A.M Update

Friday in The Week Ahead the first chart I posted was the decline Friday in the Most Shorted Index I keep of the top 100 R3K shorted stocks, this is the short squeeze we had talked about creating a head fake move above the multi-month range/top that started in February, it's the same move that was generated not by accumulation, but by sling-shotting around a 2-day bear flag with a Crazy Ivan shakeout that trapped shorts then forced them to cover. The drop off of that short covering on Friday looks like the end of that move which had been expected before it started as a range this large doesn't typically reverse without a head fake as that is what creates the reversal momentum, it's simply the head fake before a reversal concept that we see 80+% of the time before a reversal on every timeframe and in every asset.

Overnight however with very low volume as China/Hong Kong markets are closed, a +0.1% beat in Chinese Manufacturing PMI at 50.8 is being given credit for lifting USD/JPY in the extremely low volume overnight market, thus lifting Equity Index Futures.

In Europe, the ugly mix of low inflation and near record unemployment as well as another (second in a row) overnight miss in Eurozone May PMI (from 52.5 to 52.2 on consensus of 52.5) that sent bonds higher has set expectations even higher than the already lofty consensus expectations for Thursday's (6/5) June ECB meeting, with an overwhelming number of economists expecting NEGATIVE INTEREST RATES via cuts to the deposit rates with additional expectations of the main benchmark lending rate to also be reduced. Furthermore there are expectations for a new ECB long term LTRO program and easing of lending standards with many expecting Draghi to do more than "HINT" at possible outright QE at the press conference after. I believe the economists surveyed are largely on board with this line of thought with something like 56 of 58 holding these expectations which leaves a lot of potential for disappointment with Thursday's meeting/policy announcement and press conference. This is one of the main events this week along with Friday's US Non-Farm Payrolls.

The Calendar for the week in the US...

 Today we also have US Manufacturing PMI right after the open and ISM Manufacturing at 9:45 and 10 a.m. respectively as well as Construction spending at 10 a.m. for US tier 1 data.

Back to China, there are increasing expectations that the tweaks China has been making in RRR for small and now larger banks may be signaling more aggressive policy from the PBoC. In April RRR cuts were made for smaller rural banks, the new round is for larger banks that have met certain loan ratio levels specifically to the Agricultural and SMALL BUSINESS sectors, imagine that, small business!

China's PBoC has a different take on policy than most central banks, a very long perspective of decades, not years, so it's very likely these are "tweaks" to policy to help with lending costs, despite last week's China Securities Journal that suggested actual debt monetization (QE) which has no official source, just speculation from a magazine.

In any case, with the data overnight, it has helped the QE crowd sentiment and thus driven USD/JPY higher overnight, which now has an intraday negative divegrence on the charts.

USD/JPY 1 min

Obama is going to propose cutting US power plant greenhouse gas emissions by 30% from 2005 levels, thus UNG may be very interesting this week.

This general overnight movement is somewhat in line with Friday's charts as I went through watchlists, there were numerous great looking set ups, but almost universally they all looked like they needed a couple of days to flesh out their reversal process as shown with the NFLX charts Friday, they are a good proxy for the watchlist in general.

I'll also be watching the most shorted names.

I'll be posting a look at Futures in general, I saw some interesting things last night.