Market Update

This is where the 5 min charts should be cleaned up.

As you saw today, the 1-3 min charts are no longer ambiguous, they used the earlier price gains to sell in to, just look at the intraday TICK all day today trending down. To finish up and clean up the 5 min charts (and this is just from our perspective, from the mechanics of it, it's just smart money unwinding bounce positions like a reversal process, they are large positions and take more time, there's nothing any more meaningful about a 5 min chart to Wall St. than a moving average, they are reflections of behavior).

So you saw the parabolic move stall out and appear as if it will try to put in some upside gains that can be sold in to or shorted in to. The gas in the tank (accumulated shares) at the 5 min charts basically need to be sold off or drained in which case, the 5 min charts will look worse than they already do.

As for Leading Indicators, other than the seriously bearish yields...

 5 year (red) vs SPX (green)

10 year (red) vs SPX (green)

30 year (red) vs SPX (green)

All of which are pressuring the market to the downside... There's not a lot of other movement. There's a bit of deterioration in pro sentiment, but perhaps the biggest change that is underway is HY Credit, it is starting to finally take on a more negative local tone (long term is very negative).

 HYG (blue) vs SPX gave up all gains today and moved to red on the day. The market doesn't follow the HYG 3C divergences, it doesn't even know about them, they just point to the direction of HYG and the market follows HYG's price. Note at the intraday parabolic flameout, HYG went positive in a small area and led the SPX.

There's nothing wrong with this, these 5 min charts need to be mopped up.

The SPX:RUT Ratio in the middle also diverged intraday to positive at the lows and the VIX Term Structure put in a 1 min buy signal, very small, nothing like the one on the 6th or past ones, but indicative of an intraday low probably being established and giving you a chance to get in to some positions without chasing them which would have hurt even intraday today.

As for the 5 min charts, I'd say the Q's and SPY are about the same, definite deterioration, the IWM is worse and just about where we want it so any upside in the IWM would likely open up some small cap short sales or IWM shorts like SRTY (3x short IWM),

 SPY 5 min

QQQ 5 min

IWM 5 min.

This is opportunity. If we can get some price gains and keep these 5 min charts turning down/deteriorating, we have EXACTLY the edge you only get once in a while, this is why patience pays.

Patience Pays

OK, we don't chase emotional parabolic moves, not a good idea.

So just waiting a bit we have a parabolic move and we know what the probabilities of that holding up from here on out are, but as another one of our concepts suggests, large volume on a ROC change or candlestick reversal candle, is a good marker for a change in character, even if only short term.

 Just like yesterday's parabolic opening sell-off, it hit large volume which instead of "Smart money selling " as most technical traders thing, it's short term capitulation, a short term exhaustion event. Check multiple timefrmaes, the longer the better for a reversal. The same happened today, this is exactly the same concept as a daily/weekly Primary trend that flames out with capitulation and ends its downtrend, except this is short term.

 The TICK trend today was clear so a break of the channel is an early head's up.

While the intraday 3C can give you information about this kind of area, you don't need to get fancy.

Apply ROC (Rate of Change) to price and look for the divergence.

Now we are getting somewhere in which selling short in to weakening signals and underlying trade, but higher prices makes a lot of sense. I'll try to keep feeding ideas out, but I think you get the gist. Just make sure to check the slightly longer timeframes and make sure we are still headed in the same direction as we anticipate, although probabilities suggested that before the oversold bounce even moved a point to the upside.

Biotech (NASDAQ) and CELG Follow Up

These are two recent trade ideas, "Let the trade come to you" and short in to strength.

What you'll notice is the rapid deterioration since last Thursday, the day we observed the market spooked over something and as always, we see it in price action/3C long before we ever find out what it is really about.

The 5 min charts haven't had time here in the last hour to make aggressive moves, but if you look at the charts up until and the charts just after, I think anyone can figure out the probabilities pretty quickly. I don't like chasing anything and just because the market is extreme and moving right now, doesn't mean you need to get caught up in the emotional heat of the moment, there are lots of jiggles and jives, although I will say overall both are still in excellent longer term position, about as good as you get for short entries.

IBB/NASDAQ Biotech Index (BIS is the 3x inverse short).

 The 5 min chart is still in line, but again this is recent changes that haven't hit it yet in the last hour.

The 1 min chart showing the market spook we saw last Thursday.

The 2 min chart falling apart.

The 3 min chart falling apart. It won't be long before the 5 min chart shares the same fate.

As for the inverse leveraged NASDAQ Biotech short, BIS (long)...

The 3 min, like IBB the 5min is in-between and hasn't had time to react yet, but just on the other-side of the 5 min...

 The BIS 10 min which is the strongest probability of all of the above timeframes and that is up, meaning NASDAQ biotechs index down.

