Market Update

Things are moving as expected, the initial resistance at the bottom of the triangle, lower lows/ lower higher intraday, nice, clean price patterns traders can easily identify like bear flags, etc. The DIA may be showing the start of something changing, but we still have plenty of time.

To me it looks like the Q's have a ;little bearish price pattern of their own that will need to break too to make it an effective move in the market, what is the point of the Q's don't break under what looks like a  small topping pattern, in fact I just looked and they are breaking below now.

 There's the rejection at resistance and action since on a SPY 30 min chart...

Here's a closer look on a 5 min chart, note the bear flag, note volume picking up right where it should, these are all patterns retail falls for, they aren't patterns smart money falls for, they use them as a means to an end.

While I don't see much in the averages, TLT has a negative and HYG has a positive, both are market positive so we may be getting close to starting something. Whether or not I take on additional call positions will really depend on how strong the set ups are, I'm not fond of taking on much more.

I'll keep you updated on the arbitrage levers (VXX, HYG, TLT)

Crude / USO / SCO

Crude / USO shot up very strangely on apparently no news whatsoever, no currency catalyst, it just looks like an old school stop run so I intend to wait for the signals to appear of a high probability negative divergence which I would expect being this doesn't seem to have any roots beyond a stop run, then I'll look at either adding to SCO or maybe entering a USO put position.

 This is the move this morning, it's actually more parabolic than it looks here which will do the job and scare oil shorts and make them take a decision quickly which is almost always going to be based on emotion as the market is moving too fast to gather data and see if there's something real like the US and Russian Navy have some sort of escalation over Syria.

 Here's a better look at the emotional side of a stop run.

I just don't see much of anything behind this so for now unless I get different data, I'm assuming its a stop run and will wait for it to turn.

That's a Bear Flag

As predicted, some sort of flag or triangle, that's a bear flag, it keeps shorts in the game, a break below the flag should see volume pick up a bit, a new lower low on the day should as well. Each trader has their own limits of risk, some will short early as soon as they see resistance at the triangle, but not many, most want some price confirmation, we saw the first break of support for today drew some shorts out. A break below the flag will draw some more out and the most nervous of them will wait for a new intraday low on this move down from resistance.

This is exactly what retail Tech. traders expect to see, what Technical Analysis has taught them to look for, it's just those who are trading against them and us, have better tools, more information and know even better than I do how predictable these traders are. Don't forget where and why the majority of traders went from managed brokerage accounts to managing their own and why Technical Analysis went from something people use to openly mock like, "Oh, so you can tell what price is going to do by watching those squiggly lines? LOL-OK! Good luck with that!"

The reason there was such a major shift in sentiment about TA and so many people picked it up is because it's a lot easier and less time consuming to call something a buy or a sell based on what a couple of moving averages do (which is one of the most popular forms of analysis to this day-moving average). What I'm saying is the majority of retail technical traders are just plain lazy, that's why they keep doing the same thing over and over no matter how many times they get burnt.


And as I'm typing, the bear flag is just breaking now. Keep an eye on the volume.

SPY 1 min

MCP Interesting Here

The range in MCP suggested the probability of a head fake move, again this is playing on the predictability of technical traders, they see support in the range and place stops right under that support, that's why it makes it so easy to hit them and accumulate the shares and for some reason, no one ever asks, "Who took the other side of that trade?" (buying the stopped out shares), typically that would be Wall St. on a head fake move which this looks to be.

For now I'll refrain from adding unless I see something I just can't pass up, but I will continue to hold MCP calls already open.

There it is...

Amazing so far is it not? I'm not talking about anything I said or posted, I'm talking about how predictable technical traders are that I can predict what will happen just by knowing what price pattern is in place and believe me, Wall St. has far better tools, they can see the limit orders (I never put any orders on the books, NEVER! Would you show another player what cards you are holding in a poker game?), the depth of the bid/ask stack, where the best place to take the market to will be based on the order book.

