ES continues to Slide

The negative divergence in ES continues and 3C remains in confirmation. 3C is approaching the overnight ES positive divergence level seen at the far left (ES makes two similar lows and 3C makes a higher low on the second one-this is the positive divergence overnight sending ES and the markets higher). With prices elevated above the area in which ES went positive last night, around 1195.65, 3C is moving closer to that area, which will create another negative divergence with 3C in the same area, yet ES around 1209.

Longer Term Charts,

As most of you know, the longer lasting a divergence, the stronger the implications are for the reversal move. The longer 3C chart divergences appear on, also the stronger the implications for the reversal (meaning the stronger the reversals trend will be, and the further it will travel). Generally anything at about a 15 min chart shows fairly heavy distribution for swing type trends, if the divergence moves to the longer 30 and 60 min charts, the stronger the distribution. 3C can't differentiate between institutional selling and short selling as they are both registered on the tape as selling, but generally we see an uptrend,  and then distribution/selling followed by institutional short selling.

So here are the longer term charts-

 DIA 10 min, this isn't a hugely important timeframe for a reversal, but I included it because of how bad it looked and because of the SPY, which I will explain. This is clearly leading negative, the most powerful type of divergence.

 DIA 15 min, which is an important timeframe is in a leading negative divergence, I also marked some former divergences just to compare.

 The 30 min is negative both locally in this trend and over a long term relative period, which is important as I will explain at the SPY charts.

The hourly is leading negative as well, this is about as negative as we get without hitting daily charts, which are associated with much longer trends.

 QQQ 15 min leading negative

 Long term 30 min relative negative divergence and a local leading negative divergence, this is pretty strong on a 30 min chart.

 QQQ 60 min has a VERY long relative negative divergence as well as a local leading negative, the importance of these long term negative divergences are important and will be explained. Also note the depth of the crest in the 3C depth chart below, it's making new lows that haven't been seen since the late July/Early August major market sell-off.

 SPY 10 min, this is important to show because for a time the 15 min has not gone negative, but the 10 min and 30 min on either side of it both were negative.

 Here's the SPY 15 min chart-ironically going negative on a relative divergence today.

 As mentioned the 30 min chart was already in a relative negative divergence.

The 60 min chart is in a leading negative divergence.

And now to explain the importance of the long term relative divergences I showed.

 This is a SPY 60 min chart, to the far left is the end of that nasty fall from late July to early August and the choppy market that followed. If you've been here for a few months, you know we successfully navigated the chop and traded each of the moves up and down going long and short very effectively. You'll probably also remember that because of observations on the 3C chart, I said many times that I believed in October we would see a new low in the market which occurred on October 4th and that the low would be a head fake move, meaning it wouldn't move lower, but instead higher forcing a short squeeze on shorts who entered on the new low. I also said that I felt this would be the biggest rally we have see since the market became choppy, this has also occurred.

The chop which is normally the most difficult market to trade, we did very well in because the signal were very clean and clear and if we had 2 days of accumulation we would get 2 days of rally, etc. However, as this choppy flag went on, the same charts that showed the high probability of this rally playing out as it did, also hinted at something else and that was that each of the moves up and down in the chart above this one, I suspected were seeing more accumulation then distribution on the declines, in essence the flag and the chop was used to accrue or accumulate at each of the lows, which meant that this rally now, would not come with the same warning that the past bounces came with. Since we had come out of a nasty downrtrend there was no accruement of accumulated shares then, but as the chop went on, I suspected this is what would be happening.  This is important because typically a longer rally needs more time to accumulate and we see "U" shaped bottoms where that accumulation takes place, but in this case, since there was an accruement of accumulation over several months by way of accumulating more then what was being distributed in each wave of the chop, this rally could start and look just like each of those choppy bounces, meaning it could start with a "V" reversal rather then a longer "U" shaped bottom.

The evidence of this accruement of accumulation can be seen in the 15 min SPY chart above. No other bounce in the prior 2 months showed this kind of 3C positive divergence and none showed a positive divergence stretching so far-I count at least 9 days in that positive divergence, thus it is important to note the 30-60 min charts above that are showing long term negative relative divergences, just as this long term positive relative divergence was key to sending this market on it's biggest rally in a long time on a "V" shaped bottom, this is something that could really only occur within the context of the choppy flag-like pattern that has been in place since August 9th.

