Averages Should Come Down Intraday

Although we still have leading positives in most of the averages, the USD/JPY is going to come down and the intraday signals for ES, NQ and TF look like they'll come down a bit too.

Charts coming

Important Market Update

I was hoping I could get this together quickly enough before anything moves.

First, remember it's an op-ex Friday, even the weeklies count so the probabilities are the market stays fairly close to a pin and right now that's from +0.14% to -0.20% which I'd say is a fairly tight range and an op-ex pin, but as we have seen so many times before, most contracts are closed by about 2 p.m. and the market starts to move, the price movement isn't generally that interesting to me, it's the 3C movement during that period that gives some of the best information for the coming week.

We have positive divgerences in all of the major averages, but I want to try to show you why I've been saying the following comment and said it again yesterday in the EOD Update WITH EMPHASIS . This is literally how the comment appeared in yesterday's post linked above.

"UNLESS THERE'S A VERY STRONG POSITIVE SIGNAL IN THE AVERAGES, THE ONLY USE I HAVE FOR A BOUNCE IS TO SHORT IN TO PRICE STRENGTH AND UNDERLYING WEAKNESS, IT'S A FREE GIFT IF YOU HAVE THE OBJECTIVITY TO OVERCOME THE EMOTIONAL DIFFICULTY OF SHORTING IN TO PRICE STRENGTH, it sounds easy now, but when the moment comes and sentiment in financial media has changed, it's a lot different.

"Every boxer has a fight plan until the first punch is thrown""

I think after you see the charts and where probabilities and different cycles are, you might agree with me, I know it's hard to sit on your hands, but this has been the type of market that sitting on your hands is sometimes the best course of action, it's the type of market (the last month or so) that the name of the game is not capital gains, but capital preservation.

Here are the charts for the update.

 OK, the intraday 1 min SPY has made up alot of ground and has a leading positive divegrence at the time of this capture which will probably be 20 mins by the time I get it out to you. My guess is that we'll see an afternoon ramp job, but I want to check VIX futures and USD/JPY first, I didn't have time to yet because I'm trying to get this out as fast as possible.

 The SPY 2 min chart showing distribution at yesterday's highs as we know (as USD/JPY approached $102) and some migration of today's positive divegrence intraday.

Basically the same thing in the 3 min chart with a little less migration of the divegrence as would be expected

And  the same thing in the 5 min chart.

 I want to point out the 15 min chart as this is where the probabilities are stronger, it's a stronger timeframe showing more of the underlying trend, the heavier flows, those intraday positives are not  divergences I want to try to trade from the long side when a 15 min chart looks like this, but this is just the start of my example.

The QQQ looked better than the SPY on the close yesterday, it was already positive on the 1 mi chart, it has clearly added to that today with the positive starting yesterday afternoon around 2 pm.

The 2 min chart shows distribution of yesterday's intraday highs and a leading positive today so migration of the divergence is in effect and it is growing stronger intraday.

The 3 min chart has some migration as well.

Now look at the very same 3 min QQQ chart, but the trend...

This shows the short or medium term cycle that we entered a bunch of longs and closed a bunch of shorts on April 11-15th, that was a nice area to enter trades. By the 22nd we were getting negative signals and we were exiting longs. Look at 3C since then in what would clearly be stage 3 of the April trend, it's leading negative, even though we have some intraday positives, where do you think the probabilities are?

I'm not saying the market won't move up off those positive divergences, but would you think it's better to try to catch the long or short price strength? I want to trade with the probabilities and short the price strength, not try to trade it long unless as I said yesterday,

"UNLESS THERE'S A VERY STRONG POSITIVE SIGNAL IN THE AVERAGES,"

And by that I mean the kind that jumps off the chart.


QQQ 5 min with some positive action today, this isn't the very strong signal that I want to chase, it's the one I want to short in to a bounce.

Here's the 5 min chart's trend going back as far as I can to the large trend, the February trend (remember I said there are at least 3 trends in different timeframes all in either stage 3 or some area of stage 4).

We have stage 1 base in early Feb, I think the 3rd, stage 2 "Mark-up or Rally", stage 3, "Top/Distribution"  and in the QQQ's case, it went to stage 4 for the February cycle and retraced the entire rally, the other averages haven't done that yet (SPX and Dow are the furthest from doing that).

If you keep moving to the right we have the medium term cycle from April 11-15th and that's the one we started moving out of longs around the 22nd, since then it's been a lot of volatile lateral , stage 3 chop. We know what stage comes next, we know what the probabilities are.

