking at the start of the head fake "Chimney" move, it makes sense why, but it also means we should be that much closer as the Igloo with a Chimney is the last thing we see before significant declines, just look at the September highs as they formed the exact same pattern before falling within days to move to the October lows last year.

At this point, it's a matter of watching the market, watching the watch lists and entering the positions as their charts fall in line which I suspect happens quickly as the Igloo was not allowed to finish before falling sharply yesterday, distorting the rounding top (right side) and an immediate move to the "Chimney" portion of the price pattern , but needing significant help to do it.

As for internals which were overwhelmingly 1-day oversold yesterday...From yesterday's Daily Wrap...

"Interestingly, adding to the probabilities of today's new positions entered and a near term / short term market bounce, Internals WERE EXTREME!

The Dominant Price/Volume Relationship was in all 4 averages with an amazing 72 NASDAQ 100 stocks, 27 Dow 30!!! There were 1058 Russell 2000 and an amazingly strong 368 SPX-500 stocks all in the same Dominant Price/Volume Relationship of 4 possibilities... Close Down/Volume Up which is the strongest 1-day oversold condition of the 4 possibilities usually leading to a next day move higher...

Furthermore internals were exceptionally strong with all 9 of 9 S&P sectors closing red with Utilities leading at -.63% and Energy lagging at -1.58%!!!

Of the 238 Morningstar groups I track, an amazingly overwhelming 231 of 238 groups closed RED, this is a VERY strong 1-day oversold condition and especially taken with the Dominant Price/Volume Relationship of the 4 major averages. This CLEARLY suggests a next day close in the green on a very strong 1-day oversold condition.

Tonight we have the almost polar opposite...

The Dominant Price/Volume Relationship saw 17 Dow stocks, 55 NASDAQ 100, 899 Russell 2000 and 271 SPX 500, a strong Dominant reading and all in Close Up / Volume Down, THE MOST BEARISH OF THE 4 POSSIBLE READINGS.

Also in a polar opposite to yesterday's internals, 8 of 9 S&P sectors closed green with Tech leading at +1.89% and Energy lagging at -0.18.

Even more so, of the 238 Morningstar groups I track, a full 222 of 238 closed green. 

As much as yesterday's internals were at a 1-day oversold condition that as I said last night, "This CLEARLY suggests a next day close in the green on a very strong 1-day oversold condition.", today's internals are the strongest form of the EXACT opposite, typically seeing a next day close in the red. However whether we get an actual close in the red or not, this shows an overwhelmingly weak tone to the market, especially the Dominant Price/Volume Relationship which is the most bearish of the 4 possibilities!


Index Futures...So far they aren't giving up much, I suspect this is because as I mentioned earlier today, there's not enough chart confirmation to guard against the probability of a move in the area tomorrow or higher. However as it is still early, there are some initial signs that there's deterioration in all of the averages, it's minor right now and just started, it will be interesting to see what it looks like tomorrow morning or maybe later tonight.

Russell 2000 Futures 3 min with yesterday's positive divergence, today's move higher off that divergence and the start of a lateral range the last hour or so with the start of a leading negative divergence.

Remember it is a holiday shortened week and the max-pain options expiration pin on Friday is usually right around Thursday's (tomorrow's) close. I suspect we may see some signals and signs before the end of the week, but I don't expect we'll see any major downside price moves until this Friday's op-ex max pain pin is over. However that's just opinion and the charts can move very quickly as we saw yesterday. Watching the charts right now is the key to this area of the price pattern and market.

GLD correction

From the last post, Trade Idea: Swing GLD Long I wrote "I'm going with some June 29 GLD calls with a $114 strike."

It should be June 26th as to read,  "I'm going with some June 26 GLD calls with a $114 strike."

Trade Idea: Swing GLD Long

I'm going with some June 29 GLD calls with a $114 strike.

There's a nice intraday positive divergence out to 15 min charts, I suspect this will be at least an easy gap fill in fairly short order.

 GLD 1 min positive

 Nice 5 min GLD positive leading divergence.

10 min leading positive

And all the way out to a 15 min chart which is around the swing trade length trade.

Quick Market Update

Intraday charts of the averages added a bit more upside since the last look at them, however they look like they'll be seeing downside in to the close, although I wouldn't be surprised if most of them closed green for the day as yesterday's internals suggested.

I will NOT be entering any short term market average (SPY, QQQ, IWM) puts at this time. If you are a very nimble day trader and up for a very speculative trade, then it may be worth a shot just in to the close.

There'
s not enough deterioration on charts like the 5 min chart for me to trust that this move is completely over and that we don't see an attempt at additional upside tomorrow. I'm not saying this is a probability, but there's simply not enough evidence to rule that out to carry a short or put trade of the averages over night in my opinion.

