Volatility Squeeze

We are also seeing a volatility squeeze implying a directional move.

This is the tightest squeeze since 9/27

XLF-Fnancials

It looks like XLF may lead an intraday bounce somewhere in this area.

XLF 1 min, this is still the sector with the most drag. Most of the averages are about in line on the 1 min chart, except SPY with  relative positive divergence and the QQQ is starting one.

GLD Update

Yesterday I posted short term signals that looked like GLD would fall a bit today

Here's today's update thus far

 Here's the long term 150 day moving average, I have said that I would like to see a consolidation here given the way GLD dropped, it's also important to keep your eye on the direction of the moving average, should it turn more sideways or even turn down, that will be a game changer.

 Yesterday is marked in green, today in red. You can see GLD bounced off the 150 ma area a bit.

 The 1 min chart was showing a positive divergence this morning that led to that bounce and is still in a fairly good area.

 The 5 min hart showed the same positive divergence leading to the intraday bounce.

The 15 min chart still hasn't seen a positive divergence and I would expect to see one there before any major move away from the 150 ma occur. I view this still as part of the consolidation, but given the activity (the drop), this is an unusual pullback to the average and should be watched closer to make sure it holds. My belief is that Gold is a bubble (I know, there are 100 reasons why it isn't, just like every other bubble), however bubbles an persist a lot longer then we think and unfortunately for gold traders, the COMEX is a very difficult problem as they can create a game changing fundamental issue overnight.

Market Update

Last night in my "Observations" post I said,

"While we have plenty of relative positive divergences, I would like to see more of these turn in to leading positive divergences like the 15 min SPY below."


"Being the 15 min is already there, the 1, 5 and 10 min can make it to that position pretty quick, it would certainly be possible within a day as I have seen a 15 min timeframe achieve that in a day. When we have those kinds of divergences on multiple timeframes and averages, the probabilities of being at a turning point are very high.

False breaks/head fakes are also good timing indiations, I showed you on in AAPL earlier tonight and you can see how quickly it fell once the head fake is completed and the longs start losing money from buying the breakout. In an upside reversal, a break below important support leads to the head fake and it is completed when price rise above the breakdown level.

We saw several important breaks of support today, the most serious being the S&P-500. I wrote about two weeks ago that I thought we'd have one more rally, followed by a new low and a strong move up off the new low. Some of the indications were in last night's post, such as the breadth charts and the Zweig Breadth Thrust."

"The only thing I would like to see at this point before issuing a screaming buy would be leading positive divergences pretty consistently.  Should that happen, I think we could see a rally bigger then anything we have seen in the past nearly 2 months. A flat trading zone would also be encouraging."

A "Flat Trading Range" is the best environment to see positive leading divergences develop as each pullback to the bottom of the range offers and opportunity for 3C to make a higher low then the last one, this would create the kind of divergences I mentioned above. 

Also, with regard to pre-market and futures indications as well as early morning trade, I had several panicked emails and I understand why, however the futures market are routinely manipulated (Watch the Cramer Video I posted again, I'll try to get the link up), furthermore, pre-market and after hours markets with their thin liquidity are not only very dangerous to trade, but they often magnify indications to extremes. As for early trade, as I have stated many times, when I did nothing but trade full time, I would RARELY make any decisions based on the first hour of trading. Many traders I know won't even start their trading day until 10:30 as the market flushes out limit orders and plays other games, mostly taking advantage of people who place orders and then head off to work.

It's still early, but as of now, from a substantial gap down, 3/4 major markets are green with the QQQ up 1.19% and the IWM up 2.16%. You can see how a limit order to sell short placed in premarket would have been hurt.

 It took awhile to get all of these charts together and upload them so some action has already changed a bit. DIA 1 min is so far doing what I hoped to see, continuing a leading divergence, you can see a range in the red box and some resistance nearby.

 DIA 2 min is still at a relative divergence, however since this hart capture it is now moving toward a leading divergence

 DIA 10 min is moving in to a leading divergence, I would like to see pullbacks of 3C that make successively higher lows and remain leading.

 IWM 1 min, hit a leading status and pulled back, it has since made a new high and is in line with price action. The red area is a resistance zone, which you can see is the likely place we will see these pullbacks in 3 and prices.

 The 2 min was entering a leading positive divergence, it is confirming the price action in the IWM, having since moved higher.

 IWM 5 min is showing a strong leading divergence, still,  would like to see 3C pullback and make a new high as price pulls back, creating a kind of lightening bolt look.

 The 10 min hart is leading and has the slight look of the lightening bolt, but the point is that it occurs on a pullback of prices, hopefully within a trading range.

 We have a relative positive divergence which is impressive because of the timeframe, an hourly chart and because of the decline in price from the first relative comparison at the left side of the arrow.

 QQQ 1 min is leading positive making new highs here.

 A long view of the IWM 2 min relative positive divergence and the depth chart.

 A closer look at the 2 min chart, leading and currently showing a minor negative divergence after moving higher, so this may lead to the pullback in price that is useful in creating the higher lows of a leading divergence.

 Long view of what is really already a leading 5 min divergence in the QQQ and a very nice depth chart.

 Red marks resistance in this closer look at the QQQ 5 min chart, which is leading, the 5 min chart also suggests a pullback in price.

 QQQ 10 min leading positive, this remains leading positive, showing no short term negative divergence like the shorter charts.

 QQQ 15 min strong relative positive divergence

 SPY 1 min with some early resistance causing a 3C small negative divergence, this was resolved with a move higher both in 3C and the SPY, currently there is a very mall negative divergence suggesting a price pullback.

