Daily Wrap

I wasn't initially going to post a Wrap tonight because I've shown you everything that has led up to this day and today shouldn't be a surprise at all if anything it's surprising it didn't happen sooner. That being said, we are positioned for longer term (most of us), we are positioned for the very short term and we know which assets we still want and have excellent set-ups to get in to them with a little patience.

However after going through my nightly rounds, I just couldn't not let you in on what I'm seeing.

I've been posting breadth charts and credit charts as well as bonds for months and last night I showed you some breadth charts I've watched for 15 years and only seen them look like this twice, the last time was the 2007 top, well if you think last night's charts were scary, wait until you see today's.

3C has been telling us this market is hollow, smart money that supports the market and the F_E_D have left town and are leaving town, there's nothing else, look at volume since 2009 and that's with a F_E_D balance sheet over $4 trillion, probably a good $3.5 trillion added since the Financial Crisis and that's about to go bye bye according to some F_E_D officials who don't want to let assets mature and roll off the balance sheet, but rather sell them and shrink the balance sheet which may be a need considering how much the banks have had to borrow from the F_E_D for window dressing, Q2 set a new record for the F_E_D's 1-day repo from which we can extrapolate from the record setting use the last day of the quarter that banks are about 1/3rd of a trillion short in assets/collateral.

In case you are wondering, the Dow had its worst day in 6 months today breaking the 50 and 100-day moving average, we know what that means and we prepared for it late today. The Russell 2000 ended July down 7% from July 1st and -6.11% from June 30th. Remember, the Russell should always lead the market.

Transports and our timely short last week, Trade Idea: (Longer Term) IYT Short, are down -3.4% on the week, the worst week in 11 months.

I showed you how bad High Yield Credit was yesterday (well almost every night, but specifically yesterday in this post), High Yield Credit (HYG) Heavy Distribution, today stocks caught down to the red flag HY credit was flashing.

 SPX (green) catches down to HY Credit (blue), but if you think that's bad, look how much more it has to go "if" HY Credit stopped selling and stayed where it is...

Remember this? And most of that extreme selling has been since July 1st.

Here's another measure of HY Credit...

 The market has been warned....

Here are some of the VERY interesting breadth charts that I had to post, you recall last night's and how bad they were and my comparison to them as of yesterday vs the 2007 top in yesterday's Daily Wrap, well hold on...

 Percentage of NYSE Stocks Trading 1 Standard Deviation Below Their 40-Day Moving Average... This was at 38.8% yesterday and shot up over 42% today to more than 55% of NYSE stocks trading below that measure...

  Percentage of NYSE Stocks Trading 2 Standard Deviation Below Their 40-Day Moving Average...These are stocks that have already seen significant declines, they were at 19% of all NYSE stocks yesterday, they nearly doubled today to almost 37%.

  Percentage of NYSE Stocks Trading 1 Standard Deviation Above Their 200-Day Moving Average... These are stocks significantly above their 200-day and were at 41% yesterday, they declined to just over 30% today.

 Percentage of NYSE Stocks Trading 1 Standard Deviation Above Their 40-Day Moving Average... , these were 21% of NYSE stocks yesterday, just over 10% today, that's coming from 55% last month!

And the best for last,  Percentage of NYSE Stocks Trading Above Their 40-Day Moving Average... This is a pretty standard measure, yesterday less than half of the NYSE were above their 40-day at 40%, that was nearly cut in half today to a mere 24%of NYSE stocks above their 40-day, again THIS COMING FROM NERLY 75% LAST MONTH!

As for the VIX bullish candlestick pattern I've been showing every day for over a week...

The Rising 3 Methods Bullish consolidation/continuation pattern did exactly what it should and continued higher today.

All 9 S&P sectors closed red, the best performer was the Defensive Utilities, but they were even sold down to -1.57$, the worst was energy (Recall our USO short set up on July 22nd, Second Half of USO Trade Setting Up), Energy was the worst performing at -2.16%.

Of the 239 Industry and Sub-Industry groups I track (Morningstar), a mere 5 of 239 were green today!!!

The Dominant Price/Volume Relationship Among all the majors was Close Down/Volume Up which is a 1-day oiversold indication and we usually close up the next day, however who knows what tomorrow's NFP  and Options Expiration (weekly) max pain pin will bring.

The one thing I see for sure in breadth and the S&P/Morningstar performance is this market is now, very oversold on a breadth basis, so I think out position taken up today was the right thing to do and we did it based on the signals which just happen to fit the breadth oversold condition.

We'll piggy-back that trade and when we get to a little correction there are numerous shorts (some of which we have calls in now) that will be at beautiful set-ups if you need short exposure, I think most of us have been ready for this day.