Leading Indicators, What they Do and Don't Say

There's quite an eclectic mix of signals in leading indicators, I think this represents the fact that some are levers, some are piggy back riders, some are just moving one direction no matter what happens.

For the short term this isn't the overwhelming confirmation I seek, but it's close enough for the situation at hand or at least what I suspect to be at hand with some very interesting intraday moves. The big picture is unmoved.

 VXX/Short term VIX futures shows a leading correlation vs the SPX in white (*Note SPX prices in green, are inverted to show the relative performance of the correlation which inverted is near 1.0 meaning VXX trades nearly opposite the SPX or nearly exactly the same when SPX prices are inverted).

In the middle we see near perfect confirmation & correlation in green earlier today and then VXX underperformance vs the SPX, suggesting the market is getting ready for a move to the upside (thing IWM breakout of range) and VXX is one of 3 major levers that help the market when it's not strong enough on its own.

The actual VIX futures show a 7 min negative divegrence at today's intraday high.

even stranger, spot VIX...

 is nearly perfectly in line with SPX until today where a VERY STRANGE set of price movements occur, this doesn't look like anything natural, but more some kind of algo-,manipulated VIX move, when is the last time you saw VIX or any asset for that matter trade like that intraday ?

 Here's a closer look at Spot VIX alone.

I did mention Friday's closing Star Candlestick in VIX, indicating a high probability short term reversal. While I do not think VIX's upside move is done (or the market's downside move), it's not unusual to have an interruption during the trend. past VIX moves have seen the same, even the last one off September market highs/VIX lows.

HYG's leading negative dislocation vs SPX (green) has now turned to near perfectly in line.

As I have shown, we have short term HYG accumulation signals and the simple questions is , "Why would anyone accumulate HYG?" The simple answer as it has always been when removed from the long term trend and looked at on a short term basis is, "To use it to ramp the market and fool algos in to thinking smart money is in a risk on cycle".

 I wouldn't be so presumptuous as to call this a strong signal of a bounce yet, there are signs of HYG accumulation, not nearly on the scale of past significant moves of a week or more.

In fact looking at other HY Credit assets, we see not so much a leading positive relationship, but a less negative correlation than last week.

 HY Credit in line with the SPX, rather than leading it lower in a sell-off.

PIMCO's HY Fund, also in line intraday rather than selling off outright.

 5 year yields which have been in line largely or leading negative are actually leading positive intraday today only so far.

10- year yields have transformed from leading negative to in line today.

30 year yields have done the same. These are not positive leading signals, but they are an improvement over last week/Friday.

The pro sentiment indicator that has been relentless in selling off is more in line today than anything.

However one of the most interesting signals is the SPX/RUT Ration and the VIX Term Structure, both showing short term positive signals, I emphasize short term.

Beyond that most information is still in the realm of Mass Psychology, HYG charts, TLT charts, VIX behavior and the 3C charts of the averages and Index futures.