SPY Update-Not Quite Out of The Bull Pen

 This level needs to be broken on a daily chart before we have good confirmation like the CCI hart posted over the weekend.

 This level at $118 needs to be broken for very good confirmation.

 The 1 min is still showing a SPY positive divergence suggesting some more volatility in the area, off the support gap.

 The 2 min chart is negative, but also with a relative positive divergence, which is minor to the leading negative, but also suggests near term intraday strength.

 The 5 min is very ugly leading negative, but also shows signs of short term bounce.

 The 15 min chart is turning in to a leading negative divergence.

 So is the 30 min chart

 And the 60 min chart, so longer view, confirmation looks good, with short term volatility still in the area.

 ES 1 min also shows the same 1 min positive divergence

 The 5 min shows the breakdown and some short term relative positive divergence.

 This is an ES 30 min chart in a 1 day leading negative divergence

 And an hourly chart in a negative leading divergence on ES.

 Here's the EUR/USD short term 5 min chart.

This is the entire trend on an hourly chart, it is very close to breaking the uptrend line here if it hasn't already.

USO/ERY

USO has done generally what it should have, although there are several charts that I don't understand, whether this is a change in algo programming or whether there are fundamental issues in supply or perhaps it's something altogether different or perhaps nothing at all. It just looks a bit different then I would expect.

 USO (green) vs FXE/Euro (red). USO has tumbled on a stronger dollar as it should, it too is showing some signs of not trading in lockstep with the Euro/Dollar which may be reprogramming of HFT models or in this case, USO/Crude is showing a bit more resiliency compared to the currencies, so there may be an underlying fundamental issue of supply or political tensions, or as I said, it may just be nothing, but I am not surprised to see the perfect correlation broken, I am surprised that the breaks in correlation favor strength rather then weakness. On the other hand, this is a 1 min chart and this may be trying a little too hard or what I call, "getting lost in the lines".

 USO 1 min 3C shows a positive divergence on the gap down open, which it rallied from and then went negative, but it is still more or less in line with price.

 The 2 min chart shows the same, so 3C did an excellent job of picking up on intraday accumulation on the gap lower. Perhaps the gap will be filled up to the $33.81 area?

 USO 5 min showing Friday's negative divergence, but some positive strength today in to falling prices, again a bit surprising.

 USO 15 min, picking up from accumulation kicking off higher prices to a relative negative divergence now, gain, not as strong on the negative side as I would have suspected.

ERY-Energy Bear ETF 3x leveraged.

 This may not be the best comparison as it is not crude, but energy more broadly, but I had a request for the chart. 1 min overall, a positive divergence at the lows.

 ERY 2 min several positive divergences following a distribution event on Oct. 3-4.

 ERY 5 min, a longer view, including the early Oct. distribution and a leading positive divergence currently near the price lows.

The 10 min chart is just seeing that 5 min strength bleed over with an at least 5 day relative positive divergence, it may be more, this is all the history I have for this timeframe.

FX-EUR/USD closed loop, closed?

I mentioned a few possibilities this weekend in explaining the EUR's strength and how it was trading nearly impervious to any bad news. I suggested that this weekend the algos for High Frequency Trading "may" being reprogrammed away from the legacy arbitrage of chasing EUR strength/Dollar weakness. There are some signs that may have happened, although there's no way to be sure. I also said that watching 3C and the EUR would be crucial.

 Here we see the EUR/USD trading up on this 1 min chart.

 Here's the SPY in green vs the Euro in red and the former correlation that was so strong, at least in this small data series, seems to now be different, this isn't big time confirmation, but 1 small signal as the EUR trades up on some intraday strength and the SPY trades down rather then shadowing the EUR.

 Here's a Euro/FXE 1 min chart showing an intraday positive divergence that should lead to some more upside in the EUR on this move as it is a leading positive divergence.

 However, the same 1 min chart of ES is trading in line, not showing anything near a leading positive divergence, so this may be evidence of algos reprogrammed over the weekend as chasing the melt-up certainly would have raised their risk profile, especially if the melt-up in the EUR wasn't based on any fundamental strength, but rather a repatriation of foreign capital-that could have or could lead to a very risky situation for HFTs thAt are run by computers that have been chasing the Euro for seemingly , ALL THE WRONG REASONS.

 FXE /EURO 2 MIN CHART IS NEGATIVE OVER THE LONGER PICTURE AND LEADING NEGATIVE TODAY, BUT THERE IS A RELATIVE POSITIVE DIVERGENCE. Sorry about the caps, I'm not yelling!

