Market Update

I'm still collecting my initial impressions. Retail apparently is not buying this move, it's no longer "Buy the dip", but rather, "Sell the rip", but they are fickle, as I said last week it will probably take a couple of days of 1% PLUS gains to swing them to the bullish side, but from my retail sentiment sources (aka: Sam the Great) it seems the "September Seasonality" is what retail doubts. In fact just as a measure of retail, our options tracking portfolio is in the top 10 just from the changes made Friday, that gives you some idea of what retail was thinking as they were on the absolute wrong side of the move today.

Speaking of sentiment as it relates to retail traders,  from a little book every trader should have for at least some general reference, The Stock Trader's Almanac, they have this to say about September (generally-this is just a snippet)...

"Since 1950, September is the worst performing month of the year for DJIA, S&P 500, NASDAQ (since 1971) and Russell 1000....Although September 2001 does influence the average declines, the fact remains DJIA and S&P 500 have declined in 9 of the last 15 post-election year Septembers. "

Several well known financial sites have also put up charts showing September as a disaster vs. other months of the year.

I respect history, I like what Mark Twain said, "History doesn't repeat, but it does rhyme" (paraphrased).

The way I look at the "Situation" with Syria and the market is that we have been looking for this decent bounce, although the underlying tone of this particular bounce cycle is very weak for obvious reasons (it's likely to be the last or as I have been saying, "We are not close to the big picture, we are in it now"), in any case, the 10-days or so it will likely take Congress to get a vote together is a perfect time for a bounce, the uncertainty leading up to the vote and perhaps just after is the perfect time for a sell-off and net/net September may still be one of the ugliest months of the year EVEN WITH A SUBSTANTIAL BOUNCE. 

The gap from this morning WILL be filled, but it doesn't need to be filled until the bounce is over so it can just as easily be filled in 10-days or so on the way down. 

One bridge at a time though and we are in the very early stage of a new week coming out of a.m. trade, my main concern this morning is not what retail thinks, THEY'LL DO AS WALL ST. TELLS THEM (with Wall St. using the psychological power of market movement), MY CONCERN IS MORE WITH SMART MONEY.

HYG is down this morning and while I FULLY expect the underlying trade and other indications to look HORRIBLE in to a bounce at this stage, I don't like it this morning.

The saving grace this morning may be this intraday HYG chart which did sghow a late day negative divegrence Friday so I suppose weakness early Tuesday is not to be unexpected.

 I did not like the opening of HYG as a measure of "Locals'"sentiment (pros), but 3C did show a negative around 2:45 Friday and amazingly as I have shown you probably 50 times in the last 6 months, the ending 3C charts at the close, always pick up on the next trading day EVEN OVER A 3  (or effectively 4- day because most of Wall St. took Friday off for a 4-day weekend) DAY WEEKEND.

The saving "grace" here is the rounding of price and the start of an intraday positive 3C chart, it kind of looks like HYG was intentionally knocked down to purchase it at a cheaper price and why not if Wall St. had a head's up on Obama's sudden turn to Congress?

The 2 min SPY was leading positive so the gap up is not a surprise, this is "part" of what I was seeing Friday that had me so busy moving positions around.

The opening indications here are not that of early confirmation, they are that of "sell the rip", which retail is undoubtedly doing this morning, give them another day or so of positive market momentum and they'll be screaming longs.

This is the 1 min SPY, this shows there was no confirmation of the gap up, smart money isn't going to buy it, they were already in and moving in at break neck speed Friday, so retail is obviously shorting the gap up, that makes for a short squeeze and a real nice start to a solid (price wise) bounce.

I'm looking at VXX, VIX short term futures for indications and they DID confirm the gap down (they move opposite the market), however they were negative in to Friday afternoon so we should expect that based on the way 3C behaves the next trading day or rather the way price behaves based on 3C signals the next trading day.

The 10 min VXX chart is leading negative so this is absolutely supportive of a bounce and a decent one at that.

When I say I'm looking for a bounce, I don't mean a 1 or 2-day move, I mean a pre-planned cycle, an intentional move that has a purpose, to lock retail in to long positions before the market makes the next leg lower.

At 15 mins though, VXX is in line, this is the transitional timeframe, at 30-60 min it is positive, this reflects the big picture, meaning the bounce can be strong, BUT IT HAS A ROOF ON IT OR A LID AND THE PRIMARY (BIG PICTURE) underlying tone here suggests the market's big picture trend down will resume with even more force than that of the bounce WHICH IS EXACTLY WHAT WAS EXPECTED.

So at this point this morning, I'm just trying to make sure we are still on track as HYG did throw me a bit until I saw the divergence Friday and thought about the size of positions in credit and the fact they'd take more than a day (last Friday) to turn up the size on and that can't or won't be done by smart money in to higher prices so I'm now more comfortable with the open.

Now, where to go from here.

I have a VERY speculative play I'm looking at, this is SUPER SPECULATIVE, but I may just jump on. Let me throw some more analysis and timing together and I'll bring you that if it still looks good (HUSA long) and I'll also update the other asset classes including precious metals.