Headline: Dow New Highs-Not a Surprise

It's always easy to say something like, "not a surprise" in hindsight, but this was said in foresight.

Last Tuesday this subject was addressed specifically in "More Data" and addressed quite specifically...

"This is just more data that backs up my position that we will almost certainly see a correction/bounce to the upside, the thing is, saying that or hearing that right now sound reasonable and most people feel like, "OK, cool, this will be an opportunity like he's been talking about".

However, Wall St. rarely does anything half-tooshied. When they wanted a low volatility melt up to drag dumb money back into the market with no pullbacks to scare them and a bunch of nightly news headlines, "This is the highest the Dow has been since XYZ0!" they did it and did it well.

When they want to scare people out of positions, they do it and do it well, you'll see a downside move like yesterday that sends longs in to a panic, shorts chased it and likely we'll get an upside move that may indeed make that all-time new high in the Dow that CNBC was talking about yesterday morning just before the market crashed.

The point is, be prepared for an emotional assault that is meant to touch on the two things that move the market, FEAR and GREED. 

This is all part of my market Pendulum concept, it swings way too far one way and way too far the other, don't fear it, it truly is a gift/opportunity.

To give you some proof to sustain you, although I doubt you'll recall if we get the kind of move I'd expect, here are a few charts...."
Last week another post was devoted to it, last Thursday, "One More Try"...

"This could be nothing (although I doubt it), it could be the start of a move for an options expiration pin or it could be that new Dow high I think Wall St. would love to have, especially on a Friday, but there's some movement in futures."

This chart followed

As it turns out, it was both, an op-ex pin Friday and a new DIA high which was mentioned many times last week, especially later in the week.

There were a number of posts on this subject of Dow new highs more than a week ago, I can't cover them all nor is it necessary, my reasoning for posting these should be clear.

This was even addressed last Monday, Feb. 25th  in "Market Wrap", specifically in a number of breadth charts, here's an example chart and excerpt from the post....

"The Percentage of ALL NYSE stocks above their 40-day price moving average taking a dive from about 85% to 50% now, this is unspeakable horror, but also likely an indication of an oversold condition which would only be good news for us or those who want to set up shorts in to price strength rather than chasing them."

The reason for addressing the move in so many different posts (I probably haven't even covered a quarter of them" was to help explain how smart money lures retail in to the market, but more importantly as I said in the post, "More Data" from last Tuesday, "To anchor expectations so you don't fear the move that is meant to touch on an emotional nerve".

That's more than enough Monday morning quarter-backing or, "I told you so", this is so not the point, but it is important to understand market behavior and make decisions based on facts and with as little emotional intervention as possible.

By the way, the chart above, "Percentage of stocks trading above their 40-day moving average" at a new high in the Dow, looks like this tonight (with the Dow-30 as the comparison symbol in red)...

From over 85% of all NYSE stocks above their 40 day moving average to a low of less than half, this is the same night I said this indicator was "oversold" and we'd likely see a bounce/move higher. At a new all-time high in the Dow, there are only 60% of stocks trading above their 40 day moving average, these aren't even the stocks trading 1 or 2 standard deviations above the 40 m.a., this is the simplest, largest portion of stocks, still 20% points lower than January with the Dow 4% higher since.

Rather than getting wrapped up in headlines of "All Time New High", what was more interesting was what was happening as the Dow was making this historic move ( as Cramer noted, the last time this happened it was the top of the 2007 rally and we know what happened from there), I was more interested in what was happening in the averages that lost all momentum by 11 a.m. If we aren't making further highs, what is going on in the averages? Here are a few snap shots of intraday underlying trade...

 Note the failure of 3C to confirm the new high is almost exactly where momentum died and the rest of the day was spent in a leading negative divergence, most to new leading local lows.

 the same with the QQQ

 The SPY's failure to confirm...

And a closer look at the intraday action.

Several of the Leading Indicators appeared to be, if not strong, in better shape than they were a day or so ago, however we must remember the larger picture in which most are severely dislocated from the SPX's trend. Take High Yield Corp. Credit for example...

 Intraday HYG seemed to be following the SPX well, however it is locally dislocated and on a longer term basis, severely dislocated, but even intraday, things weren't as they appeared...

A series of negative and leading negative divergences at HYG turning points including today's leading negative divergence, much like the major averages.

I'm not going to go on and on about everything I see, what is important is how we proceed, where we can identify opportunities, where we can mitigate risk. Today weekly QQQ puts were taken on and had gained over 40% intraday alone, they were left open for now.

As for futures...

ES is difficult to scale because of the short history, but I'll try to give some perspective.

 ES went sharply negative as the regular market opened around 9:30, after hours saw a leading negative divergence, keep an eye on the red square, it will be the same in the next chart.

 Here 3C looks higher than it should be because of scaling, but this is a deeply leading negative divergence.

 The 5 min chart has a large enough negative divergence that I would take the SPY Out, which was added to today.

 This is the NASDAQ 1 min futures today, also turning negative at the open and deeply leading negative after hours.

 Here were are even deeper as NQ goes very flat.

As for the 5 min chart, I'd take the weekly puts on this signal every time, as mentioned, QQQ weekly puts opened today were already worth over 40% today just on the loss of momentum, this is why it was and always is so important to me.

I feel good about the GLD Calls still, the futures look pretty good, they look like they'll lose a little momentum overnight...

 YG/gold futures

Unlike the averages today, GLD was leading positive in to the pullback off the opening gap, specifically right after the a.m. gap was filled.

The yen specifically has been gaining today, but as I showed earlier tonight, there are divergences in the AUD/JPY and the AUD and JPY individually, I think this will be key to market movement tomorrow.

I don't have a problem with the ES 5 min chart, I'd have taken that as a Put and that position was addd to today, but the NASDAQ futures are the kind of divergence I just DO NOT pass up.

I'll leave it there until pre-market.