Quick Index Futures Update-VIX Futures are SCREAMING

Many of you who are using 3C have either read my articles posted on the members' site "Understanding 3C" or have heard directly from me in emails or in posts that while you can (and I often have to as a f) look at 3C and try to glean information , especially using multiple timeframe analysis and multiple asset confirmation, your best signals and strongest edge by far is when the divergences jump off the chart without the need to even look closely. I have often remarked that I use to go through several hundred charts a night to get a feel for the market as numerous assets would share a divergence or relationship which would be telling of the overall market, but I would go through about 2 assets per second (using the space bar to flip to the next chart) and when a divergence stood out at that pace, it would literally be so obvious it "Jumped off the chart" or was "Screaming".

I often remark, "These are the divergences that I NEVER ignore".  While this is an update of the Index futures for the most part, and I wish you could see what I see on the larger macro post I'm trying to get out and will get out today (I just have to keep an eye on intraday trade and opportunities between trying to finish the post) as I remarked yesterday, I took a look at VXX/UVXY and XIV (for confirmation) and their charts are "screaming" in multiple timeframes with multiple asset confirmation and it was really only the intraday 1 - 3 min timeframes (the timing charts) that needed to fall in line, otherwise, someone with deep pockets has been accumulating not only short term VIX futures via VXX/UVXY, but more specifically, actual VIX futures.

This taken with the sudden sharp rise in the SKEW Index of 16 percentage points in to the deep red zone >$140  which at minimum as demonstrated last night has called just about every IWM/Russell 2000 top this year leading to at least 5-11+% corrections, is something worth taking notice of as I doubt few have seen what we are able to see.

The point of SKEW (as a CBOE creation like VIX, with many years of history at the CBOE that are not visible to us as they just started publishing SKEW late 2011) as a CBOE metric of tail risk as demonstrated most clearly by the 1987 crash, was to measure tail risk or the probability of an unlikely event, thus it is called the "Black Swan Index", it was not meant as a timing indicator as many use to use VIX for levels of complacency and fear to signal market reversals, SKEW is meant to show the probabilities of a much deeper market event to the downside, it just so happens that its use in hedging has also called just about every R2K top/correction this year (which is as far as I looked last night).

Quickly, SKEW is a measure of out of the money options and specifically a rising SKEW points to an increase in the buying of deep out of the money puts that are only of value with a sharp move down to their deep out of the money strikes.

In any case, here's the Index Futures and more important VIX futures update. *The 1 min charts of the Index futures are going to look a little different, but if there were any divergences of anything important that has changed since their capture, I'd update those charts so there's nothing of importance that has changed on the faster moving 1 min charts.*

 ES 1 min Index futures 3C chart, as mentioned in the A.M. Update, in a near mirror reversal of yesterday's A.M. Update, in which the IWM was in line with overnight , pre-market price gains and Dow, SPY and NASDAQ futures were at negative divergences of differing intensity, which led to a massive dislocation between the averages with the Russell 2000 closing up +1.22% and the Dow closing nearly down, at a slight gain of a mere +0.04% with the SPX around +.30 and the NDX in the middle, this morning ES was the one in line while NQ and TF were negative going in to the cash open which seems to have played out almost immediately after the cash open with declines of the gap up to gap fills.

This shows a positive divegrence overnight around 10 p.m. to midnight and then in line (green arrows) or price/3C trend confirmation, with the exception of a small negative with a small pullback and returning to in line.

At the cash open, ES/SPX futures was still in line with price action.

 A closer, more detailed look at ES just before the cash open (vertical green arrow) shows a small positive divegrence from 5 a.m. to 7:30 a.m. leading to the highs which were still in line and a negative divegrence just after the cash open sending ES lower and in to a positive divegrence at the 11:15-ish lows. ES is still in line with price right now, but starting to look a little tired, a possible negative to form soon.

 The 5 min, stronger, more important ES / SPX futures chart shows a negative divegrence in to last Friday's gap up highs which is one reason the A.M. Update on Friday suggested fading the gap up intraday. Since 3C has not recovered to in line and remains in leading negative position with this morning's gap up also negative and a deeper leading negative divergence taking hold since pushing toward a new 3C leading negative low.

