Key Maybe the Euro/USD

There are a lot of price formations that could be and probably should be head faked to the downside, the difference between a head fake move and a real move is in the signals, all week we've had signals suggesting that we see a range in the market that acts as the reversal area, but before almost every reversal there's a head fake move of some sort, if the market were to break to the downside for real, there would be a head fake move above the range, a reversal to the upside and we'd expect a head fake move below the range.

We can see clearly why a move below AAPL's bearish descending triangle would bring in shorts; this is one of the reasons head fake moves are so prevalent-the shorts act as the fuel for the early momentum when the reversal comes as they are at greater losses they cover providing more demand and sending prices higher-this is 1 reason for head fake moves but there are many. IThis particular reasons though is often expressed in the saying, "From failed moves come fast moves" and it is the exact mechanics of a short squeeze on a reversal (the fast move) that make this saying true.

So why the ranges? Simple, a rectangle, which is what the SPY, DIA and QQQ ranges are, is a consolidation/continuation pattern, with the downtrend from the reversal of last week's highs, these rectangles are interpreted by technical traders as consolidation/continuation patterns, continuing the downtrend. This is where we see technical traders taken advantage of so often as Wall St. knows exactly what they will do and often sets them up to become the primer for the reversal, "The bear or bull trap".

 I was just looking at the Euro/USD and saw some interesting things, first the USD is not moving up the last few days so it's not part of any downside pressure on the market, the Euro has been moving down and it has a positive correlation with the market, but it just tested and potentially set up it's own bear trap today. While the USD isn't moving despite the Euro moving down, a reversal in the Euro would move the USD down and put positive pressure on the market.

Take a look at the Euro and USD charts, something interesting happened today (many interesting things have happened since yesterday).

 The EUR/USD pair broke the psychologically important $1.29 area today, but then popped back above it.

Here's a closer look at the break below and back above as well as the US open at the green arrow and a triangle consolidation at the green rectangle.

 Here's that same triangle consolidation today in the Euro on the FXE chart.

 Looking at a 1 min chart, there's a negative divergence on the open yesterday morning, today there's positive divergence but on a 1 min chart that's enough to cause a consolidation only such as we see or it could be for a move higher, we'd need to see longer timeframes to decide.

 The 2 min chart's leading positive divergence makes it look like more than a consolidation

 The 5 min chart's leading positive divergence makes it look like a reversal, we saw the same thing only negative last week which brought the market down from the mid-week highs.

 A larger view of the 5 min chart since last week's highs and this week's range shows a positive and leading positive divergence in the Euro.

 While at the same time UUP -the $USD intraday 1 min chart shows a leading negative divergence as UUP has stayed in a range.

 The 2 min chart USD also leading negative, the opposite of the Euro in the same timeframe.

 The 10 min chart positive at last week's market highs and dollar's lows and a negative divergence in to higher prices as well as the dollar's range this week.

In essence, a break higher in the Euro could be exactly the trigger for a break higher in the market on $USD weakness.

Here's the change in the Euro tight triangle since I started this post. This will be important to watch.

Longer term, as I posted earlier today I'm bearish on the market in a big way, the long term 1 day USD chart has a leading positive divergence suggesting upside in the Dollar and downside in the market.

NASDAQ Futures going positive

This showed up just as AAPL slipped below the psychological $600 level, these century marks act as magnets, volume was huge on the break under $600.

FB Charts

I closed half of a full size position in FB on the pop higher, I'd consider adding half of that back on a pullback to about break even on the day-yesterday's close.

 FB 15 min longer term chart

 15 min chart up close

 The 1 min chart shows the profit taking and shaking the weak hands loose that we expected in FB, now there's a decent positive divergence from yesterday on

 The 2 min leading positive

 A close look at the 2 min in to today's weakness in price

 The 5 min leading positive from a relative to a leading divergence

A closer look at the 5 min, I'd want to see a little pullback in FB and I'd probably add half of what was closed for now.

FB

FB is seeing a lot of intraday accumulation on very strong signals right now, last I heard the shorts were jumping back on, I think they are about to get taken to the launder-mat.

Charts coming

AAPL Update

Yesterday we didn't see any volume on the break of support of the bearish descending triangle, I suppose it was because no one wanted to commit to a short position before earnings or stop out. However with a price pattern like that, we would expect a break below it as it is just too obvious in the most watched stock in the market, today we saw a more definitive break. So far we do have the signals in place to suggest it is a head fake move/break, they need to hold up a bit longer a some of the longer chart/timeframes need to catch up and show they are still in positive position.

With the test in the other averages of support (and those are obvious as well so a break below them would be expected-Q's already have to some extent as well as the SPY to a lesser extent) AAPL seems to be finding some support.