The Twitter Stream updates are all the same, they're shorting and have been all morning.

So this is what we have so far which is good it's happening now because it's plenty early enough for the next stages to have enough time to play out.

 This is the SPY 5 min chart showing each candle that tests the resistance/triangle support with a long upper wick which is a rejection of higher prices, the yellow candle is the first break under morning support and is starting the series of lower highs/lower lows. The break below on volume is good, that's retail going short as they need confirmation, which often has them chasing the market and as tight and volatile as the market is now, you can get chewed to pieces chasing this market.

The 1 min 3C chart, this could be retail, it could be market makers and specialists also working the bid/ask. A 1 min divergence alone is a 50/50 coin toss between a consolidation through time or a consolidation through price- a pullback.
 

When the 2 min chart joins the 1 min, 90% of the time you'll get a pullback, which we are getting.

How long, how deep? I don't know because I don't know the full depth of the bid / ask stack, wherever they can get the most shorts to jump in because those shorts are the primer to fuel the upside move as they get squeezed, their covering will be the upside momentum.
 

The 5 min 3C chart is in perfect shape, no problems right now, no institutional distribution.

I'd guess we can see a couple of different things, a bear flag and another low or a triangle , etc.

As for the reversal process, like yesterday it didn't need to be as long as usual (which would have been 2-3 days because it was only retail doing the selling, smart money didn't have to accumulate.

"If' smart money wanted to accumulate, with the size of the move thus far, I'd say we'd need a rectangle or rounding bottom of about 2.5- 3 hours, but again I doubt they need to do it, I think they'll be more interested in making sure they can unload all short term trades like us and switch over to shorts above the triangle.

TLT, HYG and VXX have very little to do with this, this is mostly retail's doing. The USD/JPY is contributing a bit, it looks like it will help the market make some sort of bear flag or triangle intra day, in fact I see a bear flag right now on the 1 min chart.

Just hang in there, we should see some pressure in 3C, the USD/JPY and/or TLT/VXX/HYG as we get ready to squeeze the shorts, first we need to absorb them.

Working Out Perfect.... THIS IS A GREAT POST TO READ FOR CONCEPTS

Here's the post I referenced about the SPY Triangle and what should happen from yesterday.

What Retail Sees, How Wall St. Uses Technical Analysis Against Retail

I'll save you some time, but first the sentiment update which is crucial right now...

 " twittertards already shorting... They started up again, still bearish.  Amazing."

You gotta love that new name for retail traders, I never thought there would be worse than Yahoo Finance groups, there probably still isn't, but Twitter makes it easier to sort through.

In any case, from the post above first what Technical traders were expecting and this isn't from Twitter, it's from knowing technical traders as I use to drink the Kool Aid too....

This is yesterday's chart of what technical traders first expected, a breakout, but it failed,after the failure the yellow and red are what they expect, this is what was written below this chart yesterday...

" This is also what Technical Traders see, as mentioned last night, they see a triangle which IS NOT at all a consolidation/continuation triangle to the upside, but I'm sure before it broke down, most traders were looking at it as such.

The typical 5 points of contact for most consolidation/continuation patterns are there and the next thing they'd expect is a breakout to the upside, that didn't happen.

When a technical pattern fails, TA teaches to reverse your position which means they all went bearish as our earlier sentiment report made clear, THIS IS LITERALLY WHAT T.A. TEACHES TRADERS!

Now the next thing most traders will expect is a "test" of resistance at the lower triangle trendline, most traders will expect the market to fail there and then head lower.

This is what is more likely given Wall Street's propensity to use TA concepts against traders."

And here's where we are right now on a SPY 60 min chart...

Note the last three price candles running up in to the triangle's resistance, we have a big momentum candle, the next loses momentum and rejects higher prices with the longer upper wick and the third actually backs off from resistance, exactly what I said Technical traders would expect yesterday as you can see above. More importantly, we have confirmation in the sentiment report above, 

" twittertards already shorting... They started up again, still bearish.  Amazing."