 CELG was offered as an equity short rather than ETF, the 3 min chart falling apart.

The 5 min which actually put in a positive divegrence earlier than the broad market hasn't had a chance to react yet, but just on the other-side...

The 30 min chart tells us very clearly that the longer term , highest probability resolution is to the downside. All of the 1-5 min charts are more or less just tactical timing, this is the strategic view of where CELG should be heading...DOWN.

I Think We May Have Just Found What Spooked the Market Last Thursday

I have been looking at confirming indicators, which I didn't expect to see much today, although a start.

I haven't had an opportunity to go back and check Leading Indicators since, but at the last check about 30 minutes ago, pretty much everything was in line except Treasury yields with the shorter end falling more relative to the SPX, but the 30 year also not supportive of today's move.

Credit and Pro sentiment remained in line, but not anything more than that, not positive.

As for the averages...the lack of support beyond the 1 min charts from yesterday was taking a toll on price.

 The 1 min charts like this SPY were still being used as intraday "steering" instruments, but not anything of any consequence. The important changes today that have picked up from Thursday's spook, are in the longer charts.

 QQQ 2 min, no support whatsoever, thus as I said yesterday, "Morning Strength which fades" as there's nothing to support the market beyond the 1 min positives from yesterday.

What is more important is we can see the trend of what's going on with those 5 min charts...

QQQ 5 min. I tried not to draw on it too much, but to the right you should be able to make out the movement and it is negative.

Then after capturing these charts which were already looking bad intraday, this...

The SPY has given up ALL gains on the day, something changed and spooked the market around 1 p.m. , just what it is is something I suggested in the recent past in asking "Why is President Obama who is committed to "no boots on the ground" in Iraq" suddenly amassing US forces on the border inside Kuwait?"

My theory... This is one of the only ways for the US to increase the price of oil, get an armed conflict going in the Middle East and Iraq has always been special as a strategic area, it sits right in the middle of all of the trouble makers.

The drop in price, which I suspect is the news the market or parts of it got last wek and we are just hearing now is,

"Bloomberg reports Senator John Cornyn said President Obama told congressional leaders during meeting today at White House he would seek authorization for military force on Islamic State. Boehner’s office, in separate statement after meeting, said Republicans would work with him to build support."

These decisions aren't made over coffee or overnight, I suspect this is what the market got wind of last week,  the one thing that would cause them to abandon a bounce cycle they set up in advance, UNCERTAINTY.

They say, "When the missiles fly, it's time to buy", this isn't so much about buying or war being bullish, it's about the market's reaction in the run-up to a potential conflict, THE MARKET HATES UNCERTAINTY,  so even the certainty of a war starting is certainty enough for the market to stabilize from the uncertainty.

In any case, I'll look again at Leading Indicators, they are probably going to look different by the end of the day.

The move that just took place was on heavy selling and it's parabolic, but in this case for good reason.

 Not much above +1000, but plenty below -1250/-1500. That's real selling.

The 5 min charts are quickly moving toward the point of no return in which they cannot recover, the IWM may already be there.

IWM 5 min, by the end of the day, I suspect it will have crossed the Rubicon.

I'll see what else we have as things are now going to start changing overtly over the uncertainty just introduced in to the market.

I'm not big in to conspiracy theories, but did you hear about the Turkish President who was just in Paris participating in the Unity rally, well as soon as he got back today he claims the French are behind the ISIS/Charlie Hebdo massacre which whether true or not, does have odd timing with this latest announcement of the US President seeking congressional authority for boots on the ground to combat ISIS.

I'll have more for you on oil as well.

Starting to Get Some Answers

Compared to yesterday, it looks like today we are seeing a lot more underlying action which I suspected would be the case, they need upside/demand to sell in to.

The Splitting the Difference- SPX vs RUT post from yesterday seems to be right on as the SPY are outperforming the IWM handily today and I think from yesterday's, Daily Wrap,

"Toward the end of the day there were some pretty solid positive divergences in the 1 min range mostly, yet not much behind them so I suspected that we'd likely see a move higher tomorrow morning , maybe longer. Here's a few examples of what appeared to me to be a weak move getting ready to start... However, no movement or migration to the 2 min chart which would normally tell me to look for some early gains and then a failure of those early gains."

And that's where we are thus far.

Now about those 5 min charts, they are not smoking gun yet, they are not jumping off the chart yet, but they are moving which they weren't yesterday and they are giving us a feel for what underlying trade is doing as they are moving more negatively.

 IWM 5 min

QQQ 5 min

SPY 5 min

All are showing signs of relative negative divergences since yesterday, so the movement I was looking for is taking place. I suspect we keep seeing this deterioration, but that does not mean we are right at a turning point.