Example of near term intraday deterioration in to the close....

 QQQ 1 min intraday hasn't improved at all (3C) since closing the VXX puts, while price has a bit. It looks like on an intraday basis, the Q's are about to decline in to the close although they will likely still hold a green close by the EOD.

However to enter a put position, I'd want to see this stronger 5 min QQQ chart looking just as bad and the fact is, it doesn't. IT appears to be almost inline with some slight weakness, not enough to have strong confidence that the Q's (or any of the averages) will see highly probable downside tomorrow. Thus I'd rather wait for the signals to look highly probable rather than mixed.

TLT Put Set-Up Looking Stronger

Earlier today I wondered if the very sharp "V" reversal signals in VXX and TLT might form a broader top for their declines which VXX did not as it moved down in line with yesterday's puts, however TLT as I pointed out earlier on its daily chart had formed a Harami reversal or an Inside Day, looked more like it was forming a larger top than just half a day yesterday like VXX. Now it looks like we have pretty compelling evidence that TLT has indeed formed a larger short term top which should make for a stronger/longer move to the downside which hasn't started to any real degree today unlike VXX which started right off the open.

All in all, this should make for a stronger TLT move for yesterday's puts entered at the same time as the VXX puts.

 The Harami candlestick reversal pair of candles on a daily TLT chart, in western vernacular we call it an inside day.

 Intraday TLT has been forming a bear-flag price pattern rather than just moving down, but I suspect this is creating a larger top that will support a larger downside reversal.

The 3C chart has also deteriorated further today as the flag has been forming.

 This longer/stronger 5 min chart has also put in more deterioration today, again suggesting a stronger move down than if it had simply moved down off yesterday's half a day top.

And even the 10 min chart which showed no deterioration in the 3C chart yesterday has seen a leading negative divergence today.

Although TLT puts haven't put in any gains today unlike VXX, I suspect today's additional topping behavior and size will lead to a larger downside move than if it had simply moved down today. This is still a speculative and short term position, but it should be worthwhile.

VXX P/L & Market Update

I can't say for sure the VXX decline is over, I can say I expected it to be brief, but I wouldn't say I expected it to be this brief. Still with decent double digit gains for about a day of market exposure, I'm not really in the mood to test the market over a speculative position at double digit gains right now.

With a cost basis of $1.62 and a fill of $1.83, that makes a +13% gain and worth the effort. TLT I believe is in an intraday bear flag that looks close to breaking lower so I suspect gains there will increase shortly.

As for the VXX charts, they are seeing some recent and strengthening 1 min positive divergences, but it was more the charts of the averages that made up my mind in this case.

 The 2 VXX positions over the last 24 hours that we have taken action on were the Calls from last week in to yesterday which were closed around 1:15 yesterday with a VXX put position opened around 1:30 yesterday and just closed. We also closed the TLT call position yesterday at a +58% gain and entered a put position at the same time as VXX yesterday.

Note the 1 min VXX positive and the downside momentum turning more lateral intraday. As I said, there could be more downside, but I'm not really in the mood to let a double digit gain turn to a loss on a speculative position like this.

 The SPY which moves opposite the VIX/VXX is showing a confirming 1 min leading negative divergence giving more credibility to the possibility of VXX being done with downside gains for now.

The average seeing the most upside action today, QQQ is also the one showing the worst 3C charts which makes sense as it would seem any upside gains are being sold/shorted aggressively and the Q's are giving them the opportunity to do that today.

 QQQ 1 min with not only a leading negative 1 min divergence like the SPY except stronger, confirming the VXX 1 min positive above, but also a rounding /reversal process as momentum is definitely failing here.

 The QQQ 2 min chart looks like it had a positive divergence yesterday that would be big enough to sustain a larger move, but as I maintained since yesterday and through today, this is more about the percentage move and not the length of the move as the base from yesterday is exceptionally small.

 QQQ 3 min is turning negative as well, it's not the size of yesterday's divergence, but I suspect I should add a "yet" to the end of that statement.

 And the 5 min chart is about neutral.

 The IWM's intraday divergence never even moved to confirmation of its upside today.

And the IWM 2 min has been seeing a declining 3C chart all day since the open today.

 Interestingly the IWM 5 min chart DOES look like it has more upside to go, but weighing all of the evidence above, I chose not to tempt fate here.

The earlier NYSE TICK hit a nice upside extreme of +1300 earlier today, but since then it has moved down in a channel to the mediocre range of +725/-450, not much action.

And our custom TICK Indicator shows yesterday's short term capitulation/selling event and improvement with today seeing that improvement start to deteriorate.