 FXE/EUR 5 min is about in line today, with the longer term negative divergence in place.

 The important 15 min chart which went from a positive divergence starting the rally, to confirmation of the rally (green arrows) to a current negative relative and starting a negative leading divergence. This may be an important turning point for the Euro.

 The Dollar index/UUP is showing a 5 min positive divergence, which is significantly different from the FXE 5 min chart which is in line.

UUP 10 min leading positive.

The 15 min is also positive.

Quick Market Update

We have another potential intraday bounce brewing as the EUR/USD turns lateral, here's the SPY

 SPY 1 min -a potential double bottom intraday which should make for a more compelling bounce.

 SPY 2 min the same as above

 Some signs in the SPY 5 min although it is in a leading negative position with a relative positive divergence. The blue area is the gap support mentioned several times already and you can see that is where this bigger potential bounce is forming, near the bottom of the gap support.

SPY 15 min is entering the start of a leading negative divergence to add to the relative negative already in place.

I believe there is to be some announcement out of Europe regarding naked short selling/short selling ban on at least CDS, perhaps it goes further to cover financial equities as well as they try to protect the banking system which has been ordered to raise capital ratios, falling prices make that even harder and much more likely that they continue their strategy of "Shrinkage", which of course would mean that they can raise money as pointed out in last night's post by selling risk assets, thereby raising real money as well as lowering their exposure to liabilities which raises the capital ratio. What EU finance ministers don't want is for them to stop lending and kill the private sector recovery, but for every loan they make, without raising money or lowering liabilities, they raise send the capital ratio in the wrong direction, so while I have not heard of any specific news to ban short selling of financials, it would make some sense that they try that. However, it seems very clear that banks will not raise cash at depressed share prices at 60% of book value so it may be an exercise in futility, but head lines are what matter.

Market Update

Here's that earlier positive divergence mentioned in the gap area.

 DIA 1 min is already starting to show some signs of the intraday bounce possibly fading, but each average is trading a little different today with the Dow looking the worst, followed by the S&P and the NASDAQ showing the best relative strength, I would expect that also to effect intraday bounces, with the QQQ probably holding up longer then the DIA.

 DIA 2 min positive as well, but Friday when I posted adding in to strength was the best place as you can see at the green area, there was market strength, but n to a negative divergence, thus giving you a high probability entry and the least amount of risk. Any add to positions in my opinion would decrease in size, the further we move away from Friday's highs, at least until SPY $118 is broken hopefully on good volume as that would reflect the last area of good support on a head fake move. Below that level, any longs that added on the breakout above the trading range in the SPY from $118-$120 will be at a loss and that should create downside momentum as the supply/demand balance shifts to one of more supply then demand and that should be reflected in higher volume as well. You would also be adding as the trade is confirming that it is moving in your favor. Remember the CCI chart from this weekend, if that is at all any kind of a model for the market, then the downside implications are quite severe. We are still very early on a possible reversal and break of the closed EUR/USD loop, so I would want to have good risk management, reasonable position sizes, confirmation of negative divergences in to market intraday bounces.

 QQQ 1 min-looks stronger then DIA 1 min as mentioned above.

 QQQ 2 min in line, slightly leading.

 5 min still negative, suggesting these are intraday counter trend moves from support from gap resistance.

 SPY 1 min came around

 SPY 2 min did also, but again, Friday was the best risk entry point. I posted at least twice to use that strength to initiate/add to positions, I know it's hard to do the opposite of what your mind and the market are telling you, but with negative divergences in place, it makes for a lower risk entry.

 SPY 5 min, including the gap support area in white, which as expected, we are bouning off of intraday. The 5 min chart still looks very bad.

 ES 1 min shows the positive divergence and what appears to already be distribution in to the bounce, however, distribution doesn't mean reversal, it an go on for more time, we are just seeing that the bounce is apparently being used to sell in to.

One way of judging a good entry point and the end of the current or a current bounce is to watch the 1 min NYSE TICK chart, draw trendlines and as you see the TICK chart/market are moving up, when the TIK hart breaks that channel, the bounce should be ready to turn down. As I mentioned, the QQQ will probably be the last to turn down with the DIA the first and the SPY the second to turn down.

