Daily Wrap...

I think you probably have a good idea of my near term and larger term expectations for the week ahead and beyond, lets not forget what happens after and where the highest probabilities are to be found... This market is moving to stage 4 decline no matter what happens over the next week or even month, it's pretty much etched in to stone.

Beyond what I've already posted all tis week and specifically today, here are a few additional indications from Leading Indicators, headlines  and a few other sources.

This was the 4th consecutive week of SPX losses which is the worst performance since August 2011, a great month for us. Transports continue to rip higher, this time not diverging so much with Industrials, but the signal is in. The $USD, as we predicted 3 weeks ago, saw its second week closing lower after 12 consecutive weeks higher as we saw negative divergences building in about 3-4 weeks ago. And the Central banks were to the rescue with the San Fran F_E_D calling for a possible QE4, Bullard saying "Maybe we should hold off on ending QE3, the month it's due to end and then the ECB's Coeure today saying asset purchases are to begin any day now, it was a PPT/Central bank jawboning week.


We were right yesterday when we (me and the mouse in my pocket) believed that any additional base work that needs to be done, which is at this point, minimal, would have to be put on hold for monthly options expiration as the probabilities heavily favored puts over calls and likely out of the money strikes so really any upside does the job of causing the most number of contracts to expire worthless.

The 5 and 7 min 3C charts for the Index futures are calling for a near term decline and short term treasury bounce , as the move opposite each other most of the time, this makes sense. As for the longer term, bigger move, the 60 min positive SPX futures with the 60 min negative 30 year Treasury futures which was covered extensively last night in the Daily Wrap, also makes sense along with the 60 min negative VIX futures which also move opposite the SPX futures.

There was a near term 3C hiccup in HYG, but nothing to worry about, HYG is leading as it should and on a pullback, it will create that much larger of a leading gap.

 HYG leading the SPX, an SPX pullback will only make this a stronger leading relationship.

While HY Credit was in line yesterday, short term 1min today it failed to move higher suggesting a near term pullback, but there was no panic selling, again suggesting a pullback rather than anything more ominous.

 Yields led the market higher with a positive divegrence at the lows and then reverted to the mean by the close of Treasuries today, that opens the door for a pullback, yet again, yields are not negative or leading negatively.

 And finally professional sentiment is leading the SPX.

Our custom indicators show the larger base area being built, the VIX term structure inversion buy signal and today's slight negative forecasting a near term SPX pullback as well.

The major averages ended the day largely with 1 min positives and 2 min negatives suggesting a higher open Monday or at least in the area of today's close, to be followed by a pullback. Intraday market breadth in to the close would support this view.

As for internals, the Dominant Price/Volume Relationship fits expectations almost perfectly with the SPX, DOW and NASDAQ all coming in at Close Up/Volume Down, the most bearish of the 4 relationships, typically resulting in a close lower the next trading day.

Also helping that sentiment was 9 of 9 S&P sectors green with Industrials leading at +1.98% and Utilities lagging at +.58%

And to seal the deal of the 238 Morningstar Industry/Sub-Industry groups, a whopping 202 closed green, all near term overbought signals typically resulting in the next trading day closing down, essentially what we are looking for.

Just stay patient, there's tons of opportunities, but it's a alot easier to stay patient and keep your chips than it is to try to make something happen and try to make your chips back.

Have a great weekend!