Important Market Update

I've been looking at the market all morning (the day after) and while I didn't listen to CNBC yesterday much longer than I had to, I've seen (I think we all have seen) QE expectations earlier this week go from "No taper until 2014/2015" to, "The F_E_D can never taper" and even "They'll announce an expansion of $15 bn in additional Treasury buying a month".

What a difference a day makes, today the "consensus" seems to be a taper in December.  My point is simply like the tongue in cheek prediction I made that the F_O_M_C would increase asset buying, but they'd do it last week", which makes no sense and it was not suppose to, it's a statement of how useless these predictions are.

Our best source of market information is market action itself.

I think before you make tactical plans you need to have some idea of what the broader market is likely to do, right now we are sliding down a slope so it gets a lot trickier. Retail is getting bullish again, but what do you expect, they've been brain-washed to BTD and I'm actually glad to hear it.

We all know the market can change dramatically in a few hours, even underlying trade can warn us of a change in a few hours so this is something that needs to be watched, but I saw something yesterday and I'm seeing some today, although dispersed as the averages are breaking correlation more and more.

The reason this is important is because about 2/3rd of a stock's movement is dictated by the market's movement and the second most powerful force is the Industry group which is totally at odds with the way most people pick trades, they pick the stock first and then hope the market cooperates.

MY GUT FEELING FOR THE IMMEDIATE FUTURE IS A CHOP-FEST, A GRINDING MACHINE. This is normally not the kind of market you want to trade, it's a portfolio killer.

So far I don't expect it to last long, maybe through op-ex tomorrow. 

Here are a few Leading Indicators and other things that tell me this seems to be the most probable direction (remember we have 3, up, down and sideways- no one likes to think about sideways, but it's real and it's dangerous).


*With Leading Indicators, the comparison symbol is always the SP-500 unless otherwise noted (green).

There are a few longer range charts in here, I prefer saving these for the daily wrap, but you know most of them, this is really just to demonstrate the atmosphere even with short term moves doing something different.

 Commodities intraday, not looking great, not leading positive, but this may change as currencies change trends.

This is the leading quality of commodities on a larger scale, it's the entire 10/9 cycle with commodities leading the SPX at the lows and leading at the highs. I only include this to give you a feel for the atmosphere so I'm not just leaving you with short term "choppy" (and choppy is my best guess right now based on what I see).

 HYG Credit has been pounded and it's a great leading indication for the market's important trend, however very short term...

Again these 3C charts if taken for the timeframes and the underlying trade those timeframes represent, should also tell you something.

 Intraday distribution in HYG before it falls and the slight 2 min positive divegrence that started yesterday and continues today, this would represent very short term support for the market, even if that were only sideways.

For a while it's been this HYG 60 min chart that has been perplexing as it was ready to support the market long before 10/9 and had been used in every rally before from August, finally it moves from 3C confirmation to 60 min leading negative. Many times it looked like it would do this with 15 and 30 min charts leading negative, but pulled out, now it's locked in.

Again this is to give you some sense of the structures that have been holding the market together that are collapsing.

VXX-short term VIX futures don't have the bid in them today you'd expect, but the fact they didn't make a lower low for a week also tells you something as the bid was there, I suspect there's probably some short term manipulation for the market's sake and to buy protection on the cheap.

 This is the trend in sentiment and it's not retail sentiment, it's important and it leads the market.

Again to show the broader atmosphere, this is the same indicator, I don't think it has ever been so dislocated from the market, but it goes to show where professional money has been going. It's almost a spitting image of what 3C has been telling us about the same subject.

 Yields are up today, that's short term supportive of the market, they are a fantastic leading indicator and act like a magnet for price of the market.

A longer view...

 Leading the market in August, Sept. and October whether up or down, but the current leading negative is the worst, again much like any of the leading indicators.

 This is the 60 min Yen chart, if it moves up with the 3C divergence the carry pairs move down and the market loses that support which it did yesterday and even the day before it started.

However short term I think the Yen pulls back, that allows the carry pairs to offer some short term support.

This is the EUR/JPY, you can see how the carry pair collapsed and where the market is now, however this short term 3C positive matches the Yen's short term charts so I do think the carry pairs or at least one or two will offer support.

AS OF NOW, I DON'T SEE ANYTHING IN 3C THAT SUGGESTS A COUNTER TREND BOUNCE UP AS AVERAGES LIKE THE R2K HAVE CLEARLY ROLLED, BUT I DO SEE ENOUGH TO CAUSE A DANGEROUS CHOP, WE MAY BE ABLE TO USE IT FOR SOME TACTICAL ENTRIES, BUT OVERALL I'D BE CAREFUL THE NEXT DAY OR SO UNTIL WE SEE SOME CLEARING, ESPECIALLY WITH OPTIONS.