Again, why are levers needed if there's so much strength in the market. Even more interestingly, with such low liquidity, why not by some Index futures contracts unless you don't feel good about holding them, it would have the same effect in such low liquidity.
In any case, there's a slam in all of the JPY pairs as well, USD/JPY and AUD/JPY both showing distribution in to the move, EUR/JPY is in line as the Euro looks for a 3rd day of strength which has weakened the $USD the last 2 days, thus it would stand likely the USD/JPY as well which is probably why there's a negative divegrence in the pair which were launched with the VXX slam. Even more interesting, there's VIX futures accumulation in to the slam. I'll cover VXX separately as this is fast moving.
After looking at leading indicators, it looks like a ramp not only in the SPY Arb, but JPY carry pairs as well, however it may be a last Hurrah as HY credit is selling off in to the move and the negative divergences in Index futures are worse, I'll update the averages as well after this post. It almost looks like "
Push the market , but use a stock, don't touch it" meaning don't commit funds , use indirect methods. For example, a VXX slam can be accumulated killing 2 birds with one stone. The HYG divergence (positive) from last week can be sold in to further strength, killing 2 birds with one stone, but NOT touching anything like an SPX future that might carry risk on the downside where as VXX accumulation , well it moves opposite the averages.
This is the IWM chart right now, you'll see it looks amazingly like the Russell 2000/TF Futures...
IWM intraday
And the Q's...
QQQ intraday 1 min
2 min, which looks very similar to the NQ/NASDAQ futures chart.
In fact, if I can confirm this looks to be a set up, I'm going to be forced to decide if I can create some extra liquidity and add to SQQQ today, or perhaps a similar asset, depending on what looks best, right now, QQQ seems to look best.
That's my gut feel of the look of all of this.
VXX (blue) vs SPX, with SPX price inverted to see the correlation, the slam in VXX short term futures has been all morning, but that wasn't moving the SPY, thus that last vertical drop whack in VXX.
VIX itself vs SPX (SPX not inverted, just normal) shows the VIX is actually moving up when it should be moving down.
Don't forget about the VIX buy signal and the pinching Bollinger bands.
With the averages up on the whole, Dow is red), why would VIX be moving up?
And for SPY Arbitrage HYG needs to move higher and look at the week's support, again in my opinion Consumer Sentiment support / Black Friday, the barometer of the holiday shopping season.
While most Americans don't understand economic data like the Richmond F_E_D , ISM, PMI or even GDP, THEY DO UNDERSTAND "DOW DOWN 200 POINTS TODAY", WHICH IS THE LAST THING I THINK THE INVISIBLE HAND AT THE F_E_D AND WHITE HOUSE WANT TO BE HEARD. Americans can put 2 and 2 together in already bearish sentiment among consumers and understand that headline or even misunderstand it, but all the same it won't help shopping on Black Friday.
Thus HYG's increased ROC today, which is also the red flag of a change of character, while supporting SPY Arb.
TLT is the 3rd and last asset in the SPY Arb, it needs to be flat or move down...
We went long TLT via short TBT (which gave us a 2x leveraged TLT long as there's no viable TLT leveraged ETF). Since you can see TLT (blue) vs the SPX just take off.
This is a non-sequitor.
A move to the safety of bonds is a flight to safety in the middle of a risk on move, but just as we saw the opposite happen at the October lows, as I said then, I believe this is the handing off or rotation from 1 asset to another. Broken down in simple English, moving to bonds while the transitional equity period takes place.
I'll have to update TLT specifically, but with the 60 min large positive divegrence, I doubt any corrective or downside move in TLT will last long. 30 year Treasury futures moving up/yields down was one of our macro themes,
that has already been underway so it's not a theme anymore but reality.
However as sharp as the TLT move up has been , putting our short TBT position at a gain, today's rate of change and flat trade looks a lot like either the relative under-performance needed to activate SPY arbitrage or it's a flat range with near term distribution which I do see today. TLT moving down would increase the effectiveness of the SPy Arbitrage lever.
As for High Yield Credit (
not HYG which is manipulated, but also in a large trend dislocation vs the SPX like HY credit above), there's a very obvious large dislocation which is bearish for the market outlook and when I say, "Off the chart" or "Off the map", LOOK AT THE LAST NEGATIVE HY CREDIT DIVERGENCE VS SPX AT THE SEPTEMBER HEAD FAKE HIGH (yellow), that caused one of the largest moves down this year and the most bearish sentiment in multiple years.
Imagine the size of the move with a dislocation this much bigger than in September!
Intraday, HY Credit, a risk asset that usually follows equities, is NOT, it is instead heading the opposite direction. It is not useful in the SPY arbitrage so there's no reason to push it higher.
5 year yields have long been one of our most useful leading indicators as they tend to pull equity prices toward them so this long trend dislocation in yields and especially the recent increased downside ROC is very strong, negative pressure on the market which may be why the SPX couldn't move without at least 3 levers being pulled, HYG, FX and SPY Arb.
However intraday, note the virtual stop in the trend, it is lower than yesterday's close at the top of the yellow box, but not at all the same other wise.
This is no more than a short term lever if it works, the larger trend above far outweighs this.
And 30 year yields,. again the last time they diverged from the SPX in green was at the September Igloo/Chimney head fake highs leading to stage 2, but no where near as large as this dislocation which has picked up incredible downside recently,
another macro trend forecast that has taken place.
However intraday, again like 5 year yields, essentially flat.
This is ES's 1 min chart, the pre-market positive divergence failed utterly and the ramp on VXX slamming and FX pumping hasn't seen 3C confirm, in fact the exact opposite.
TF/R2K futures intraday are at best, in line.
And NASDAQ / NQ futures remain leading negative, see the QQQ charts above.
USD/JPY, NO positive divergence at the lows and in fact a negative divegrence in to the move higher. This has something to do with EUR, however it lifts ES
which is in purple in all of the charts below.
USD/JPY vs ES, you can se the clear correlation in addition to a VXX slam and SPY Arb.
However as shown earlier, the divergence between this long correlated pair is growing, USD/JPY trending lower while ES struggles higher.
The AUD/JPY was slammed up as well, all JPY pairs were, however again the AUD has weakness near term and as a macro trend.
AUD/JPY v ES on a longer term also diverging.
EUR/JPY leading ES, this is one I believe is strong (EUR), which weakens the USd, thus probably the USD/JPY which is probably why there's a deep negative divegrence in USD/JPY intraday.
While VIX futures were slammed, apparently someone is using that to their advantage as I laid out above,
"Killing 2 birds with 1 stone".
And VIX futures longer term weekly trend as well.
I'll update other assets as well as potential trades in individual posts as we should start moving faster.
If there's any doubt the SPY Arbitrage works, at the last posting before the VXX slam it was adding about $.20 cents to SPY price, now after the VXX slam...
Now 3x that at +.60 cents.
While the CONTEXT ES model shows ES overvalued right now by at least 40 points!
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