The market , op-ex pin and all taken in to consideration, took this as "Good news is bad news" initially as the market knee jerked around pre-open.
The averages on the day don't tell the full story , likely as it was an option expiration Friday, but here's what the major averages looked like on the day...
Note like Trannies below, the major averages were ramped in to the European close and then started to fall off in to the close.
Both the NASDAQ and the SPX were red post the Non-Farm payroll data.
Transports which were one of the positions I mentioned yesterday as a short, gave up significant early gains, still closing green at +0.36%, but giving up a lot of intraday gains.
On the day, the Bearish Falling 3 Methods that I mentioned last night can have more than 3 candles as long as their real bodies are all inside the initial bearish down day, stayed intact.
Of the averages, the high beta Trannies ended the week as the biggest loser despite lower oil prices on the week, something I'm happy to see for our Transports short.
As one of several levers to support the market after Monday's early parabolic crash on large volume creating a short term oversold event or selling climax which we expected to see a market bounce after as early as 10:30 Monday morning, Treasuries and yields were a lever seeing yields which move opposite the Treasury bond, rise on the week.
There was DRAMATIC 2 year vs 30 year yield FLATTENING, in fact, flatter than they had been (the spread) since just before the Lehman collapse of 2008!
2 year yields rose 10-bps points on the day with 2-7 year yields rising from 10-17 bps on the week, although the 30 year yield rose as well only 7 bps on the week. The 2 year's 17 bps rise on the week was the most since Feb. 2011. 5 year yields rose the most in 9 months today.
The yield curve flattened dramatically from 2year to 30 year with a spread of 234 basis points between the two, again the flattest the yield curve has been since the Lehman Brothers 2008 failure.
This move in yields with out-performance on the short end which is most closely tied to F_E_D action was the market voicing its opinion that the strong payrolls data was likely to see the F_E_D start hiking rates sooner than later and the longer term action in the 30 year reflected an expectation of subdued inflation.
SO ACTUALLY ON THE DAY, THE CURVE FLATTENING WAS THE MARKET EXPRESSING AN OPINION THAT IS BEARISH FOR THE MARKET AS THE MARKET DOES NOT WANT TO SEE THE F_E_D RAISE RATES ANY TIME SOON, BUT THE YEILD CURVE'S DRAMATIC FLATTENING WAS THE MARKET TLLING US THAT IS WHAT IT EXPECTS SO, GOOD NEWS WAS INDEED BAD NEWS.
This may not have been reflected in the averages to the same extent, but I suspect that's largely because of options expiration which had their fare share of ramping lever help today, some actually QUITE extreme and strange.
As for a few of the levers...
USD/JPY which hit $121+ stops today as the $USD rallied on the 8:30 payrolls report, lent some strength, but far from what it has been in the past and the correlation broke down prompting the need for some other levers to be pulled to counter late day building weakness.
In an extremely strange move mirroring the HYG ramp late day and throughout the day...
As for VIX and the BB's...
Also seemingly helpful, although perhaps not a lever and probably creating some tension for the averages, the 5 year yield like the 2 year yield also rose dramatically on the payrolls data, seemingly supporting the market as yields tend to pull the market to them...
As for High Yield Credit, spreads widened dramatically- the oil sector's HY credit is about to be decimated. As such HY Credit fell even faster and harder.
Why does no one ask themselves why professionals (as retail doesn't trade HY credit) sell a risk asset as the SPX, a risk asset moves higher? This is ONE OF THE SCREAMING MESSAGES OF THE MARKET COMPLETELY IGNORED AS TRADERS WHISTLES PAST THE GRAVEYARD FOR A +0.38% SPX GAIN ON THE WEEK!?!?
And the trend...
Compare to HYG (HY Corp, Credit) or Yields or professional sentiment, it doesn't take a genius to figure out these are leading indicators sending a very powerful message that will be ignored until people ask, "Why the heck did I ignore that when it was staring me in the face for over a month?"
Speaking of Hindenburg Omens, today was the 3rd in 4 days, although I have had an email that would suggest this is the 4th in the cluster, a bearish signal either way.
The $USD was up +1.25% on the week because of Yen weakness and fading Euro strength after the ECB yesterday, however as mentioned, CITI believes it's time to abandon the USD/JPY trend and trade against it-I didn't read their reasoning, but it falls in line with out macro indications for each currency.
As for other leading indicators...
Pro sentiment traded down again, although not surprising as you can see the same in HY credit...
To the far left sentiment leads the market, at the red arrow a negative divegrence just as all the other leading indicators and 3C at the stage 3 head fake Sept. high and now, well it best speaks for itself.
Gold was up 2% on the week- best in 2 months, Silver up 5.14% on the week and the best performance in 6 months while oil was down -0.75% hitting the lowest levels since July of 2009 and 9 of 10 weeks in the red, yet trannies still underperformed.
Internals...
The Dominant Price/Volume Relationship was only seen in the Dow and the NASDAQ, the SPX and Russell 2000 had no dominant relationship. As for the Dow and NDX, it was Close Up / Volume Down which is the most bearish of the 4 possible relationships with 13 Dow stocks and 45 NASDAQ 100 stocks.
Of the 9 S&P Sectors, a moderate 5 of 9 closed green with Financials leading at _0.89% and Energy lagging at -1.19%.
Of the 238 Morningstar Industry/Sub-industry groups, 164 of 238 were green, roughly the same ratio as the S&P sectors and not showing any extreme movement , nor was the Dominant P/V relationship.
As for tonight's breadth charts... The McClellan Oscillator...
As for Index futures, I showed quite a few last night and this morning, in addition, a weak 3C close for Index Futures intraday.
And the rest of the full house as seen Sunday...
Surprisingly one of the main events of the week was the Treasury curve flattening and to the extent (2y-30y yield spread) that it occurred, as mentioned, the worst since Lehman Brothers failed in 2008, which is a reflection of the market's anticipation of the F_E_D to hike rates sooner than later, sop all in all, it turns out this morning's Non-Farm Payrolls' good news was actually bad news if you follow the logic as the last thing the market wants is a rate hike. I'll continue to follow this development as it unfolds.
As usual, if anything pops up Sunday night or in the news before then, I'll bring it to you, otherwise have a great weekend.
No comments:
Post a Comment