Leading Indicators...

As far as what we expect for this week, what we expect to see and what comes next, Leading indicators are spot on.

If you have the means to watch the strength with 3C or other indicators you like, watch HYG, that's the true support in the market. AUD/JPY is going to play its role, but it will be limited because traders in general (not smart money) know what kind of trouble China is in, we saw it back around 2011 through commodities and they have just gone downhill since then, but now that there are bond defaults, this is really serious, as in US circa 2007/2008 serious.

In any case, take a look at Leading indicators, just as we saw what was the most probable path for this week the last two hours of Friday, you can see the same in certain Leading Indicators.

 HYG is a leading indicator, actually most credit is, it's a much better informed market than equities, as are bonds. In this case High Yield Corp. Credit which we have talked a lot about this week as being the sponsor for any upside move as the strength just isn't there in the averages, was actually part of what went in to Friday's afternoon analysis for what to expect this week, we could already see HYG under some accumulation on Friday the 7th and if you look at HYG (blue) vs the SPy/SPX (green), there's a leading negative bringing the market down and HYG settles in to a lateral trend under accumulation by Friday, it continued to do so (reversal process) the rest of the week thus far and now SPY is right at reversion to the mean where HYG should take over soon.

Although we'll be watching everything, in this particular instance, HYG is the patron saint of any upside so it's an asset you want to keep an eye on looking for distribution or changes in character.

 High Yield Credit started to lead to the upside right after last Friday, which is a short term leading indicator, so equities should follow unless things really go wrong with another bond default in China or more deterioration in the Ukraine.

My experience by and large though has been, Once Wall St. sets up a cycle, even a mini cycle, they see it through because there's a reason they set it up, these aren't random moves.

 Our longer term Pro sentiment indicator is calling out a clear top, they are not interested in chasing the market, but rather getting the heck out of Dodge.

Our short term pro market sentiment is right in line with the SPY.

One of my favorite Leading indicators is 5 year Yields, you can see short term they are at reversion to the mean, the ideal scenario would be the market moving up a bit and Yields moving down as they act like a magnet for equities and eventually pull prices to Yields.

 The longer term view of Yields shows that it's calling a top here as well as it is leading on the downside, equity prices should soon revert to yields.

 As for currencies, you saw earlier that the AUD/JPY carry trade is the one Index futures are following as China is a much bigger deal right now than people appreciate so one of the ways we determine where the pair is going is by looking at the individual currency futures with 3C...

AUD 5 min is leading positive, that should push AUD/JPY up and Index futures should follow tick for tick

Again, the Yen is leading negative 5 min but VERY strong on the 15, 30 and 60 min which would mean in multiple timeframe analysis that short term it should provide some market upside as we are looking for, but the longer term charts will win out, which is perfect as we look for our stage 4 pivot.

Looking at the close, I suspected we wouldn't see downside in QQQ and IWM which is why I went ahead earlier and added to the QQQ/IWM call hedge position, so all in all, things look to be right on track, timing is "follow as you go", but expectations have been nearly exactly what we have been looking for for 3 days now.