Again, I wouldn't be surprised to see more upside gains in the market and more VXX put gains, but I'm just not willing to take the chance with so little objective evidence supporting that view presently.

As for possible S{Y, QQQ, IWM put positions, it's something I'm considering, but I'd want to see more evidence.

I don't usually like these short term or especially day trades, but when there are good signals, it's hard to turn away from what the market is willing to give. That's the best we can ever hope to do, take what the market is willing to give, very rarely does the market give what we hope to take.

Closing Yesterday's VXX Puts for Now

At a decent +15% gain, it just looks like intraday the markets are about to come down, I'm not sure for how long so not going to look a gift horse in the mouth.

So Far, So Good

Amazingly for such a parabolic move, (another sign of the weakness inherent in the broad market) so far it's holding together pretty well and both new positions opened yesterday are in the green, TRADE IDEA: SPECULATIVE TLT PUTS & TRADE IDEA: SPECULATIVE VXX Puts.

A quick look at the charts and they are amazingly strong for such a tight "V" shaped base and parabolic move, but this is what we expected, a strong, albeit brief move. I have alluded to the brief move that does not end well, but I thought that I'd show it to you in visual form via multiple timeframe analysis and you can see for yourself what the very near term looks like, why we closed yesterday's put positions in IWM & QQQ as well as TLT and VXX calls all at a gain and almost immediately opened TLT/VXX Puts for a short term position and why I want to use any price strength to enter longer term core/trend shorts and in some cases long positions.

I think that this visual (set of charts) that moves through multiple timeframes from the very short term, brief moves to the very long term market trends makes all of this quite clear. We'll look at TLT which I still expect (despite today's puts) to see a strong counter trend rally before it fails miserably (although the developing F_E_D story seems to be taking on more and more of a June Rate Hike theme which could have implications in TLT's future). We'll also take a look at VXX/Short term VIX futures which despite today's put [position, should make a huge move to the upside and the SPY as the market proxy which again is right on the ledge of a cliff from which there is no recovery.

As for asset choices yesterday, TLT is a toss up, it (as a put) is outperforming certain averages and slightly underperforming others, so it all depends on which of the averages you chose as to whether TLT would have been a better position or one of the averages so it's a coin toss. VXX (puts) are clearly outperforming any of the percentage moves in the averages.

*It takes a while to capture and upload this many charts so some of the very short term intraday charts may look a little different obviously, but it has no effect on the point of the post.

 VXX 1 min intraday is in line with the move lower today. Remember yesterday we closed VXX calls at a gain and 15 minutes later opened short term VXX puts for today and perhaps a bit longer. VXX moves opposite the market averages for the most part.

 VXX 3 min with Friday's leading positive divergence leading to Tuesday's cash market picking up where Friday's divergences left off , a strong 3C concept that we see on the next trading day...even over a 3-day weekend. That should tell you something about how the market is set to move in advance, sometimes days, sometimes weeks and even months in what we call "Cycles". The market is not nearly as random as you might think, but the mainstream financial media can't explain this and doesn't want to explain this, it would reveal too much about how the market really works and it doesn't fit in to a 30-second sound bite that tells people why the market did what it did today. That's about all the mainstream of retail investors can handle, a simple 30 second explanation of how some meaningless economic data from before the open moved the market even though in past weeks or months the same economic data had no effect at all on the market.

 VXX 5 min which is a fairly strong near term timeframe, the first or earliest timeframe I consider to be able to show institutional activity on an intraday basis, while shorter timeframes can show institutional activity through longer term trends and generally show the middle man activity like market makers, specialists and HFT's performing the same liquidity functions in which they make their money on the bid / ask spread through 10's of thousands of small spreads per day.

Again note last week's positive divergence sending VXX higher yesterday and the negative divergence at the intraday highs yesterday sending it lower today...the reason we closed the VXX calls yesterday and opened VXX puts 15 minutes later.

 However the stronger 10 and 15 min charts have a large leading positive divergence. Perhaps in the very near term VXX runs down to the bottom of the recent base and runs one final stop run below support before launching higher on a longer term trend at the same time the market moves lower.

TLT-20+ year Treasuries...

 This morning's 1 min intraday chart with a slight positive divergence that has caused a slight lateral consolidation intraday which is looking like a bear flag right now. It should break lower soon (today).

 This is the TLT 1 day chart. Treasuries out performed equities in 2014, but since have made a top and are on the edge of moving from stage 3 top to stage 4 decline as they have broken below a long term trendily, but in my opinion before they do, much like the $USD right now, I expect a shakeout of new shorts and older ones in Treasuries, a thick trade. This is the counter trend rally I expect in TLT much as we expected it in the $USD and as of yesterday's close, the $USD had put in the strongest 7-day move in about 7 years despite its primary trend turning down this year.