The question is one of greed because we know it's probable we do get an upside move, but how is it best traded? For me , trying to hitch-hike an upside move without a VERY good reason to do so is just greed, and as they say, "Bulls make money, bears make money, pigs get slaughtered".

The overall trend of the QQQ on the downside has been confirmation.

This is the QQQ 15 min from the medium April 11-15th (start) cycle, then stage 2, then stage 3, you see the chop, is it worth it?

Hey, there can be a head fake move above the chop, we know that's a probability before stage 4 is entered, but is it worth it?

The IWM I captured fewer charts as I think I made the point, but still wanted to show it...

 The 1 min from distribution yesterday at the highs to a leading positive divegrence on the 1 min

and leading on the 2 min

We have a leading positive out to 5 min

However, look at this 15 min chart's trend from the February 3rd (large) cycle, the IWM like the Q's "almost" retraced the entire cycle, the SPX and DOW have not. There are divergences on the way down and some cycles, but the overall 3C trend is confirmation of the downtrend.

So I'd be careful with long positions, I'd much rather short in to price strength and 3C underlying weakness.

I'm going to look at the currencies and VIX futures.

GDX/NUGT Movement

Movement is good, that's when we get to see whether there's accumulation/ distribution or in line. The whole point of a head fake move BELOW a range is to hit stops and suck in the bears, all of the selling and short selling provides one thing a big Wall St. firm that trade large positions needs if they are buying and accumulating a position, "SUPPLY"  and cheap too...

The trendline to the left and higher is the range's former support line, price to the right of that has been bouncing above and below the trendline, there are no stops in that range, but right under the former lows, that's where you'll find stops and they just hit them.

This is why we wait for the signals that tell us, "I can't ignore this anymore".

Give GDX/NUGT a couple of hours, see if they start moving sideways and we'll update them again and see if the positive divergences have grown as they should with that kind of supply coming available.

I wonder why traders never consider "Who's on the other side of that trade?"

GDX / NUGT Daily Update

Yesterday I posted Very Seriously Considering Adding A Partial NUGT Long Position and today I'm feeling the same way, I think there just needs to be an event/signal that gets me off the wall where I'm admiring the way the "come to me" trade has developed to jumping down and saying, "We don't ever ignore signals like this".

If you recall, I laid out the bigger picture on Monday May 5th in this GDX / NUGT Update when GDX was trading (this is a chart from the actual post)...

Right at the head fake high ABOVE the range, the very next chart from the same post was this one with the following commentary...

..."This is GDX's 10 min chart that looks specifically like there was a distributive move, enough to send GDX below the support of the range. This is one of two charts that needs to be repaired and go positive and the way that will happen is the accumulation of shorter timeframes on a move lower and/or below the range."

Shortly after, we got a move to support and yesterday in this GDX/NUGT Update we got...

From the post yesterday linked above, the move we were looking for BELOW the range.

So, from this point, the only thing that we were still looking for that was expected from the first post linked above from Monday, was the 10 and 15 min GDX and NUGT charts (the same ones telling us that a break below the range was coming) to start repairing themselves and eventually going positive which started happening yesterday which can be seen in yesterday's updates.

This is what we have now...

 There's work that needs to be done on the 1-3 min charts, this is where the migration of the divergence is going to move to the longer term charts where we need it. That said, this is a leading positive divergence in GDX.

The 2 min chart of NUGT shows initial accumulation as stops and orders were hit on the move below the range, but you can see 3C momentum fading here.

And at the 3 min GDX chart the momentum has faded to a simple "in line" or 3C / price trend confirmation.

We need improvement here.

The 5 min charts are leading positive so they "should" continue to work on repairing the 10 and 15 min charts which were always the objective, at least as far back as the initial post Monday.

GDX 10 min is slightly leading positive which is a huge improvement over the previous negative divegrence in to the head fake false breakout which needed to happen to get the downside momentum to create another head fake move , but this time BELOW the range.

NUGT's 15 min chart is leading positive. We need these charts to all be leading positive with good confirmation between GDX and NUGT and DUST should show the exact opposite divergences for confirmation.

Remember, this is the prize, a huge STAGE 1 BASE, Accumulation, in the form of an Inverse H&S pattern and we are on the right shoulder near the lower end, the next move (unless we form a second right shoulder), should be through the neckline and that's when we enter stage 2 trending.

As you may recall my estimate based on the price pattern is an upside target around $43-$44 conservatively speaking.

A.M. Update

As expected from yesterday's EOD Update ...

"Don't forget tomorrow is a Friday and that means it's likely the market will open near today's close and we'll have a weekly op-ex max-pain pin until about 2 p.m. so we may not get a lot of action tomorrow."

