This is more complicated than usual because all of the chop creates multiple timeframes that can be traded, we
always use multiple-timeframe analysis because that's what tells the story and has the highest probabilities.
Therefore, I have to use quite a few charts, you may want to come back and look at them later,
the basic premise of last night is still in play, the market to move lower (How low now becomes a question, I was expecting back toward yesterday's lows and then a head fake below them before a run higher, at this point that's a large intraday loss, it will make retail short term or recent bears feel great and lock them in)
the danger I have to watch for is that the set up doesn't slip, we do have a lot of wildcard fundamental news and long term destruction to the framework of the market, I don't think it's that high of a probability, but I have to watch and thus I'm not taking some of the trades I've mentioned today (day trades or 1-day)
but am more interested in the larger plays. The other possibility I have to keep an eye on is that the market just rips higher from here, this is why I haven't moved many positions since Friday-THE CHOP.
I'll do my best to show you what I see and what I expect, with that said, in my experience, whatever you think is a reasonable move or a reasonable timeframe, you can usually just about double or triple it.
*You'll have to pay attention to the timeframes of each chart and the time scale at the bottom of the chart to keep all of these in perspective.
SPY
2 min intraday shows the unusual and very bullish underlying trade from Friday resulting in an early week gap up. Today's 2 min chart is leading negative,
I suspect retail is short all over this as I've already seen in some retail sentiment updates, thus the leading negative.
Smart money accumulation would not be expected to take place until we are near the lows of yesterday.
In a sense, retail shorting here could be considered a bear trap (short term or longer depends on how tenacious they are about holding).
3 min SPY intraday shows where this chart went negative (remember the first charts to go negative are the 1 min then if strong enough it passes to the 2 min, 3 min, etc).
You can see where the 3C distribution takes place on the 3 min chart the market has lost upside momentum and is stuck in a range,
this is where we often see the strongest divergences.
*This is the same 3 min chart as above, look at the timescale though, instead of intraday (today only), we are looking at the trend over the last 6+ days.
I tried to show you how large the accumulation is as time passes with the white blocks below, they are placed where the positive divergences and accumulation occur and their size is a representation of the size of the divergence or accumulation, clearly the chart is getting stronger and stronger which means it can support a stronger move to the upside.
This is the 5 min intraday chart,
5 min charts are typically the earliest timeframe where we see institutional activity intraday.
To the left we see yesterday's mid-afternoon accumulation and an "in line" status in 3C (it takes a stronger underlying trade, distribution or accumulation, to move the divergence at 5 mins), however we can see it go negative intraday and as it does, the SPY has lost all upside momentum and is moving sideways.
The SPY 15 min is obviously a very strong, important chart and this is on a mulitple day timescale going back to July.
To the left we are coming out of a top and also where I believe this bear market started.
Around 8/16 a new cycle begins, accumulation for a move to the upside, even though the Primary down trend is barely established, I'd still consider this cycle that has built a base since the 16th to be a "Counter trend bounce".
*Counter trend bounces in a bear market are some of the strongest rallies/bounces you'll ever see, they have to be to convince bears that perhaps the market has turned bullish.
At the bottom of the scale in red we have a distribution phase and the market heads lower, in white we have an accumulation phase of the newest cycle, but still countertrend, not primary.
The SPY 60 min chart is the strongest of all the above, it has the highest long term probabilities and shows the strongest accumulation/distribution, because of that it lacks details because a 5 min positive divergence may never become strong enough to register here, thus it's good for showing bigger trends.
In yellow I have included the 4 stages of the market which are:
Stage 1 Accumulation/base;
Stage 2 Mark-up/Rally;
Stage 3 Distribution and
Stage 4 Decline.
From left to right, stage 2 mark up runs in to stage 3 distribution at the red arrow marking a major top and sending price lower in stage 4 decline.
Right now we have stage 1 base/accumulation, but notice I made the number smaller, it would be like Elliot Wave counts, the previous stages are larger, intermediate and belonging to a Primary trend, this is more of a sub-intermdiate base or "Counter trend" move.
QQQ
2 min over the last 5+ days showing accumulation at the bottom of the chop's range and distribution at the top of the range.
The distribution is not meant as true distribution, but rather to stop price from advancing and sending it back to the accumulation zone, smart money "Can" take well over a year to accumulate a position, this isn't that case, but they aren't like us where we can put on a position with 1 trade because of the size they are dealing with.
However, look at the direction of the overall 3C trend.
QQQ intraday 3 min shows in line in green and distribution in red as price turns flat.
When price is flat, this is where distribution (in this case) often becomes more severe or it can be timing to hold the market in place until an event or catalyst occurs in which they can magnify the move.
QQQ 5 min again shows the distribution of the highs to send price ,back to cheaper levels where smart money will buy,
smart money does not chase prices higher, ONLY RETAIL does that.
QQQ 5 min, I tried not to draw too much on the trend, but I wanted to show how the price range (especially at the lows) has remained fairly consistent, but note the trend in 3C, higher and higher, which is indicative of a stronger positive divergence/accumulation as well as base.
The larger/stronger the base, the larger the upside move can be, it needs the base's support and smart money needs to push prices higher to offload more inventory IN TO HIGHER PRICES as well as short those higher prices.
IWM
The 3 min trend, again overall look at the trajectory of price (lateral) and 3C (up).
3 min intraday has gone clearly negative and held up any more upside .
To me the only reason I think at this point we are still lateral is just part of the reversal process rather than a reversal event.
IWM 5 min accumulation as we saw it yesterday afternoon, in line on the way up until the 5 min chart went negative intraday and the IWM has been lateral ever since.
the same 5 min chart in trend perspective through August, again note the lateral (sideways) flow of the market's base and the higher and higher 3C readings, this of course suggests a stronger and stronger base to rally from, still however counter trend in underlying trade if not actual Dow Theory price, as new as the trend would be.
This IWM 15 min chart (a very strong, important timeframe) is one of the clearest explanations of the trends taking place, a large top/distribution sending price lower and the start of a new cycle for an upside move 8/16 and becoming stronger ever since as it should.
I have little doubt we see a very strong, sentiment shifting upside move,
I just hope we get the 1 more pullback I wrote about last night.
This 60 min chart is a representation of the underlying trend, Primary trend, it's clearly leading negative on the strongest of all of the above trends, you can see the white accumulation which is no more than a counter trend set up, this puts it in perspective.
While I'd like to catch upside on a bounce and have set up to do that, the real prize is to sell short in to upside price strength as the prevailing 3C trend says the market is in huge trouble.
