I have a feeling the "Invisible hand" is going to try to activate the SPY arbitrage in to the close using TLT, VXX and HYG (the 3 assets necessary to use this market manipulating intraday lever) as the SPY is on a very slippery slope right now since the last intraday negative divergences, close to slipping to intraday lows.
However, let me stress this looks to be short term, if the market had the strength to do it on its own, it wouldn't need the SPY Arbitrage.
Remember , above I said "TRY", not succeed. They need to try something as yields are going to make a mess out of this market shortly.
Remember the larger trend of 30-year yields (green) dislocating from the market (SPY red) since the October rally got started? I mentioned that the recent rate of change in 30-year yield downside (which pressures the market toward yields-DOWN) has seen a recent increase. After today, it's at near insane levels.
A Closer look...
30 year yields (green) vs SPY (red ) intraday have just seen the floor fall out.
The SPY just broke the 1 min 50-bar after the last intraday divergence just posted, but more importantly a lot of traders will be watching the 50-bar 5 min chart...
50 bar 5 min SPY, this is sort of an intraday line in the sand. The slippery slope can be easily represented by
Beyond the divergences on 5 min Index futures, I still have to get out the MACRO Market Map post, which will make much more sense as to why the slope is so slippery, but for now I can represent at least the short term dislocation between risk assets with 1 simple chart, CONTEXT, which is over 32 S&P points rich vs the model.
As I said, I think they "Will try" to activate the SPY Arbitrage lever, for one they have been trying all day just to support this range.
This has been worth about $.30 cents on the SPY at the high, now less than 10 cents.
I mention this as I went through the TLT (20_ year Treasury bond fund) with our recent long there, short TBT creating a 2x leveraged TLT,
Trade Idea (Swing+) TLT long via TBT Short which is in the green.
HYG is providing more support than its correlation intraday..
However, HYG is still seeing continued distribution. I think it still has so,me gas in the tank from last Thursday's accumulation area, but again, whether they succeed in creating a stronger lever, it's obvious HYG has been used today to get what they can out of the SPY Arbitrage lever above.
VXX may not be very cooperative as it is in the middle of a positive divegrence suggesting that the market will see downside in to the close, remember this is just a short term chart, but the VIX futures showed in an early post are pointing to a very large move to the downside as is my VIX buy signal and the BB squeeze on spot VIX (see last night's post).
As for macro economic data, the Black Friday holiday spending spree couldn't have gotten 2 worse data points, Consumer Confidence destroyed this morning and according to the Richmond F_E_D release also at 10 a.m., there's good reason.
The Richmond F_E_D was expected to come in at 16 with a prior last month of 20,
it came in at FOUR! The biggest M.o.M. miss since May 2006.
More importantly backing Consumer Sentiment, the New ORders component PLUNGED, Employment and the average work week also dropped, so it's simple confirmation of why Consumer sentiment is so poor, at least for the Richmond area. Again, probably not mainstream media macro data, but I doubt politicians and certainly retailers would like this to be broadcast across the nightly news, the only thing that may be worse is a plunge in the market which they can more easily understand.
Thus the SPY Arbitrage lever as a last ditch effort, perhaps with a VIX slam.
If you're not catching the bigger picture by now, the point is, "If the market were indeed strong here, why would they need any such market manipulative levers?"
On the Richmond F_E_D data the 30 year Yield plunged and at last look was at 2.969, under 3%.
Remember, yields pull equities toward them like a magnet. This is only good for our TLT 2x long position.
As for TLT...
This is TLT (20+ year bond fund) and our recent long. On the pivot highs there was a typical head fake move as we often see just before a trend reversal and a negative 3C divegrence at that head fake move in yellow. Since on the pullback which saw yields rise and initially support the October rally, TLT has seen strong 60 min 3C accumulation which is why I've been watching it and issued a buy signal on it, linked above.
The TLT 30 min chart with more detail shows a sharper negative divegrence at pivot highs/head fake move and the 3C positive divegrence at the pullback lows,
one of my favorite trade entries as price comes to us and proves it has been a constructive pullback. It's also leading positive, thus any short term or intraday antics are not likely to last more than a few hours or so.
The 15 min chart is in line and confirming the TLT move higher.
As is the 5 min chart above, this is where I see a small negative divegrence and assume this is likely about SPY Arb.
Also a 1 min chart in line confirming the trend with a small negative divegrence.
I wouldn't make any changes in the TLT long position, just be aware of what is going on.
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