Dow Closes Red for 2014, SPX Makes it Back to VWAP

So far, the USD/JPY has been very reliable for market action this week, however I think there's little doubt that things are getting significantly weaker...SPY Timeframe Update

As the title says, the Dow closed red for the year and ES closed at VWAP after significant weakness coming on the heels of two failures of USD/JPY to break and hold above $102 early this morning and around 8:30 a.m. EDT.

ES closed like this at 4 p.m....

 First a walk down the lower VWAP standard deviation, then a bounce to VWAP at the close .

As we expected yesterday, this makes 4/4 when ES has dislocated from the USD/JPY, only to be dragged back to the correlation almost no matter what it takes, but it's interesting that ES ended back at both the USD/JPY correlation and VWAP.

The SPY Daily had an interesting close...

The candlestick pattern in the yellow box which would also be considered a false breakout/head fake is a Doji reversal with confirmation yesterday and today as well, but today's candle. although it's technically nothing, did move up off the lows on heavier volume so I looked at the Dominant Price/Volume Relationship of the component stocks within each of the major averages and found a dominant relationship as I expected based on today's close/volume.

The dominant relationship for all of the major averages was Close Down/Volume Up, which is a short term oversold condition and typically the next day closes higher. 

Here's how dominant the relationship was: Dow saw 23 stocks in this category of the 4 possible categories, the NASDAQ 100 saw 73 and the SPX-500 saw 333, so very dominant. This is however, only a short term signal.

I also found the intraday action and close interesting.

 SPY 5 min intraday leading positive

SPY 1 min going negative in to the close.

IWM 5 min leading positive

IWM 1 min going negative in to the close.

DIA 5 min leading positive

DIA 1 min intraday going negative in to the close.

It seems like the averages "could have" moved higher today, but were pulled back at the last hour or so which is interesting when looking at the VXX correlation.

I have inverted SPX prices (green) to better show the natural correlation between VXX and the SPX, as the SPX moved toward the close it started falling harder than the VXX. It's as if they were aiming right for VWAP.

Still with the 5 min positives, there's not a whole lot of firepower there considering the duration which is about half a day. The R2K looked to be the best 3C intraday performer today and it's not surprising considering how many traders it has shaken out above and below its 200-day moving average.

Many traders use the 200-day m.a. as a trade signal, they would have been eaten alive the last month.

As for Leading indicators, I don't know if it is a bounce as we expect and hope to use to short in to or Options Expiration (pin) tomorrow, but there are some very short term signals and then the more serious ones and a bit of difference between them.

 HYG (High Yield Corp. Credit) is still leading the SPX, it hasn't fallen yet or not that bad so I still expect some sort of bounce and with the Yen signals moving, that could provide the bounce.

However, pro sentiment isn't waiting around, that has turned negative on our first...

And second indicator we use.

As for Yields, like VWAP or the USD/JPY correlation,  the SPX has come right to Yields short term. However as I have pointed out several times this week...

The SPX still has quite a bit of catching down to do to longer term Yields.

As for breadth...

 The NASDAQ Composite's A/D line has fallen out with the Comp.


The Percentage of all NYSE stocks trading above their 40 day moving average has dropped from 77% around late February to 51% today.

The Percentage of all NYSE stocks trading 2 standard deviations (momo stocks) above their 40-day has dropped from 30% to 1/3 that, about 10%.

As for futures, I'll check them again later tonight. but for now...

Index futures aren't giving any signals right now, they're pretty much in line, that's not only intraday, but out to 5 mins as well where they were negative before today, they are still negative on longer timeframes.

The Yen looks like it will come down at some point over the next 24 hours, but the $USD remains very weak, we may see more action from 3C signals of the averages than the USD/JPY.

For now, I expect tomorrow to be the typical pin, maybe some upside based on the Dominant P/V relationship and candlestick close, however, I would be using any strength to get in to shorts that finally look ready.

* On a side note, Appaloosa released their 13-F quarterly report for Q1 2014, 45 days after the end of Q1, this is why I would never try to trade according to their holdings.

Some of the positions (as I often mention position sizes of the big boys being much larger and taking much larger to fill out) include $1.1bn in SPY calls (as of 45 days ago), about $815 million in QQQ shares, $492 mn in GOOG and $480 mn in Citi and these are considered "moderate" size positions.

Interesting huh.

I'll let you know if anything interesting pops up in futures tonight, I kind of doubt it with op-ex tomorrow.