Market Update-Near Term Support/Bounce Probability Growing

Earlier the charts for QQQ and VXX as interpreted with regard to very short term price action were early hints at what seems to be developing.

I'll start with the Index futures and work out to the bigger picture as the cash market 3C charts have caught up.

 Es / SPX futures intraday 1 min with the cash open at the green arrow. I haven't marked the divergences on the chart, but rather the divergence area, I think you should be able to see where 3C diverges away from price creating an earlier negative divergence and a current positive divergence, but remember this is a 1 min intraday chart so keep the divergences in perspective.

 We have almost the exact same thing for TF /Russell 2000 futures, also with a cash open at the green arrow, a negative divergence earlier and a slight, 1 min (weak) positive divergence working out now.

QQQ

 The 1 min intraday chart shows an early opening positive divergence and since we have had intraday confirmation at the green arrow.

 However the 3 min chart is showing a stronger intraday positive, although it must be kept in perspective.

This is the 3 min 3C / QQQ trend since the June 15th mini-cycle labelled with stage 1, stage 2 mark-up, stage 3 top/reversal process and stage 4 decline. Note the positive divergence to the far right, but keep it in perspective vs. the large leading negative divergence at stage 3

QQQ 30 min chart is the strongest of all the above, it is also showing the area of the June 15th mini cycle which was a bounce off the SPX 150-day moving average as you might recall. Note stage 1 (base), stage 2 mark-up, stage 3 distribution/top and stage 4 decline as well as the negative divergence where it should be and the in line status with  no current positive divergence because it is far too weak to show up on a strong underlying trend like this, again keeping it in perspective.

SPY

1 min intraday slight positive currently.

3 min is closer to in line, but could lock in a positive divergence with some slight 3C upside from here.

SPY 5 min for some perspective with the May head fake/false breakout from the SPX's nearly all of 2015 range/ascending triangle , which saw strong distribution making it a likely late stage 3 head fake which we most often see (in all timeframes) right before a transition to the next stage which in this case is stage 4 decline which is what was expected and forecast as early as April 2nd in detail including the bounce off support near the 100 and/or 150 day moving average for the SPX.

SPY 10 min showing the May 6th/7th accumulation we saw market wide which was the "Gas in the tank" that lead to the May head fake move in yellow. Note the 3C trend/distribution at the head fake and since including the June 15th mini-cycle which is labelled as stage 1, 2, 3 and 4 with 3C at a new leading negative low as the June cycle's stage 4 decline is a resumption of the larger primary trend's stage 4 decline from the May false breakout/head fake area which was distributed.

As for intraday breadth, the NYSE TICK

It has been range bound all day, although volatile.

Our custom TICK indicator intraday showing the earlier negative trend and a positive trend I saw early on, as it was just a hint.

And the longer term TICK through the entire June mini-cycle just to show you the different breadth at the different stages. Note the negative divergence in breadth at stage 3 top/highs and increasing as stage 4 transitions in.

As for the IWM, I'd like to say there's good confirmation, but it actually looks worse than the other two...

There is an intraday positive forming on the 1 min, but...

After that at the stronger 2 min chart it is in line with the downtrend/stage 4.

As is the 3 min chart with the 4 stages of the June 15th mini-cycle, now in stage 4 decline.

The 5 min IWM with VERY clear distribution in to stage 3 and at stage 3 with confirmation in to stage 4 decline as it leads negative strongly.

IWM 10  min also showing the June mini cycle to the right with heavy distribution in to the stage 3 top/distribution area transitioning to stage 4 decline with a deep leading negative divergence, thus it looks worse than SPY/QQQ.

IWM 30 min.

So I think it's probable we get a chance to open a new QQQ put at slightly better levels with longer expiration as well as VXX calls, but the main trend or core positioning is clearly leading negative as was forecast on April 2nd after we saw a head fake/false break out attempt (May) and then a move lower ultimately challenging the October lows for a new lower low in the primary trend which could reclassify the entire market's primary trend toward a bear market for the first time since the 2009 lows/base for the primary trend.

VXX Follow Up / Update

I closed the VXX July 17th, $18 calls for the same reason as the QQQ puts, I see some intraday divergences, small as they are, that should offer a better opportunity to reposition with a longer expiration. However, as for the core/trending positions in equity longs like UVXY (2x long VXX), I have no reason (no Theta decay) that makes it worth closing these longer term trend positions.

