Daily Wrap

I'm going to try to keep this short, but there really is so much that could be covered. I saw some analysis suggesting today was the result of bad economic numbers out of China, I couldn't disagree more.

I've been monitoring currencies for at least a couple of months now several times a week as they started with slight changes in character within their respective trends to complete break downs of those trends, this connection moved me so much that I probably spent somewhere around 10 hours this weekend writing about it (Currency Crisis and Currency Crisis Continued).

Other events: Friday's collapse in commodities, it wasn't just gold and silver and the $USD was down making it a favorable environment for gains.

Also on Friday Yields being very bearish for stocks

The VIX futures move on Thursday followed by Treasuries on Friday prompting the post, "TLT and VXX-Real Organic Demand, Fear and Greed?" both were events so out of character that I felt this was the first time we saw real, true organic supply/demand dynamics in play and both were moves toward protection and/or a flight to safety as well as a very clear relative sector performance moving to safe haven assets.

Friday morning in the Pre-Market update I showed the futures charts in multiple timeframes leading me to say,

"Here's NQ first because last night I looked at every timeframe here, 1m, 5m, 15m, 30m, 60m, 4hr and 1-day, all leading negative. I don't recall ever seeing that ll the way through and the longer the timeframe...I say, "When 3C charts jump off the page, don't ignore them" These are the charts I don't ignore."

Even a simple Market Update on Thursday showed some intense distribution.

Last Wednesday in yet ANOTHER example of this concept I'm ALWAYS sure to remind you of before any F_E_D or F_O_M_C event, I put the warning in the title of the post itself...
"Minutes Leaked From the F_E_D...As Always, Beware the F_E_D Knee-Jerk Reaction"

For newer members, the concept of the F_E_D Knee-Jerk reaction is simple, after year of observing the events and reactions I have found whenever there's a F_E_D or F_O_M_C event or policy disclosure, there's almost always a strong knee-jerk reaction and that reaction is almost always wrong as it is reversed usually within a matter of days.

Here are examples from recent F_E_D / F_O_M_C releases to illustrate the concept.

September 13, 2012, the much anticipated QE3 program is announced by the F_O_M_C, the market rallies hard the rest of the 13th and part of the 14th, the knee-jerk reaction.

 Although conventional wisdom was that the market would fly from there as it had before, I wasn't ready to give up on several shorts and go in 100% long because we had multiple long term 3C charts showing  negative divergence in to the F_O_M_C policy announcement, there was accumulation before it that ran the market higher, but as of the 13th, 3C was negative so we didn't change anything despite conventional wisdom and a lot of emails about "Not fighting the F_E_D".

 It turns out the knee jerk reaction were the highs which were not seen again for another 5 months as the market headed -8% lower.

Wednesday's F_E_D minutes knee-jerk reaction and today.

There were a lot of reasons last week that were cause for concern long before the Chinese data missed last night.

I'll be bringing you the futures in a bit after they develop a bit more in to the overnight session.

So far there are 1, 5 and 15 min positive divergences in NQ (NASDAQ futures), 1 min positive divergences in TF (Russell 2000 Futures) which the R2K by the way was the day's worst performer at a loss of -3.78%, nearly double most other averages.

The Russell 2000 would have made for a better "Trend Channel Warning"

The Trend Channel Stopped out the R2K Trend on February 21, 2013 @ $912.15, the R2K closed at $907.18 today, if you were trying to ride the trend and figured the last 2 days before today were just small corrections, you would have made more money stopping out in February than holding through today.

In 1-day the R2K took out 6 weeks of gains and most of the last two and a half months, this is what I've been warning about and now we have a real world example only days, even a night after I last warned about the Trend Channel Stop out (which I warned about dozens of times since it happened).

As for the other futures right now, the ES (SPX futures) are positive in the 1 and 5 min timeframes.

I'll have more on futures and some other stats in a bit as they develop.