In the next post we'll take a look at the intra day signals, but for those who want to establish new short positions or add to existing ones, this may very well be the place to do it. First, lets take a look at all of the other indications and charts.

I know the concept above is a little difficult to follow, if you have questions, feel free to email me, I'll respond ASAP.

I want to get this out quickly, so it's going to be in piees

Rather then 1 big post as the information may be needed quickly.

As you know this week we got a new market to lay eyes on, the Futures market  and specifically ES or E-minis which is a big market and big money is found there. Since it's a new market,  I wanted to take some time to see how it trades and how 3C signals work on this new market, well a week isn't what I had in mind, and I'm sure it will be an ongoing learning process like anything else, but the signals for this week have been spot on. I'm going to show you this week, culminating with this morning's market open and the current signal.

ES Futures move the market, much more so then extended hours trade. The Black areas are normal market hours, since ES trades 24 hours a day, you see the full movement of the S&P through the ES market. The grey light shaded areas are overnight until the next open. As always, white arrows point to positive divergences/accumulation and red point to negative divergences/distribution. Each tick represents 5 minutes. Each regular hours trading day is marked with the day "M" for Monday, etc .

 Late Sunday night, earlier Monday morning pre market, a positive divergence sends ES higher. During trading hours Monday a negative divergence sends Monday to the lows of the day before a rally in to the close, 3C didn't follow that rally and futures stopped moving up in after hours and traded flat to slightly down until early monday in the a.m. a positive 3C divergence showed up at the second white arrow, sending ES and the S&P higher Tuesday morning, a negative divergence during market hours ended that rally and the market stayed flat in to the close.

 This Shows the negative divergence on Tuesday as mentioned and ES fell Tuesday nighty until late Tuesday night a positive leading divergence was put in and then a second relative positive divergence in the early Monday morning hours sending ES higher in to Wednesday's open. A large negative divergence in to Wednesday's normal trading hours sent ES/S&P from the best levels of the day to an end of day sell-off.

That selloff continued all night and morning with 3C in confirmation. Thursday morning we had a positive divergence and from the gap down lows the market lifted to fill the gap until an end of day regular trading hours  negative divergence  appeared, sending ES down last night. Late last night, very early Friday morning we had a positive divergence send ES higher, there's been no confirmation as Friday's open approached and in fact a pretty bad negative divergence, suggesting today's gap up is not to be trusted. Currently the ES negative divergence continues and you can see what's happening with the gap so far in early trade.

I hope the charts were understandable, they are important since ES sets the tome for premarket trade as well, the market -S&P-500/SPY, etc, follow the smart money working in the high end futures market.

More charts on the way.

the Euro....

Well after a lot of downgrades last night, one would think the Euro and thus the rally would be dead in the water, bot so. Apparently there's a shot of hopium going 'round the table on the G20 meeting and "hopefully" it producing some favorable results.

The Euro since 4 pm yesterday with a very parabolic spike.

ES futures started making a move higher about 4 a.m., but  I have reason to believe this too shall be faded,

I'll show you in the next post after collecting a few more charts.

Financials to take a hit?

UBS was just downgraded by Fitch, a bunch of other banks were put on negative watch, here's the story.

FAZ longs must feel pretty good

Want to see what's happening in AH?

3C continues to predict trade even in AH on the SPY and E-Minis

 Here's SPY After Hours trade and 3C on a 1 min basis. The darker area is the regular market hours-this shows mostly the afternoon trade and the light grey is after hours, the blue line is 3C. 3C went negative during regular trade, sending the SPY lower  toward the close (first red arrow) and in AH, the SPY moved up right after the close; 3C was still negative and SPY pulled back in AH, now there's a slight positive divergence that should send AH trade a little higher-it's actually still developing.

 In ES trade, this is the 1 min chart during market hours -the white box is where 3C made a positive divergence and ES took off from there, then 3C topped and moved lower. The market topped after that and dropped a bit, in AH it made another attempt to bounce (too the far right), 3C is still negative and that bounce pulled back and continues to.