And that's just about how we opened, the Q's a little weaker as AAPL opened a little weaker than the broad market. Then , as I'm writing this, we got this move (USD/JPY (red/green candlesticks) vs ES (purple)...

I'm not quite sure what that's about if anything as of yet, USD/JPY didn't sell off that bad, but we did close with some negative divergences in DIA, SPY was flat and a few leading indicators were negative or flat, yields were negative in to their close, some sentiment indicators went sharply negative in to the close as if they'd expect an early move to the downside. In any case, we'll look at that in OPENING INDICATIONS if there's anything to see.

As far as overnight futures and the ramp, there wasn't one. Nothing significant happened in USD/JPY or Index futures, but still worth a look.

 ES just before the open with a 4 p.m. print of $1871.50 and a 9:30 open of 1871.25, as I said late yesterday, " tomorrow is a Friday and that means it's likely the market will open near today's close ".

 USD/JPY never came down enough to form a "W" pattern, but saw a small positive pre-market sending the pair higher, but not too close to the $102 mark.

The Yen saw a small negative at the same time which obviously helped that small move, there's nothing important about this, I'm just showing how "A" effects "B".

The $USD 1 min stayed in line on a move higher, also helping that little move, but there seems to be a larger relative negative divergence, we shall see what that's about if anything.

5 min ES is nearly perfectly in line pre-market like the n"op-ex pin" that opens near Friday's close, of course yesterday's intraday highs sold off, that's also where some Leading Indicators went negative, like sentiment as if the pros were taking their profits at the highs knowing something else was coming along early today of perhaps longer, but it wasn't that big of a sell-off to induce panic.

 5 min USD/JPY, there's a relative negative divergence here too at the current prices, maybe we form an ascending triangle? If so it would be exactly in the wrong place , but traders don't care about confirmation rules, they just see price patterns.

The 5 min Yen is negative at the same area, remember yesterday I showed the negative divegrence in the 5 min Yen, it fired and sent the Yen lower (green arrow) and was still leading lower in pre-market at the capture so it makes sense with that price move just after the open which is now forming an intraday bear flag.

Interestingly the 5 min $USDX looks like it wants to come down soon and take the Index futures with it. Ironically a smaller move down could form an Ascending triangle so that may be in the cards. The $USDX is looking a tiny bit parabolic anyway on the MOST RECENT pre-market move up anyway.

 VIX 5 min Futures remain very strong with a long/strong leading positive divergence so the VIX activity in price seems very bland and sometimes outright strange, but I do believe they are grabbing this by the handful.

ES 15 min is a little more positive, this "may" reflect a price move that goes with USD/JPY>$102, or it may be noise, it's too small right now to be reliable, but needs to be watched.

This 15 min leading negative Yen is still the best chart suggesting near term action, the 5 min negative in the Yen has started to move, if the 15 min does the same as it should, the USD/JPY $102 would be an extremely likely event. However as mentioned before, a short lived one as there's nothing negative in the Yen beyond this 15 min chart.

And $USDX 15 min is ladgging a little, but I suspect it will catch up, the 60 min chart is positive.

I still think THE MARKET DEPENDS ON THE $USD/JPY, i think that's the near term key to getting some upside movement and that upside movement is a gift with all of the averages having at least 3 cycles (multiple timeframe analysis) that are all either at late stage 3 or have already hit stage 4 and are late in the volatility shakeout, the next move in staging would be a return to stage 
4.

I'll have opening indications out as soon as there's something to post.

EOD Update

Don't forget tomorrow is a Friday and that means it's likely the market will open near today's close and we'll have a weekly op-ex max-pain pin until about 2 p.m. so we may not get a lot of action tomorrow.


I still think all "potential" bounce or failure of the market here depends on the $USD/JPY pair, we'll get to that.

As far as some of the near term and big picture signals, here are leading indicators

 HYG went positive in to the lows yesterday and is still in line, I'd think this would be leading negative if we were on the edge of imminent collapse.

 High Yield Credit is essentially the exact same situation as HYG (Corp. Credit).

 Pro sentiment went positive at the lows yesterday and fell off a bit today, that's probably in line with afternoon trade.

The big picture though is very bearish in sentiment alone. This is the Feb. Cycle with the 4 stages and 4a being the volatility shakeout that happens early in stage 4 decline.

Our other sentiment indicator is in line with the SPX, in line with an op-ex pin tomorrow.

VXX had a nearly perfect correlation with the SPX today so no point in showing it, this chart of TLT with SPX (green) prices inverted so you can see the normal correlation shows TLT went from leading yesterday and early today to negative, which makes sense considering the earlier TLT/TBT post and TLT expectations of some decline.