As for the P/L

With a cost basis of $1.28 and a fill of $1.67, the VXX calls that I had hoped to have closed last Tuesday morning at a 50+% gain, still came out pretty well in the end at a +31% gain precisely because I use these longer dated options, typically about 3 to 4 times more time than I "think" I'll reasonably need.

 This is also why I want to re-open these positions if possible with a longer expiration as July 17th is creeping up fast. As for the long equity positions (VXX and UVXY), I have no reason to close those as they are meant to be longer trend-based trade ideas, UVXY is currently doing well at a gain of +8%.

The charts...

 This is the intraday 1min VXX chart with last week's/Friday's leading positive divergence near term and this morning's little lack of confirmation which is no bother for the equity long (UVXY), but for the options/calls, it's a little more important very short term and may give me the opportunity to book the gains as well as open a new position with a longer expiration.

Here's a closer intraday look at VXX 1 min and an intraday (small) negative divergence.

This is the 2x long VXX, UVXY intraday, also with a small intraday negative divergence, as well as Friday's ;leading positive pointing to near term upside. However the longer charts are pointing to trend upside.

 VXX 2 min, still near term with an excellent leading positive divergence with what I believed/believe is a head fake move as posted in this update from last week, VXX - VIX Futures Follow Up.

Here's the VXX daily chart and the head fake under a clear range/support area in yellow as posted last week here, VXX - VIX Futures Follow Up with the confirmation/accumulation on the chart above this one in the same area, but today's price movement back above the lower range trendily and right back in to the range with all of the stopped out shares accumulated and all of the new shorts squeezed.

 This is the 3 min UVXY (2x long VXX) showing the same confirmation on a longer 3 min chart.

 And the overall bullish VXX 5 min chart with a nice accumulation zone n the area of the range and a strong positive divergence at the head fake/stop run below the range where smart money can pick up stopped out shares not only on the cheap, but in size without anyone questioning or paying attention to what they are doing. Most technical traders think a breakout on volume is smart money buying, THEY DON'T CHASE PRICE, THEY BUY ON THE CHEAP WHERE AND WHEN NO ONE IS LOOKING LIKE THE ABOVE.  Thus the idea is , we do the same.

VXX 10 min with an excellent 3C confirmation of the price/3C trend to the left as 3C and price are moving nearly tick for tick and the very obvious 3C positive divergence to the right on a strong timeframe.

 VXX 15 min showing confirmation, a negative divergence with price following lower shortly after , confirmation and a leading positive divergence.

Today's price move looks a little parabolic and as you know, despite loving the charts in VXX, I never trust parabolic moves, even with a strong leading positive divergence.

As for the actual VIX futures (VXX is VIX short term futures/ETF)...

 /VX (VIX Futures) with last week's leading positive (short term) divergence and today's slightly negative 3C action, thus my moves with options, but leaving longer trending positions be.

 /VX VIX Futures 30 min with several positive and negative divergences

These are the longer term/stronger underlying trade charts such as /VX 60 min with obvious divergence and a leading positive to the far right, in line with a longer term/primary trend move up in VIX and down in the market.

Even more telling, the Daily /VX-VIX futures chart which has a very obvious leading positive divergence to the right, VERY strong right at the same area as the SPX head fake/Fallse/Failed breakout move in May.

As you can see, I have very little reason to close non-leveraged or less leveraged (UVXY 2x leverage) positions vs. the 100x leverage of options with near term expirations (July 17).

ALL IN ALL, VXX/VIX FUTURES LOOK GREAT, THE MARKET NOT SO GREAT.

Closing VXX July $17th $18 Calls for the Same Reason as QQQ

I probably wouldn't have a problem holding the VXX calls, but I would like to see if I can add them back at a little better price. I am NOT closing the UVXY long position or VXX long equity position, just the calls and intend to add them back at better levels VERY soon.

QQQ Follow Up

It looks like we may have hit the intraday or a.m. low right on the nose and  if you are fa,miller with our concept of an intraday flameout or what you might consider intraday/short term capitulation , a mass selling event that often marks a short term/intraday low, then you'll recognize it in these charts and see why there was an objective reason for closing the QQQ position.

