Leading Indicators Update

Because of the shortened holiday week, today is the last day for institutions/private equity, etc. to place trades and have them settle for November (count as November, - there are several reasons this is important, window dressing, even though it's not quarter's end is among them), this is because of the "T+3 Rule" or "Trade + 3 days" for settlement.

In any case, here's a look at some leading indicators and it's a good thing I looked at breadth last night and decided to show some of the longer term indications because I discovered something I had missed previously.

 This is one of our sentiment indicators (pro sentiment, not retail), it has been very reliable, actually both have. It has seen an "inline" intraday movement right up until Friday's 2 p.m. pin release, then it started falling off and today that has just continued.

I thought it would be useful to remind you of what sentiment over the year has been, essentially how they have been allocating.

 This is 2013, when I looked at this chart it just reminded me of something else, take a close look as sentiment falls off through the year and is now near lows of the year.

Now look at the Percentage of NYSE stocks trading ABOVE their 200-day moving average, this doesn't make sense to some, how more stocks could be underperforming and crossing under their 200-day with a rising market, but look in to how the averages are weighted, the NASDAQ 100 doesn't split the stocks weight evenly among all 100 stocks (each 1%), in fact AAPL use to carry near 20% of the weight meaning if AAPL and the bottom 50 weighted NASDAQ stocks were put together and called the NASDAQ 51, all 50 stocks could have an average decline on the day of 1% and if AAPL was up 2% on the day, the NASDAQ 51 would be up for the day 1% even though 50 of 51 stocks closed in the red.

All the averages have some similar scheme, NASDAQ protects their proprietary formula, even the weight unless you buy a NSDAQ subscription for $10,000 a year. However at the same time, this is also a clear indication of the distribution that has been ongoing as the actual stocks have been sold and are trading lower than early in the year.

 The % of NYSE stocks trading above their 200-day average vs SPX in red, from 82% to 53 %, but looking very similar to the finding of the sentiment indicator above.

 This is the other sentiment asset we use because these are not part of any manipulation/lever scheme, clearly it is falling off as well

Here's the short term VIX futures (VXX) with the SPX in green inverted for today, they should be almost exactly the same, but the VIX has more support, is stronger on the day, a trend of some time and with recent signals, I couldn't pass up the positions Friday.

 Yields in red vs the SPX, yields act like a magnet and a leading magnet for equities, take a look at a larger view.

Yields are leading the SPX at the green arrows and the SPX makes a move up toward yields until the meet at "Reversion to the mean" (yellow), this is the first major Yields dislocation, but it has been going on since the Oct.9th cycle started.

Finally, HYG gets manipulated as it's market level, HY Credit does not, here you can see HY credit (one of the assets pro traders use to express a risk on sentiment) refusing to move with the SPX (green arrow) to higher highs, then it starts falling apart, the last 2-days have been particularly bad.

I'm going to look at some trades/management.