This is what Technical traders expected, it helps Wall St. accomplish their goals to give Technical traders what they expect and then once they're committed, turn the tables, as always using TA against traders because it's so predictable.

Here's the next chart I posted yesterday of how I expected it to go down.

 I expected the market to push right up to resistance at "1", a short failure at "2" which fills technical traders expectations and gets them to short, then eventually after enough shorts are in place to squeeze them and use them as the fuel to push prices above the triangle, the move at #3/#4 should take place and ultimately #5.

Here's what was written below this chart yesterday.

"At "1" the market moves to resistance, "2" the market makes a little jiggle making it look like resistance is holding, shorts will enter, longs will generally sell, "3" then the market blast above the triangle, new shorts are squeezed, older shorts from Friday are squeezed and their buying sends the market higher, traders see that it was a dip they should have bought and they chase it buying too, now you have all the bears buying to cover their shorts and the bulls buying to chase prices above the triangle, Wall St. doesn't have to do anything but wait.

At "4" volume should pick up as shorts are squeezed and longs jump in. This gives us our "Crazy Ivan" shakeout, we look for distribution in to rising prices, that's where we want to dump any longs and get our shorts in order.

*This is what I see as the most probable outcome, some details may differ a bit as there are a lot of dynamics in the market, but that's the gist of it."

At last check, here we are still goofing around right below triangle resistance. 3C is showing an intraday 1 to 2 min negative divergence, nothing big, this is in my view, Wall St. giving traders what they expected as we can see from the Twitter Stream. 

The entire point yesterday and still today is, "Why should Wall St. dump any money in to moving the market the way they want when they can simply use retail to do the job for them?"

This would not be possible if Technical Traders weren't so predictable, so predictable I drew the exact chart we are looking at right now, yesterday!

This is the dogma, the laziness and the lack of "thinking for yourself" and instead following gurus who write the same thing over and over again in TA books.

Enjoy the show while it lasts.

NFLX now Up +1.60%

And on good momentum, if I was a real busy body I'd take profits on yesterday's calls and then look for a pullback to start the position all over again, as it is, I'd rather wait it out, but I wouldn't blame any one for taking such a nice, quick gain.

We're also Just about at the Triangle Resistance

I showed in a post yesterday what technical traders will be expecting, a test of resistance on the bottom side of the SPX triangle, which is right now out to about $165.25 for the SPY, but as low as the breakdown point around $164.95 which is where we are right now.

As I mentioned yesterday, traders expect this to be a "Kiss the triangle goodbye" test of resistance so quite a few will short any sign of the market pulling back from that area and I believe the market WILL give traders what they expect, at least long enough to pull in some shorts which the market will need to break above the triangle on short covering.

If the market heads right through it without any kind of look of "failure", I'd be surprised so I mentioned this yesterday, if you see it, don't be surprised.

Early Update

The action is a little frothy, a lot of the calls we picked up yesterday are up decent, you might consider taking some profits in them, I'll probably hold for a while longer.

The USD/JPY isn't doing this, it's actually the SPY Arbitrage as TLT gapped down and HYG is up, VXX is about neutral, but that and probably some chipping away at the ask stack is what's causing the early momentum, I'd expect a pullback or lateral move some time soon, although if the momentum kept on steady, that would be the psychological weapon they need.

SCO from yesterday is doing well, the SPY calls as well as the NFLX calls, I'm hoping MCP will fire soon.

Pre-Market

Well there's not much to say, Japan closed up about 2% last night, not much happened and the US averages are set to open just about where they left off, the only difference, the USD/JPY retraced overnight and all night right back up to $100.


If we get some softness I think it may be earlier in the day, otherwise I think we are still on track, nothing has changed since last Friday/Sunday night. Those 15 min positives still make me think we break above the SPX triangle, probably to new highs, but it's a thin facade.