This gets more interesting as you see the VIX futures charts and their migration to timing charts.

NQ / NASDAQ 100 futures were negative before the open and reversed off the opening highs.

This is the NQ 1 min chart hitting an intraday leading negative divegrence. To the left you can see an overnight positive around the same time as ES above, right in to midnight (EDT).

The 5 min NQ chart also shows last Friday's negative in to the gap up opening and the fade trade mentioned in the A.M. Update intraday. It to is in leading negative position since and has not recovered to in line with this morning's strength seeing a negative divegrence. Compare the leading negative of 3C vs. price at points A and B and you'll see the larger leading negative 3C divegrence. Again the movement in VIX futures is very interesting below.

An updated TF 1 min chart is required...

This is an updated TF 1 min, there's not a positive divegrence at the 11:15 lows, however 3C is in leading positive position. I looked to confirm on the IWM and have intraday timeframes after 2 min in line, the 2 min is leading like this, however the faster 1 min (all new divergences including intraday will show up here first) is showing deterioration of this divergence although it will have to migrate to the 2 min chart to neutralize it. I'll keep an eye on it, although I'd say there is some support taking place in the area- likely the invisible hand.

 5 min TF/Russell 2000 charts show the same distribution in to Friday's gap up highs and the fade intraday, in line since and leading negative again at today's highs with a deeper leading negative divegrence developing.


The VIX FUTURES (not spot or VXX)

 You may recall the longer term 60 min trend with a strong positive divegrence in VIX futures, this lead to a bounce off the 11/10 lows, the same place our custom DeMark inspired indicator gave a buy signal, the second signal in VIX this year with the first at the VIX October highs (sell) to the day.

Note the pullback since last week...Remember the shorter timeframes have more detail, as they become stronger they migrate to longer timeframes and the intraday shorter charts show timing of an expected move.

The 60 min chart NEVER went negative and remains positive, just in line on the pullback since last week.

 The very strong, but more detailed VIX Futures 30 min chart didn't go negative at the pullback pivot highs either, but it has shown accumulation in to the pullback. This is one of my favorite trades, to have a strong macro chart like 60 min and then a pullback that shows accumulation which we can buy at a lower price and less risk. So far, this is showing accumulation of VIX futures in to that pullback, again and importantly, VIX futures NEVER went negative at the pullback area or pivot highs.

 The even more detailed, but still very strong 15 min VIX futures shows the pullback in greater detail with a much stronger looking positive divegrence in to the pullback, this is because while still very strong, a 15 min chart is not as strong as a 30 min, thus the same divegrence and same amount of accumulation will look stronger on a 15 min chart than a 30 min chart. However the point is, the continued accumulation of the pullback with the macro 60 min positive, multiple timeframe confirmation.

Remember the Index futures are negative at the 5 min charts, at the VIX futures (which trade opposite the market/Index futures), there's an even stronger looking positive divegrence, they all start at the same area, thus we have excellent multiple timeframe confirmation as once again, even on a shorter 7 min chart, THERE'S NO NEGATIVE DIVEGRENCE ON THE PULLBACK. 

The deep pocket accumulating this large VIX position as well as SKEW most likely (deep out of the money puts) , did not sell any significant amount of VIX futures that have been accumulated, thus they seem to be very concerned about a market collapse at virtually any moment which is the same thing we find in our indicators, even leading indicators seen this morning as the size and length of the negative dislocations and divergences are OFF THE MAP, meaning no historical precedent, SUGGESTING A FAR LARGER MOVE DOWN THAN THE OCTOBER RALLY UP WHICH WE KNEW WOULD BE STRONG BECAUSE OF THE SAME INDICATORS WHICH DON'T EVEN REGISTER NOW VS. THESE DEEPLY DISLOCATED AND NEGATIVE SIGNALS .

Add in VIX futures accumulation and SKEW rising 16 percentage points in to the deep red zone in a mere 3 days, something is certainly going on and deep pockets are quite concerned with a sudden break in the markets, which as mentioned earlier is why I didn't support the October lows as being that final break as too many people were calling for a bear market at the time. As history has shown us, tops have tended to be at all time new highs (1929, 2000, 2007, now)...