Mat Update

 DIA 15 min doesn't look too good, but this is basically what I'd expect to see on a head fake breakout, longer term weakness and short term intraday positives to drive the breakout, essentially selling in to strength on a head fake or false move.

 The 5 min chart since the positive divergence for the bounce, this is the same positive divergence that has had me looking for the head fake move in AAPL, but all of the averages are close enough to do the same except the IWM which has been playing catch up recently as the best performer Friday (all of the other averages Friday closed +.18% to +.42 whereas the IWM closed +1.35% but is still the laggard).

 DIA 2 min weakness on Friday, most likely typical Friday selling with traders not wanting to hold over the weekend, here there's a positive intraday divergence, also note the slightly distorted triangle, it looks like it's being shaken out a little, similar to how both AAPL and IBM saw slight downside shakeouts before moving higher.


 DIA 1 min, this is an outlier as far as the rest of the charts... We'll have to see what develops here.

 IWM 5 min and the positive divergence last week on the bounce, the IWM optically looks stronger then the other averages, again it's also the biggest laggard so it has catching up to do.

 IWM 2 min with a negative Friday and a positive intraday today.

All of the other averages are near the top area of a couple of weeks ago, the IWM is the furthest from that. If the IWM is going to post a head fake move, it still has catching up to do.

 IWM 1 min has a nice intraday positive here, probably one of the stronger ones.

 QQQ the bigger picture on the 15 min chart, I guess you could call this a very small double top, with double tops and bottoms, the last move before a reversal is almost always a shakeout, with a double bottom, the second bottom hits a new low before moving higher.

 QQQ 5 min has a relative positive right now...

 Here's a wider view of the same chart, we have the positive divergence for the bounce from last weak, but as QQQ moves in to the area of a small double top, 3C was weakened significantly, again, this is the kind of underlying action I would expect and hope to see in this situation for a reversal move.

 QQQ 2 min is actually pretty weak looking here. This is a longer view, below is a closer view of the same chart.

 When looking at it intraday, there' a negative on the open, but it doesn't look quite so bad intraday, pretty much in line with price.

 QQQ 1 min with what is thus far a relative positive divergence unless it moves below the lows at the left of the arrow.

 SPY 5 min, the bigger picture here is weakness, but intraday there's a small positive divergence.

 It's pretty much the same on the 2 min. there's a small intraday  positive divergence inside a more powerful leading negative.

 A closer view reveals the intraday positive as well as an earlier negative on the open.

And the 1 min chart with an intraday positive.

IBM seems to be forming a similar pattern to AAPL

These are the breakouts I was hoping to see last week as they set up a likely head fake move,  IBM has formed a similar pattern, although larger

Volume is correct for the pattern.

AAPL Directional move / ES

AAPL should be making a highly directional move shortly...

 This is exactly the set up a long would be buying right now, a triangle continuation pattern with perfect volume for the pattern.

 Just like last Monday, the Bollinger Bands are pinching right here indicating a directional move, I'm surprised it hasn't already happened as the apex of the triangle has already been reached.

Meanwhile, I haven't pulled up out own credit/risk indicators yet, but the CONTEXT ES model (now that all the markets that are in the model are open) is diverging significantly away from ES, again like last night, showing ES as trading rich to the implied model value. This divergence has become much wider since last night.

Commodities Correlated Again...

You may recall Friday the commodity complex was acting very strange, rallying with the Dollar as there is a historical inverse relationship between the two, today the dollar is up slightly and commodities are down, the historical correlation is back on track...

 Here's the channel commodities were traveling in until we got a candlestick that looked like a shooting star (in red) , although the candle is bearish and looks like a shooting star, technically it is in the wrong position, but the bearishness of the candle did send commodities below their channel, as we have seen so many times before, an attempt to kiss the channel good bye is quite common once it is broken.

 I always take note of strange or out of the ordinary trade, especially when such a long standing historical correlation is broken, something is usually afoot and these small signs are worth noting as they become a piece of the puzzle. Here are commodities via the Dow Jones UBS Commodity Index ETN vs the Euro (in white). Typically commodities and for that matter, the market, are well correlated to the Euro, you can see that correlation earlier in the week, Thursday commodities failed to rally with the Euro and Friday they rallied without the Euro, today they look to be back on track.

This is the same index vs. the $USD, commodities generally have an inverse relationship with the $USD as you can see earlier in the week. Thursday commodities tracked the dollar most of the day until late afternoon, they rallied on a dip in the dollar as they should. Friday they rallied with the $USD which is way out of character. This morning we have a slight uptick in the $USD and commodities are down as they should be, however they look like they are overreacting to the correlation as the uptick this morning in the $USD has not been that big. I suspect they are probably trying to revert to the historical relationship.

NYSE Short Interest

There's little doubt that short covering boosted the market since December, but with NASDAQ shorts at 10 year lows (as of the last update) and now NYSE shorts come in at a second consecutive lower low, a 4 year low, that component of market momentum is being taken out of the picture.

Here's the NYSE short Interest just released this morning...

NYSE 4 year low short interest for 2 consecutive months.

Background on China

When you have time, you might look in to this WSJ article on China's recent trade deficit and other problems the country is having. It was first obvious about 6 months ago with commodities underperforming as China is the world's largest importer of various commodities.

This is one of the reasons I like FXP as a "trading" tool moving forward.

IBM

IBM is worth keeping an eye on here as well, it may set up a potential short trade on a head fake move as well....

IBM is only $.04 from a new intraday high, much like the AAPL concept-AAPL is to the QQQ as IBM is to the DOW.

SPY Early Trade

The SPY is finding some early resistance right below Friday afternoon's trading range...

Thus far the Russell 2000 is in a similar situation. Of course I don't read too much in to early trade, especially on a Monday, but it is worth noting as AAPL just moved below the former intraday high as well.

FXP Follow Up

FXP was a long trade idea that did well, we expected and got a pullback on Friday covered in this post.

This morning FXP is looking interesting as China (as mentioned last night) has a large trade deficit, the largest since 1989.

FXP looks interesting here,  note Friday's pullback to the 10-day yellow moving average (this is what I was looking for in previous posts) I would prefer a stop that is wide enough to cover the gap around $22.25-$22.80, of course I wouldn't want a stop right at the obvious support of the gap, but perhaps a bit below. I'd prefer fewer shares and a wider stop, you can always add as the trade moves in your favor. If that gap remains unfilled, it will be a very bullish breakaway gap (as it is thus far). FXP is also set for a long crossover on my crossover screen above.

AAPL

As you know last week I was looking for a move in AAPL that would set up a probable head fake reversal, we had a small head fake move Monday leading to a waterfall intraday sell-off of -2.2%. Friday AAPL closed within $.04 of the new closing high, while I have no idea what the close will be yet, AAPL has managed a new high above the intraday, psychologically, this is what I want to see, price strength that will draw the bulls in...

Here's AAPL this a.m.,  outperforming the broad market on this gap through both the intraday and former closing high.  The SPY last week was also in striking distance, a move through resistance would be helpful in the SPY, but not absolutely needed, AAPL should be enough. Time to pay attention to AAPL and look for the signs of a head fake move...