First, if you saw or review the charts in the
"Pre-Market Futures-Last Night Told the Story" Update, then none of the trading action thus far or the charts I'm going to show you will come as a surprise.
In fact, if you saw any number of posts yesterday on the type of base I expected before a move up and the pre-requisites or standards for a tradable base (vs one I'd rather just sit out), than no price action thus far is surprising.
First, assuming you saw last night's
Futures Update as well as
"The Daily Wrap" and the
"Few More Things " post that came after the Wrap, again none of these charts will surprise you, in fact you should be expecting a move toward further consolidation. In fact, after a quick search, I referred to a "W" , "U-shaped" or "Rectangle-base " at least a dozen times yesterday and specifically said that
"I would NOT buy anything that I thought would not have a sufficient enough base to produce a reliable move, I do NOT want to buy a DEAD-DAT bounce as they are highly unpredictable and unstable" and that I thought it would take at least a day and a half to 2 days of accumulation at minimum to produce a sufficient base to even consider.
This is demonstrated most efficiently with 3 SPY charts.
3C SPY charts
This is a 5 min RELATIVE POSITIVE divergence, it is relative because we are looking at two points and the difference between 3C and price at those two relative points represented by the left side of the white arrow
(*white is for positive divergences, red is for negative divergences and green is "in line" or "3C / price trend confirmation"*) and the right side of the white arrow.
You will notice that price is lower at the right side, but 3C is higher, this is a relative positive divergence between 2 relative points. A leading positive divergence is stronger and this is when 3C leads price, this typically develops after a relative divergence.
So we have the start of a positive divergence, in this case that can be less selling as price moves lower (
and we are talking about the underlying trend or institutional money, not retail) or actual accumulation of lower prices which is typical of accumulation. In either case, whether smart money is looking to sell at higher prices and more than likely looking to sell short in to higher prices.
The short term 1 min chart does not represent the underlying trend of larger money flows, it represents intraday moves and in this case it is not confirming the gap up at the time of capture which leaves us with a negative divergence intraday and suggests lower prices. *
Since capturing this chart (as the 1 min chart moves fast) prices have dropped a bit as expected and there's the start of some intraday accumulation.
The idea is that at very minimum, the gap up today in the smallest "W" base, would represent the middle high of the "W" and the next move would be a pullback to the last low of the "W" before moving higher to a breakout and that is in the case of a single small "W" base as I have drawn in above with arrows.
Now looking more specifically at intraday currency movements and the resulting Index Futures movements, we will see the same thing proposed last night and shown this morning in
the pre-market post which suggested there would be an early pullback today as the more important 5 or 15 min charts have positive divergences like the SPY 5 min above and the 1 min intraday charts like the SPY 1 min above tell us the highest probabilities are for an intraday pullback which allows us to continue building a more reliable base.
Remember it takes time to capture and post these so the charts may have changed a little by now, but the concept is what is important.
Currency Charts (1 min intraday)...
(Please recall that
the Euro and $AUD tend to move with the market so a pullback signal in either suggests a pullback in the market. The Yen and $USD tend to move inversely or the opposite of the market so strength in either currency or signals suggesting strength should produce a pullback or intraday price weakness in the market averages. Weakness or signals suggesting weakness in the $USD or Yen suggest strength (underlying accumulation or price moves) in risk assets like the averages as well as commodities like Gold, Silver and oil).
$AUD 1 min intraday signals a leading negative divergence and a pullback in the $AUD.
$Euro 1 min has the exact same signal as the $AUD, both suggesting early price weakness in the market averages.
$USD positive intraday divergence suggests higher $USD prices
Yen 1 min intraday has the same signal, both suggesting risk assets see intraday weakness or a pullback, all 4 currency charts confirm each other and all suggest early price weakness in the market averages.
We already know that the 1 min SPY chart above agrees with all 4 of these charts as there was a 1 min negative intraday divergence suggesting SPY, early downside such as we saw already.
Market Index Futures... We should see negative divergences in all of the following on the intraday 1 min charts to confirm every chart seen above from SPY to Yen.
ES 1 min intraday negative divergence
NQ 1 min intraday negative divergence
TF 1 min intraday negative divergence.
All 3 Market Index Futures, the SPX, NDX and R2K respectively all confirm EVERY CHATT ABOVE.
Other risk assets like Gold and Silver should at least confirm the $USD currency chart on an intraday basis.
YG (Gold Futures) 1 min intraday negative confirms the $USD and risk assets generally as seen above.
SI/Silver Futures 1 min intraday leading negative divergence also confirm what gold and the $USD show as well as the risk assets (market averages above).
On an intraday basis, EVERY SINGLE CURRENCY, Market average, Index Futures and Gold/Silver ALL confirm each other.
As mentioned above in this notation right under the SPY 1 min chart "*
Since capturing this chart (as the 1 min chart moves fast) prices have dropped a bit as expected and there's the start of some intraday accumulation." and here's the results of that...
The SPY 1 min intraday divergence I mentioned that was moving toward the positive and prices following.
As of now the 2, 3, and 5 min SPY charts are all positive suggesting more upside. ES, NQ and TF futures 1 min charts are still in leading negative position, but improving, their 5 min charts are still positive as they should be. So far this should lead to more upside, but I'd hope that this is an intraday shakeout and we return to a basing pattern.
All of the intraday currencies suggest we will pullback shortly as of now.