Yields as one of my favorite leading indicators as they pull equities toward them are just getting worse as they dislocate negatively from the SPX, so this is the near term move I expect, after we get a bounce or what remains of a bounce assuming USD/JPY hold up as I think it will.

As for the more important near term driver of market activity, USD/JPY carry trade...

 This 5 min chart of USD/JPY (red/green candles) vs ES/SPX Futures (purple) shows the correlation, a little screwy today, but this is the driver right now of the market.

 This 5 min 3C chart of USD/JPY looks to be a "W" base to me with price now pulling back toward the second bottom of the "W", meaning almost done, there's a positive divegrence at the first bottom and a leading positive right now.

Resistance is clearly at the $102 level, if USD/JPY breaks $102 where there are bound to be tons of BTC stops and long orders, the market will get a bounce and I suspect it will no matter what the 3C charts look like, without decent 3C charts though to hold the market together, the relative performance and the staying power would be greatly diminished.

UNLESS THERE'S A VERY STRONG POSITIVE SIGNAL IN THE AVERAGES, THE ONLY USE I HAVE FOR A BOUNCE IS TO SHORT IN TO PRICE STRENGTH AND UNDERLYING WEAKNESS, IT'S A FREE GIFT IF YOU HAVE THE OBJECTIVITY TO OVERCOME THE EMOTIONAL DIFFICULTY OF SHORTING IN TO PRICE STRENGTH, it sounds easy now, but when the moment comes and sentiment in financial media has changed, it's a lot different.

"Every boxer has a fight plan until the first punch is thrown"

For the $USD/JPY to move up, the Yen either has to move down significantly, the $USD has to move up significantly or best of all both happen, the Yen moves down and the $USD moves up.

 Here the 5 min chart of the Yen is threatening to make a move lower which would help to send the USD/JPY and Index futures (the market as well) higher., however this is not the main signal that has me watching for this outcome...

The 15 min Yen chart is showing and has been showing a significant 15 min negative divegrence, price "should " follow the divergence lower sending the USD/JPY/market higher, however this is ONLY out to the 15 min chart, there's no divegrence past the 15 min, which means in my view that any USD/JPY move up (market move up) is limited because the roof is established at this 15 min chart.

 The $USD moving up would send the USD/JPY higher and this 60 min chart suggests that will happen. We have also seen a recent return to the long term "$USD Legacy Arbitrage" which has been missing since the F_E_D's intervention in 2009, that correlation means $USD higher=stocks, precious metals, energy and most commodities lower. We are just seeing this correlation re-establish as the F_E_D continues to taper out of QE which is what killed the correlation in the first place.

This could mean GLD/gold heads lower near term which would make sense then to wait a few more days before entering a NUGT/GDX long as the correlation between gold and GDX is very high, but once again, we are just "starting to see" the correlation return, it's not dominant.

 This $USD 15 min chart has a small negative divegrence, this "may" be enough to pull the USD/JPY back down to support which would form the "W" base that I have been talking about.

 The $USD intraday 1 min chart suggests the same right now, but this is unlikely to hold overnight, the 5 min may.

 If you look at a monthly VWAP of ES, this looks like a normal sell at VWAP, price moves down to the lower standard deviation and then bounces to VWAP where it would be sold again, in other words, this looks like a pretty normal move to the downside.

The ES 5 min chart is showing a negative divegrence, which would fit with a USD/JPY pullback to the support forming a "W".

As far as market signals in to the close and beyond, there's what looks like some rotation, but there are very poor divergences in intraday timeframes...

 DIA intraday 1 min didn't close looking very good, distribution of any gains.

DIA 2 min is probably one of the better migration signals, leading negative

And 5 min leading negative

 As far as probabilities, this is the 2 hour chart, the divegrence has grown exponentially to the downside.

SPY intraday with a very small relative positive.

The 10 min SPY is really showing this is ready to fall off a cliff, it's pretty much up to the USD/JPY and $102 at this point.

We haven't talked about what a base and failure of $102 in the USD/JPY would look like, likely an instant sell off.

 SPY probabilities with distribution at 4 hours

The IWM did show some late day strength, but this was isolated.

At the 3 min chart there wasn't enough migration to move this very far.

And 4 hour probabilities are clear which way this is heading.

QQQ also has an intraday closing positive, but like the IWM, it couldn't make it to the 3 min chart, it may be early, or it may just be weak, trying to hold the two averages at the op-ex pin for tomorrow.

QQQ 5 min shows how close the averages really are to the cliff.

I'll check the Futures later as that's really all that can save this market or rather give it a VERY temporary reprieve.