First the P/L:

At a cost basis of $1.52 for the QQQ July 17th $110 puts and a fill of $2.79, the P/L came out to a gain of +83%

 The charts...

 The intraday NYSE TICK chart has been range bound, albeit in a volatile range, of about +/- 1000, no real huge extremes, but rather persistent extreme levels of 1000 (above and below) for the entire morning.

Our custom TICK indicator that I developed to give us a better sense of trend...

 Shows the morning trend of increasing downside so I stuck with the QQQ put position after putting out this earlier warning that I may be closing it sometime today, Position Management-QQQ Puts.

While VERY early, to the far right it looks like the trend may be starting to change in intraday breadth as the histogram ticks up. I usually would wait to see if this is noise or if it develops further, but there was additional information.

QQQ charts...

 The 1 min intraday chart caught up early to the futures decline as it is the fastest chart we use. Note the divergence from late Friday, the one I was a bit torn over as to some early price strength which I would say was there as an intraday bounce toward a gap fill, but as I also said Friday, "This is nothing like the previous Friday (June 19th) The Week Ahead post in which there was a fairly strong intraday 1 min chart signal that made it a high probability that we'd see early week/Monday price strength such  as we did. This one was much weaker.

The intraday 3C chart shows the positive divergence I am talking about in white and then this morning's cash market charts catching up to the drastic change in price action from Sunday night open of Futures with price turning down and in line/confirmation at the green arrow, but notice the volume increasing.

Looking for an intraday FLAMEOUT/short term mini capitulation selling event...

We use this concept a lot for flameouts as well as the opposite concept, "churning" events.

Note the QQQ 5 min chart shows a decent up-tick in volume on a bullish candle, Doji Star (upside reversal candle).

This isn't a huge event or what I'd call a screaming signal that jumps off the chart, but subtle changes in character lead to changes in trends and with options, price can change quickly and go against you in a minute or two.

In any case, whether right or wrong on the timing intraday, we still booked a nice 80+% gain and still have all core shorts open.

I'll have an intraday market update out in a few minutes.

Closing QQQ July 17th $110 Puts For Now

The market seems a bit stalled here and I'd like to take the gains from the QQQ put position and re-open a new position with a longer expiration than the current July 17th.

This has nothing to do with the market direction, it has more to do with the tool used in this trade, options which have many more factors than just price such as Theta or time decay of the options and sitting still or losing momentum doesn't help their cause.

So for now, I'm closing the QQQ puts, booking the gain and looking for a new area to re-open the QQQ puts.

This has no bearing on core shorts/equity shorts, this is more about the tool and theta/time decay than the underlying asset.

The biggest risk here is that the intraday stall just breaks down, but with a 70+% gain to protect, it's a risk I'm willing to take.

Position Management-QQQ Puts

I'm looking at the July 17th QQQ $110 puts that are now at a +60% gain. Any loss of momentum or temporary hang up around the SPX 150-ma intraday (even though I believe we slice through it this week to the downside), I may look at resetting the July 17th expiration for something longer, this greatly depends on what very near term intraday trade looks like.

As for futures where we have the most information right now...

 NQ/NDX Futures 5 min chart shows the reversal process from Tuesday/Wednesday after the initial price strength Monday of last week and the failure of the top moving to stage 4 decline. The 5 min chart is showing confirmation right now which is why I'm considering closing and re-setting the position to take gains and "maybe" get better positioning with a longer expiration.

 The NQ 3 min chart shows the early bounce attempt or very limited intraday 3C accumulation of the lows which looks like it wants to make a gap fill, but even that seems to be starting to fail right now.

The QQQ 1 min chart has caught up, you can see a little of the positive divergence late Friday which had me wondering if we see some price strength early Monday, while we have a nasty gap down, the attempt to fill it is indeed price strength.

However the 3 min Futures chart looks as if it may be failing already so we'll see as the 3 and 5 min charts in the cash market catch up. If it looks like we may spend some time in the area, I'll be closing the QQQ puts and booking the gain and looking for a new entry with a longer expiration.

However if it looks like we are going to see more IMMEDIATE downside, I'll obviously want to leave them open and there are hints like the 3 min futures chart and these two intraday cash market charts, that this may be the case.