 SPY 2 min leading positive and showing what the "lightening bolt" should look like as 3C made a higher low at the pullback which was at the same relative price level, this is what I want to see and why pullbacks are important in creating this pattern, I'm sure you understand the implication of a higher leading divergence at a pullback.

 SPY 5 min in a leading divergence, it has since moved higher and is trading in line with the SPY within a leading status.

 The 10 min chart leading, but not yet creating the lower highs, a more significant pullback would likely be needed.

SPY 15 min has remained in leading status and added upside to that today thus far. It is now higher then the previous high at the same relative level.

EUR/USD Follow Up

 FXE 1 min-last night's positive divergence, right now we have confirmation and a leading positive divergence.

 FXE 15 min-a broader view

UUP/$USD 15 min, even on the 15 min chart this early, 3C has moved down.

Euro Update

Last night I posted this about the Euro/Dollar

Excerpt: "With what's coming out of Europe (and this is an extended news cycle, usually the Euro fears persist for 5 days and then take a back seat only to reemerge) its hard to see how the Euro could even manage a bounce, but much stranger things have happened."


I haven't seen any news out of Europe as of yet, but the Euro is moving up.

The red arrow is the market close as of yesterday, you can see we have had a sharp bounce this morning, a stronger Euro/weaker Dollar is generally equities positive.

Early Market Update

I usually don't like to update this early as there are a lot of market gimmicks, but here are the first signs of some short term stabilization.

 DIA 1 min

 IWM 1 min

QQQ 1min

My connection is lagging a bit because of the live speech.

Bernie K's Speech Live

Here's the link

Observations

Tonight we have a dominant price/volume relationship, Close Down/Volume up, by a wide margin, this typically leads to an oversold situation and an oversold bounce.

Further evidence of a VERY oversold situation is the 239 industry/subindustry groups, only 2 closed green today!

While we have plenty of relative positive divergences, I would like to see more of these turn in to leading poitive divergences like the 15 min SPY below.

Being the 15 min is already there, the 1, 5 and 10 min can make it to that position pretty quick, it would certainly be possible within a day as I have seen a 15 min timeframe achieve that in a day. When we have those kinds of divergences on multiple timeframes and averages, the probabilities of being at a turning point are very high.

False breaks/head fakes are also good timing indiations, I showed you on in AAPL earlier tonight and you an see how quickly it fell one the head fake is completed and the longs start losing money from buying the breakout. In an upside reversal, a break below important support leads to the head fake and it is completed when price rise above the breakdown level.

We saw several important breaks of support today, the most serious being the S&P-500. I wrote about two weeks ago that I thought we'd have one more rally, followed by a new low and a strong move up off the new low. Some of the indications were in last night's post, such as the breadth charts and the Zweig Breadth Thrust.

The volume on the break of both the closing low and intraday low was not as strong as  would have preferred to see, nor was the break as sharp as I would have preferred to see, we'll have to see if it was enough. Both MACD and RSI were positively divergent on today's move below the support levels.

The 3C depth charts are getting very low in their troughs, some at new lows compared to past accumulation areas.

 The DIA improved a lot today in this respect, but still is lagging the others. The two white boxes represent the past area that my "gut feeling post was based on, that more or less stated that I thought the last accumulation zone at the  Sept. 23rd area was going to look like the zone in the first white box, which in retrospect I don not view as two separate accumulation events, but as 1 event separated by a short bounce. Some other things they have in common include the fact that we didn't see the level of distribution at the bounce area that we saw at previous rallies. Here you can see there was no negative divergence on the hart , just a "V" shaped peak , whereas the other two rallies showed clear distribution.

 The IWM depth chart is at a new low, it too did not see negative divergences at the interrupting bounces. The depth harts shallow troughs would tend to indicate heavier zones of accumulation.

 The QQQ also saw a new low today on the depth chart, you can see clearly that the troughs have been areas of accumulation while the crests have been areas of distribution, ending bounces.

The SPY also hit a new low, again notice the white boxes on 3C are not showing negative divergences.

As for the Demark signal variant indicator, as mentioned earlier, all of the signals that were present Sunday night played out on the open today in the SPY, they probably did in the other averages as well, I just didn't check those.

 As of Sunday night, the longest timeframe we had signals on was about 30 minutes, tonight all have 60 min signals which have done a goo job at marking the lows that lead to rallies as you can see by the buy/sell signals on this SPY 60 min chart.

 DIA is the only one that is only to the 30 min, but with 2 consecutive signals, which we have seen at two previous bottoms that led to rallies.

 QQQ

 IWM

IWM daily which has marked every bounce/rally

The VXX which trades opposite of the market has a daily sell signal.

They have been pretty reliable.

The reason I have felt for some time that we would see some good upside from the bear flag daily formation is the daily positive divergences, this is something I have talked about for awhile, not just recently.

 DIA daily leading

 IWM daily leading

SPY daily leading, even while price breaks to new lows.

So the Demark signals are in the right area, the daily charts suggest something has been cooking of a bigger nature, there were numerous signs in last night's post, the depth charts are now in an area in which a turn up would signal a tradable bottom and the 3C charts are almost universally showing relative positive divergences.

The only thing I would like to see at this point before issuing a screaming buy would be leading positive divergences pretty consistently.  Should that happen, I think we could see a rally bigger then anything we have seen in the past nearly 2 months. A flat trading zone would also be encouraging.

Tomorrow Bernie K speaks before Congress, I would doubt he would be making any policy statements there, but who knows what he might say and if the market will latch on to it. He's scheduled for 10 a.m., hopefully CSPAN will cover it so I can be spared CNBC.