Here's ES 5 min during the day, the white line is 4 pm, 3C is making lower highs and the rally today pulls back as well as the attempt in to AH.

GAP CLOSED

This is probably no coincidence, all 4 major averages saw their 5 min charts finally go negatively divergent right as the gaps were pretty much filled.

 DIA 5 min

 IWM 5 min

 QQQ 5 min

SPY 5 min

3rd Day in a Row

This is the 3rd day in a row that the market has diverged from the performance in the EUR/$USD.

As a general rule of thumb, a rising Euro means a falling dollar and a falling dollar means a stronger stock market. An easier way to remember it is, when the Euro rises, the stock market rises.

Her the SPY in green just fills the gap, while the Euro moves higher relatively speaking, so today is not as bad as the last 2 days, but the market is dragging behind the Euro, probably reflecting domestic concerns like earnings rather then the recent concerns over Europe.

FXE/Euro 2 min-as I asked -"Sell the News?" on the Slovakian vote. Of ourse there will be a knee jerk reaction to the vote being passed, but 3C 2 min has shown some weakness in the Euro as it moves higher.

3C 5 min shows the same and in fact started moving down in the red box, before the Euro.

GOOG Earnings

GOOG reports today at 4:30, this will be a big event for the market. The most stressful calls have to be earning's calls, I don't like making them, but I have in the past to illustrate that there are often leaks that Wall Street trades and you would never know it by the price action. The last time I made a GOOG earnings call it was correct, not on whether they beat or miss, but the market reaction, a miss or beat is irrelevant, it's perception moving forward.

So this is not a call, but do with it as you like, just remember that last time we did GOOG we were right, but the signal didn't come until the last 15 minutes of the day!

 GOOG 1 min-I know-it's like a maze, just follow the divergences. Green at the left is confirmation of the move up, the red square shows GOOG hitting new highs, 3C was in a leading negative divergence, this morning we saw some accumulation (white) and made new highs, which were negative divergences, both in leading terms (small red box) and in relative terms (long red arrow) because 3C was at a certain high at 2 pm Oct 11, prices were lower then they were at today's intraday highs, 3C should have been higher as well to confirm the new high, instead it was at the same spot, which would imply there was selling/distribution there. The last red arrow on the right, GOOG has made two relative highs, 3C has moved lower. This is a close up view of the 1 min.

 Here's the wide view or big picture of the 1 min, a leading negative divergence.

 The 5 min shows accumulation this a.m. and negative divergences from the resulting move up.

 The 15 min wide view shows GOOG at a new high just about, but 3C is lower then the previous high. The white area is heavy accumulation that moved GOOG up.

 Close up of the 15 min chart shows price moving up and 3C flat.

 The 30 min shows a very big accumulation area at Oct 4-5, but again, 3C is not making those new highs.

And one again on the 60 min, a leading negative divergence.

Now in a lot of ways this mirrors the market (A rising tide lifts all ships), I would prefer the market looked totally different, but it is what we have. Lets just say that based on this,  would not buy GOOG for an earnings play, nor would I want to hold it long.

Market Update

 DIA 1 min with this morning's positive divergence and the negative divergence that caused the last pullback, generally speaking, the divergences will start on the shortest timeframe and then as they get stronger move to the longer timeframes, so if this 1 min chart falls apart more, it will start to effect the 2 min chart, if that falls apart then we'll see weakness on the 5 min chart. This process already happened as far as the positive divergences this morning.

 DIA 2 min with an early positive divergence and in line trade.

 The 5 min is still strong intraday and I would still expect intraday upside until this goes negative.

 IWM with 2 different intraday accumulation points on the 1 min chart, but the 1 min chart is looking negative now and it is at best consolidating sideways, rather then making a new intraday leg higher.

 IWM 2 min chart with the early pos. divergence and a leading positive, however, there's a little more downside on the right side of that leading divergence in the box.

 IWM 5 min chart also in a positive leading divergence intraday

 QQQ 1 min is starting a negative leading divergence

 The 2 min has as well

 And there's a 5 min relative negative divergence. Again, if the 1 and 2 min continue to deteriorate, the 5 min will.

 Here's the updated SPY 1 min

 SPY 2 min

SPY 5 min