 IWM late day divergence from Friday. As I said Friday, this is no where near the strength of thee previous Friday in which the forecast was for early price strength on Monday as we saw.

The IWM 1 min intraday looks to already be failing.

As does the 1 min intraday SPY.

I'm just trying to preserve the most profits and allow for extra gains if it looks probable, but I would like to extend the expiration on the QQQ puts beyond July 17th soon.

Early Update

It will take the cash market averages/3C charts a few minutes to an hour or so, depending on the timeframe to reset to include the cash market reaction. Intraday 1 min charts will react first and reset first, but we can see in futures what has been going on for the most part.

Remember last week was the reversal process to topping area off the June 15th lows bounce cycle, June 15th was stage 1, the bounce is stage 2, the reversal process was stage 3.

We are well in to stage 4 decline right now, ES 5 min...

 ES 5 min showing the reversal process forecast for last week, remember Monday was the "early strength" followed by the reversal process and shot to downside or stage 4 for the mini June 15th cycle and stage 4 for the larger Primary cycle (returning to lower lows and a break of the SPX-150-day moving average heading toward the October lows to make a new low in the Primary trend.

This 5 min ES chart shows that reversal both on the short term June 15th cycle and back to the primary trend cycle which was at its reversal process at the May head fake move-that was the end of the stage 3 top/reversal process for the market's primary trend.

Since the futures open the 3 min chart (faster and more sensitive) has shown some dip buying, but it looks like it's starting to fail, we'll be able to better confirm that with the cash market charts.

SPX nearing the 150-ma, there should be some temporary loitering on an intraday basis at the 150 ma.

 SPX daily chart and 150 sma

So far the intraday 1 min (fastest chart) since the cash open, a small intraday positive divergence, a gap fill attempt would be likely.

As the next time frames catch up and start giving indications as the market resets underlying trade after such a gap down, I'll update those charts.

SO FAR THERE'S NO ACCUMULATION IN HYG AS A SHORT TERM LEVER TO TRY TO HELP THE MARKET.

Good morning, I hope you had a pleasant weekend because all hell is breaking loose across the rest of the globe. I personally went out boating and fishing with Andrea.

I can't even begin to summarize the global bonanza going on right now from Chinese being told the socialist system will save them from the market after the CSI-300 futures went limit down and the Shanghai Comp was down the most since 1996, the sentiment by the socialist media was said to have brought investors to tears when the People's Bank of China pulled out a double rate cut (the RRR and the Benchmark), which bounced the market for a moment and then the unthinkable, the socialist system couldn't save the market with the Shanghai Comp down -3.34%.

The Nikkei 225 was down nearly 3%.

Then Europe which saw Stoxx 50 futures were down -7% at the open until the Swiss National Bank showed China how a plunge protection team works as they bought Euros (EUR/CHF) selling CHF and $USD) which did stem the selling in Europe as a Greek Referendum for Julky 5th is scheduled which the country may NOT have the money to even pull off!

Greek Capital controls are in effect and a bank holiday to last the week with a desperate pleas from EU commissioner ("When things get serious you have to lie"), Juncker....


"The European Commission appealed on Monday to the Greek people to vote “yes” in a referendum on its international bailout, warning that a risk of the rupture of the European Union was real.

They report that Jean-Claude Juncker, the commission’s president, said: “I love you deeply - You shouldn’t commit suicide because you’re afraid of dying. You should say ‘yes’ regardless of what the question is.”

A “no” vote in the referendum “will mean that Greece is saying no to Europe,” Mr. Juncker said."

If you haven't seen the emotional plea, you have to check it out on YouTube, telling the Greek people there were no pension cuts in the bailout package, oh my what a week this promises to be.

By the way, some asked if I think this will delay the F_E_D September rate hike, I didn't, but we got confirmation from the F_E_D's Dudley this morning that September Rate liftoff is very much in play!

ES futures look like this after an initial hard dump...

 ES futures still down hard after futures opened down hard Sunday.

The EUR/USD after the SNB intervention in EUR/CHF which looked like this...

EUR/CHF SNB intervention to rescue Europe's markets.

We'll see what the charts look like as the cash market develops, but aren't you glad you have those core shorts in place.

Now to navigate this mess. It will be an exciting week, should be a very profitable one as well.