Note the resistance yesterday at the trend line as the area below the trend line is serving as the base to support the counter trend rally. Today's candlestick on the Daily chart taken with yesterday's forms a bearish Harami reversal (down) or what is known in western vernacular as an inside day. I suspect TLT moves toward the bottom of the recent range, maybe puts in a last head fake / stop run below recent support before breaking above the trendily and squeezing all of the shorts, powering the counter trend rally at least initially.

 The 2 min TLT chart shows 3C distribution yesterday right at the highs that hit the long term trendily on the daily chart above, this is when we closed out the TLT calls yesterday at a gain and 15 minutes later opened short term TLT puts.

 The stronger 3 min chart is also leading negative suggesting there's still quite a bit more downside in TLT and our put positions should do well, at least double digit gains in a short period.

 The stronger 5 min TLT chart shows the base/accumulation I mentioned above as well as yesterday's negative divergence at trend line resistance,

 And the 10 min TLT chart, a much stronger timeframe showing us much more trend than near term trade like the intraday 1-3 min. charts above showing a strong positive divergence forming under the long term trendily, the exact place technical traders would short or add to shorts as TLT broke below a technical level (the long term trendily). While this worked for Technical Analysis in the late 1990's before it was mainstream with the advent of the internet and cheap online brokers and a rush of investors wanting to manage their own accounts, but needing an easy way to make decisions which led to the rise in popularity of Technical Analysis, it no longer works as well as Wall Street knows what the majority will do when faced with any particular technical set up that has been taught the same way for nearly a century in many cases. Wall St. adapted and uses these technical concepts against traders, traders never adapted and use the same concepts that were in use in the 1930's.

 The base area as seen above on the 10-15 min TLT charts just under the long term trendily, once prices move above the trend line the short squeeze begins as traders are very predictable as to where they put their stops and they often place them in advance so Wall Street (really anyone) can see where they are grouped making them easy targets.

 TLT's 15 min chart in line on the downtrend (green arrow) as prices break below the long term trend line (yellow hash line) and accumulation for a counter trend move begins to shakeout a trade thick with shorts.

Note the leading positive divergence on this strong trend timeframe.

The stronger 30 min chart shows much less detail, much more underlying trend. It looks very clear that TLT is being set up for a strong counter trend rally, as we have seen with the $USD, these tend to be some of the strongest rallies you'll ever see.

 However it is still a counter trend rally with this TLT daily chart which shows the 4 stages of a trend or at least the first 3 so we know which comes next. Stage 1 accumulation/base; stage 2 mark up/rally; stage 3 top/distribution and as 3C daily (3-day) leads negative to a new low, the next stage is 4, DECLINE.

Thus after a short term decline in TLT we should see a strong counter trend rally which will ultimately fail the same as the $USD rally under way now and move to stage 4 decline or bear market.

That's the essence of multiple timeframe analysis and how we use it to enter, exit and plan our next positions.

SPY...

 The 1 min chart with the leading negative divergence as the market closed Friday leading to yesterday's downdraft in price and a positive divergence, as I said, any of the averages could have been used for call positions, I just liked VXX and TLT puts better.

 The 2 min chart showing the same thing

 As well as the 3 min chart.

And the stronger 5 min chart with Friday's 3C weakness and yesterday's leading positive divergence. It doesn't matter how strong the divergence is and it is a strong divergence, it doesn't have the time, meaning it doesn't have the accumulation or size to hold up very long. It's like building a skyscraper, if the foundation is not strong, you can't build very high before the entire thing comes crumbling down.

 The 10 min SPY which has been a key chart in determining when this cycle ends and the next begins. Note the positive divergence on May 6 and 7 which we see everywhere in all kinds of assets other than stocks. I've been waiting for the already negative 10 min chart to put in a new , lower leading low which it has begun to do. I suspect the SPY may rally to the gap created yesterday, maybe even a bit more, but it doesn't have the base to go too much further or for too much longer.

 The Daily SPX chart with the triangle and the head fake move or failed breakout we expected above this very obvious resistance zone that technical traders would chase upon a breakout (yellow).

This 30 min 3C chart of the SPY shows the distribution in the triangle culminating with stronger distribution in to the head fake move above the triangle (yellow) and why?  Because there was demand (by retail traders) on the break above the triangle that allowed institutional money to sell in to the demand or short in n to the demand, both transactions come across the tape as sales.

And the daily SPY 3C chart leading to a new negative low through 2015 and the triangle area.

I hope that makes our view of the market and its multiple trends a bit more clear.