I'm going to try to confirm in as many places as I quickly can and then go from there and decide whether it's time to start looking at those short position entries.

Market Update

I'd say that yesterday's afternoon positive divergences and "Picking up where 3C left off" has worked again.

There's already signs of weakness and while it's too early to expect the 5 min charts to have made any definitive moves, there are some hints sprouting up.

First the typical levers and some of the late day moves that suggested a bounce today... VXX, TLT which was losing ground near the bond market close yesterday and HYG which is up and acting as a ramping mechanism, but still in to distribution like yesterday.

 TLT's late day divergence yesterday which sends TLT lower and yields in support of the market (higher) today, still not a big divegrence and the 5 min TLT is still in line on the upside trend.

VXX negative 1 min

HYG neg. 1 min, but it's price that matters as a ramping mechanism which is up today.

As for the averages...

 SPY 1 min is in line.

 like yesterday, the 2 min chart still has not turned in support of the 1 min chart and this may be the undoing of the 5 min charts, but...

As of yet, that hasn't happened in SPY.

 QQQ 1 min late day positive and losing a little steam intraday today on the gap up.

 Again, the 2 min chart has no support, this is why I suspected a move higher early today that may start to fail not so long after.

The 5 min chart isn't telling us anything yet.

However...

 The IWM 1 min never went positive yesterday and is leading negative intraday.

Again the 2 min chart here looks horrible.

The one difference...

There are early signs of the 5 min chart possibly coming apart so we will keep looking for this in the other averages and see what assets are maybe coming in to a target zone for a decent trade set-up.

Does the Crude Bounce Hold?

My guess is yes, the "bounce" holds, but not much more than that.

It's funny how you get in to things and they turn and backfire on you. I may be wrong, but I believe I recall the US reaching out to Saudi Arabia to boost production and try to starve the Russians out (as Russia is an oil exporter) in tandem with other measures, meant to cripple the Russian economy over the Ukraine situation.

However it seems our allies, the Saudis have also found they can crush the US shale oil industry in to virtual oblivion and wipe out any US / domestic competition. I doubt this is the way the story ends, there's too much money from the oil industry on Capitol Hill, but whatever may be launched as a counter-offensive will surely have unintended consequences as well.

The immediate question is what does this current oil bounce have for legs? I'd say there are some, but likely pretty short legs.

Here's what I see.

 There looks to be evidence that a base area was formed again at the start of the year, it looks like yesterday was a stop run and a head fake below that range as volume pumped up on the break, as did short term 3C signals, suggesting a small head fake move and an oil bounce.

If today's closing candle can engulf (close above yesterday's open), then this move has an even better chance, especially if volume picks up.

 This is the January range mentioned above, which looks like it had a decent positive divegrence; the break below and what looks like confirmation of a stop-run/head fake move with a positive divegrence on the break below support (stop run).

 USO 3 min shows the same thing, just with less detail.

As does the 5 min chart, which also shows the volume spike under the small range (stops hit).

 The fact there's a divergence out on the 10 min chart makes me think this bounce has a chance.

However as I have maintained from the start, this is no change in trend. This2 hour chart should make that very clear.

As for Crude (Brent) futures, there's similar recent confirmation as well.

5 min leading positive looks like confirmation of a head fake move/stop run that was accumulated.

7 min

And a very strong leading 15 min chart.

That's about as far as we go right now, but a 15 min chart can make for an impressive move.

Morning Update

Good Morning,

In yesterday's Daily Wrap some several end of day charts including some industry groups, averages and individual stocks made some movement in an otherwise very dull day leading to the comment below,

"Toward the end of the day there were some pretty solid positive divergences in the 1 min range mostly, yet not much behind them so I suspected that we'd likely see a move higher tomorrow morning , maybe longer. Here's a few examples of what appeared to me to be a weak move getting ready to start....

However, no movement or migration to the 2 min chart which would normally tell me to look for some early gains and then a failure of those early gains."

Thus far, this is what we have. I don't see anything standing out in futures that would imply this morning's path is about to see an imminent change in character unlike yesterday's open. In my view the movement is good, I don't think we are going to see much unless there's movement and as I mentioned last night, if there's any attempt to get out of the bounce base accumulation that was put together last week, it will be in to higher prices not lower.

So I'll keep an eye on how things develop, whether there's near term confirmation and more upside or whether there's distribution in to higher prices as I believe we will see no matter what, it's more a question of whether the oversold bounce will be aloud to spend all of the gas in the tank for the move or whether they are trying to slip out the back door on this one, both scenarios are useful. The first for tactical positioning and the second would have that and more informational value as small cycles like this are rarely abandoned, if it were, it would be because of something pretty scary for the market.

I doubt very much this is January Effect money coming in to the market.