A.M. Update

Overnight the Shanghai Composite was down at one point by 4$, but reversed losses to close up +2.93% on poor CPI and PPI data , both missing with PPI showing the 33rd consecutive decline and CPI at the lowest since November of 2009 spurring hopes that the PBoC would come to the rescue with intervention and closing the SHCOMP +2.93%. There were also rumors of the PBoC injecting liquidity after the Yuan had slumped by -.3% and moved back up to +14% and all of this admidst the rumors that regulators may cut off more funding by limiting Brokerages interbank borrowing,

The Nikkei was down -2.225% (a a macro theme) on a strong Yen (another macro theme) and as such a weaker USD/JPY (another macro theme of ours).

 Nikkei 225 futures with not only a macro weakness theme, but a weak on the week theme as Futures Sunday night show a fairly large negative divegrence, however on the overnight sell-off, it appears as if the Nikkei may be a bit oversold for the moment (much like the Shanghai Composite which regained more than half of yesterday's losses overnight.) Note the leading positive divegrence to the far right on this Nikkei 225 futures 5 min chart. So unless something goes terribly wrong with the Yen or the US session, I expect the Nikkei 225 to bounce tonight.


 This is "part" of the macro theme for the Nikkei 225 on an hourly chart showing the in line status of the recent run up and the negative divegrence late last week and in to Futures' Sunday night open, just as was seen on the 5 min chart above (multiple timeframe confirmation.

As you can see though, here unlike the 5 min chart we have a leading negative divegrence suggesting the Nikkei will bounce on a 1-day oversold condition overnight, but should resume the trend to the downside that has started this week and this is just "PART" of the wider NEGATIVE macro theme.

 Part of the Nikkei 225's MACRO theme has to do with the Japanese Yen which was the cause of overnight Nikkei 225 weakness, here the 1 min chart was in line overnight on strength, but just as the Nikkei is showing a positive divegrence short term, the 1 min Yen futures is showing a negative divegrence (helpful for a Nikkei 225 and USD/JPY bounce).

 This is the 5 min Yen chart, it's theme is still in line from Sunday night's positive divegrence sending it higher, I suspect after a slight pullback (helping the Nikkei bounce tonight), then Yen strength will likely continue or soon after as Yen strength is a macro theme of ours as well via 3C long term charts.

 The USD/JPY overnight seeing downside, one of the charts from last night and helping send the Nikkei lower overnight, on this 1 min chart is still in line.  However the 1 min Yen chart above suggests we'll see a little bounce in the USD/JPY soon.

The 5 min USD/JPY chart has shown weakness all week and 3C in line with that, I expect that to continue to be the near term dominant theme despite a short term correction as well as a macro theme as traders de-leverage or are forced to de-leverage, I can't say which came first in this scenario, the chicken or the egg, I just see the negative longer term charts for the USD/JPY and Yen strength.

As for US markets, although the charts from last night did eventually bring futures down this morning and a gap down on the open, I do suspect that our market average analysis which differed from the Futures analysis , is probably more correct with a little time needed for the reversal process to complete today. In the end, both look to be right as the Index futures did fall before the cash open as divergences last night suggested, Index Futures, however for that analysis to be correct, we'll have to see some lateral to up action today in the averages with 3C charts continuing to deteriorate in the short end of 1-5 minutes as they started to yesterday.


Index futures suggest that after that, our macro theme for US Index futures weakness will reassert itself, perhaps as early as today.

For instance....

 Last night's Index Futures post seems to have been correct as ES lost ground, however it has a positive divergence in to the open so I suspect last night's Daily Wrap theme of some continued lateral chop to up and a reversal process finishing out today is the highest probability with this 1 min positive in SPX futures.

 NQ/ NASDAQ 100 futures show the same

As do Russell 2000 futures,  ALL 1 MIN CHARTS.

Most of the 5 min charts are in line with a slight negative bias, I expect these (Index futures charts) to turn sour and more negative today just as I said last night about the major averages (SPY, IWM, QQQ) that we track during the cash market.

Part of this theme includes weakness on the 7 min chart, ultimately the stronger chart vs a 1 min (below)...

ES shows a clear leading negative divegrence so after the completion of the reversal process today , I suspect this negative theme reasserts itself, making today useful to short in to any price strength as an opening trade set up.

 Russell 2000 futures which I suspect will see the worst relative performance to the downside also have a very clear 7 min negative as do NASDAQ 100 futures.

As for crude, it continues to slide overnight, both Brent and West Texas Intermediate (WTI).

 This is the 1 min overnight Crude futures (/CL) which shows 3C in line with the downtrend near term.

The 5 min chart also shows the same so I suspect this continues until we get a divergence here suggesting otherwise. Glad you didn't try to play an oversold bounce? Just because an asset is down significantly doesn't mean it can drop a lot more. We play the edge, not the price movement.

Gold which showed a positive short term divegrence in Sunday night's futures is showing a 7 min negative as well so I suspect as we look at gold ad update it today, we'll see signs of a GLD pullback, although the longer term trend has not stabilized on the charts yet, it has been VERY fluid.

Opening updates to follow shortly.