Early Market Update

As a full time trade I usually didn't make any moves before 10:30-11 a.m. as this is the time that overnight orders by people who go to work, are being manipulated, but by the looks of the longer term 3C charts, this does appear to be a valid move down. Friday I posted 2x to use strength to short in to, even though that is very hard to do, it would have given you a very low risk entry. If you are playing catch-up now to either initiate or add to positions, I still prefer to do it on intraday strength. There are some gap support areas coming in to play and gap support/resistance in my experience is the best support/resistance you'll find.

 DIA 1 min 3C has signaled a positive divergence so as we plunge in to the gap, hopefully it will build and offer some intraday strength, if not, then it's a pretty bad sign for the market.

 The DIA 2 min is in line to leading negative so the 1 min divergence is not strong yet, it may not even hold, we'll have to see if it can transfer to the 2 min or 5 min charts, then you would have a better looking chance to see some intraday strength.

 QQQ 1 min is showing the same, although slightly stronger (which may be due to the fact that 3C "blue" is a much faster to react version of 3C), however, this divergence may have already played out on a slight bounce, although I don't see the downside 3C signals yet, so it may continue.

 The 2 min and 5 min above and below are not registering any positive divergences and the 5 min is leading very negative.

 The SPY is not even showing 1 min signals, but the gap area in white is where I would expect some to materialize, we are just entering that area now.

 The 1 min ES hart however is showing the start of a possible positive divergence and perhaps intraday strength.

The 5 min is trading in line with price ever since the negative divergence at the overnight highs.

Sector rotation makes sense with the signals seen and not seen in 3C in the major averages. As you can see, so far today Tech is outperforming say Financials at -.73 vs -1.90 respectively. As you might expect, some other groups performing better on a relative basis only, are defensive sectors including Utilities (red). Financials in green are not doing well even though C (Citi) remains green on a farce of earnings, once again showing the headline scanning algos and most people don't dig in to the reports beyond the headline beat. If t weren't for accounting gimmicks, Citi would have come in at a HUGE miss, I expect that will be discounted soon, or as soon as Wall Street is done fleecing those who don't go beyond the headline "BEAT" on earnings. Speaking of which, this is a heavy week for earnings, 1/3 of the S&P market cap reports this week. Remember, earnings aren't about beat or miss, but expectations moving forward, making forward looking guidance the most important part of earnings. The market is not moved by value, it is moved by sentiment and it will be interesting to see what sentiment is on earnings reports this week.

I pointed out distribution in GOOG over the weekend (sell in to strength and demand) and GOOG is down 1.23% vs the tech heavy NASDAQ 100 at -.76% and as one of the few industries with decent relative strength today.

Overnight Action and the Open

Is it possible? The loop is broken?

Well, whatever is going on, 3C has not been looking well on the regular charts, Indices or  ETFs of the indices which tend to give faster signals. I pointed this out last night particularly in ES and in my bigger article on why the market was acting the way it is or maybe was and reminded you that even if technical indicators weren't responsive during the Euro's closed loop, it didn't mean that the readings in something like 3c should be ignored.

So overnight, here's the EUR/USD FX/currency pair.

 The blue box is the start of this week's trade overnight and as I posted last night, the pair first hit resistance from last week, but the main resistance was in the form are large sell orders at $1.39 and you can see the rally in the EUR was turned back at that level (red). Buying came right in where there were open orders with the last rally coming off the $1.3830 level I mentioned last night (green). Stops were hit at $1.3815 (orange) and you can see that level looks like it will be tested as usual.


 3C 5 min ES Continuous 24 hour trade put in a negative divergence overnight as an extension of the longer 5 min relative  negative divergence that has been in place, now turning in to a leading negative divergence.

 This 30 min 3C EC chart lost a LOT of ground last night in a leading negative divergence. Just so you can see how much, the next chart shows the entire rally on a zoomed out 30 min scale.

 You can see the 30 min negative leading divergence is close to hitting levels associated with the start of the rally when prices were much lower.

Here's the overnight/opening trade ES 1 min chart with a negative divergence in to the rally and a slight positive divergence going in to opening trade, which has thus far caused some a little upside off the open, but the bigger picture is looking pretty bad as Euro worries are seemingly finally being discounted after weeks of nothing.

Here's my Trend Channel....

As you can see, it gave a stop signal on 10/13, you'll never catch the exact top with this channel, but you will usually catch 80% of the trend. Often after the first stop out, which I usually take, there's some volatility, but rarely is it worth trying to catch. The Channel is starting to turn sideways and approaching another breach. ADX below has signaled 2 changes of trend by turning down from above 40, 1 at the start of the rally, and the other around the same time the Trend Channel stopped out.