 The bearish triangle, most traders won't commit to a short position without confirmation, the actual break below, that is what sets up a head fake move or a bear/bull trap. Yesterday's small break produced no reaction as noted yesterday, today's did.

 And a second smaller volume surge on a break of intraday support.

 AAPL 1 min is holding up well on this break and would suggest it is a false move.

The 5 min chart is also holding up well, it should be caught up by now, but I'll keep watching it a bit longer.

Both would suggest that this is a false break. As mentioned yesterday (again), more than 80% of the reversals we see have a false break or head fake move just prior to the reversal.

Range Test

The 3 averages that have the most obvious, clear ranges are testing the lower end of the range and seeing some positive divergences in the area, the DIA, QQQ and SPY.

 DIA near the lower range

 DIA 1 min

 And the 10 min I showed earlier.

 QQQ just breaking under the range

 QQQ 1 min

 QQQ 10 min

 SPY finding support at the range lows

SPY 1 min

SPX and NASDAQ Futures

Both futures are pretty close to in line and are not showing anything extraordinary since the US open.

 ES 1 min positive earlier in overnight trade, leading positive in to pre-market trade, a small negative divergence in regular hours this a.m. and about in line.

NASDAQ futures had a larger positive divergence in overnight trade and in pre-market trade and a smaller negative divergence in regular hours, also it's a little better than in line right now.

It's still very early and the intraday volatility we are seeing has been quite common. I'm not reading too much in to any of these signals as of yet as none in regular hours trade really stand out.

Early Indications

This is obviously not opening indications because there's simply too much emotion and volatility in early trade after the earnings and ES behavior, so I watched a bit longer, a couple of themes are emerging.

 DIA 1 min since yesterday's open is in line

 3 min since yesterday's open is leading positive in this area.

 The 10 min has seen a large leading positive move starting late yesterday and continuing this morning.

 QQQ 1 min is a little better than in line, especially with all the volatility.

 QQQ 3 min is in line

 And the 30 min still has a positive divergence large enough to create the upside move we have expected from this range.

 SPY 1 min was negative on the open, it is just starting to see its first positive of the day.

 The 2 min however is in line, it seems the opening volatility and 1 min negative didn't make it as far as the 2 min chart.

 The 15 min is also in a leading positive large enough to provide the upside move from this range.

 AAPL 1 min since yesterday's open is in a slight leading positive position.

The 5 min since last week's top is in a larger leading positive position in which I would normally expect a move higher from here, perhaps AAPL needed to break under that descending triangle on some volume.

 The Euro 1 in is in line since yesterday

The 5 min however since last week's top is leading positive in this range, again, enough to move it higher.

I'm still looking at different assets, I'll continue to update as things pop out, but this should give you a feel for where we are both short and a little longer term

AMZN / AAPL Opening trade

The volatility and surprises continue...

 AAPL slipping below the bearish descending wedge, now we have the volume that we'd expect to see on a break below the price pattern that we were looking for yesterday, still AAPL has broken back above and is in the green at +.51%

AMZN has seen a lot of opening volatility, but is up right now +3.58%! I guess those calls would have worked after all.

A Testament to the Real Danger of the Markets

For the last week or so you have heard me talking a lot about a bounce, a volatility shakeout, I just hope you remember why we want to see this move (which has been based on evidence in the charts), TO GET SHORT IN NEW POSITIONS AND FILL OUT EXISTING SHORT POSITIONS.

I have been making the argument for a while that this market is in real trouble punctuated by a few simple charts, here's one.

A daily SPY leading negative divergence with negative divergences, each worse then the last, at each top. This is a process and for a while the market has been breaking down, I have been warning for some time, but on a daily basis we don't see it, only when we step back do we see just how dangerous this market is.

After hours and overnight we saw something incredible...

 The red arrow is yesterday's close, the white is the AAPL earnings dive-bomb and then return to unchanged where it is now in pre-market trade, then a dive bomb in ES overnight in to the European open in green.

Then ES somehow rescued overnight with GDP at the orange arrow, you can see GDP helped, but the rescue started long before that.

In my experience, once Wall St. sets up a cycle, they see to it that it is run, that is why I think AAPL was brought back from the brink last night, AMZN too to a lesser degree and ES.

This is why we want to get short, why we want to use a bounce that the market has been indicating it is building to sell in to that strength.

This is all pretty amazing action to me that so far backs up my experience that once Wall Street sets a cycle in motion they finish it rather than take a loss.

We can say that bad economic numbers out of China were responsible for the ES decline, or the NY Times Story that essentially accused China's PM of hiding Billions in stolen state cash  or maybe Australia's Banksia starting what may be the Lehman of Australia.

That "might" explain the overnight crash in ES, but what explains the recovery? The only thing I can think of is my experience in Wall St. cycles. It wasn't GDP as that came out at 8:30.

So just remember what the big picture is, what we are trying to do.