Futures Update

As we hit the 2 p.m. hour when we have noticed the max pain op-ex pin is usually removed, although a max pain range was less obvious today, this tends to be when price will do random things that are or can be disconnected from underlying realities, thus the last 2 hours of the week is when we get some of the best 3C data for the entire week as it pertains to the week ahead.

 I suspect the apparent lack of a max pain pin range today was really simply lower and the market had a bit to give back after the Evan's comments sent the market higher yesterday which kept SPX futures disconnected from support of USD/JPY because of that air pocket I showed earlier today.

I have to do these updates in separate posts because short term charts move so fast, but we'll look at the composite picture once I get everything that matters to you.

First futures...

 The last update, I suspected something like this, price had made a low and bounced off it close to the European close. I suspected we'd need to see a test of that level or maybe a bit lower creating a small intraday "W" which the market could bounce off intraday, again "The Jiggles" as one thing that I suspected and still do is the size of the SPY / market base (while not huge) is bigger than what we have seen on the upside and if indeed there is a change of character which we witnessed yesterday to the negative as if Wall St. became aware of something that suddenly turned them risk off, still the size of their positions would still require a larger top/reversal process than what we have in place now. I'll give an example below, but remember this pattern intraday to the far right (yellow) for the chart after.

The SPY 5 min with something like an inverse H&S base, this was part of our oversold (late December/early January) deeply oversold bounce we were looking for. Yesterday we saw a dramatic change in character, to the negative side, but even with a complete 180 reversal and wanting to move from risk on to risk off, the size of the "top" in place is so small and tight, I don't think logistically positions could be moved that quickly without taking losses,  this is why we see the reversal process rather than tighter "V" shaped reversal such as the one above would be, which would be a reversal event which are usually based on new fundamental information that has not been discounted, not typically part of a cycle that was pre-planned like this.

Thus, I still suspect that this needs to widen out whether it's in to higher prices, lateral prices, , etc.

 The USD/JPY is what the SPX futures have been tightly correlated to and if you recall the first chart and the "W" scenario I mentioned to keep in mind, you can see the same thing in USD/JPY to the far right at the white trendline.

I borrowed this from today's earlier USD/JPY Charts post, the USD/JPY in candlesticks and ES/SPX futures in purple, but it shows how tightly the FX carry pair and SPX futures have been.

 As for intraday charts, yesterday in the Closing Market Update and several other posts, I made the following quite clear...

"I still think we have gas in the tank as of right now for more on the bounce, I would have expected more as of yesterday, but something happened today and the levers are pulling out. Look at the distribution in HYG, they can't get out fast enough.

Something changed and it looks like we'll likely open on a weak note tomorrow, I wouldn't say that the gas in the tank is fouled yet, but I wouldn't be surprised to see a negative open"

The "bold" comments were based on the simple concept of price action picks up the next day where the 3C charts left off, even over a 3-day weekend and the charts left off yesterday leading negative which is why I said I'd expect to see weakness on the open. We saw weakness overnight, but a pop on the NFP (Jobs) data this morning, however as the 1 min charts show clearly, the 3C concept kicked right in on the cash open and despite the knee jerk higher in pre-market, we saw early/opening weakness as yesterday's closing 3C charts forecast.

Here's the Index futures 1 min charts, note the action after the NFP payrolls at 8:30 and the cash open at the green arrow.

 ES 1 min with a clear negative divergence in to the cash open, giving back all of the NFP bounce and then some.

In fact, the Dow gave up well over 200 points since the NFP highs,

 RUT 1 min negative at the open and overnight before the NFP. However note to the far right the in line status, no divergence here, just drifting along as price has been doing since hitting intraday lows.

It's the same for NDX and SPX futures on the 1 min.

As for the USD/JPY carry pair that Index futures are pegged to, remember I showed they look almost exactly the same right now.

 The 1 min $USDX has a positive divegrence suggesting USD/JPY make a short term (probably closing) bounce.

The Yen 1 min futures have a negative divegrence on the 1 min chart recently suggesting the same thing, USD/JPY bounces very short term, likely in to the close.

This would suggest Index futures do the same which would not be at odds with creating a wider topping reversal pattern.

Please remember though, despite everything we have seen, until those 5 min charts are dead, I'm not calling this market's oversold bounce chances dead.

 Just as we saw in an earlier update, the 5 min Index futures (ES/SPX above) have a negative divergence and an impressive one. These same charts at 5 min went positive before the market bottomed from the late December /early January ugliness, so the signals here are important and despite whatever may occur in to the close, these have deteriorated significantly. I don't need to add NQ and TF, they look just as bad and they were posted earlier today so nothing has changed here.

As for the slightly longer term USD/JPY action, beyond intraday 1 min charts above...

 We have the same strong Yen positive 5 min divergence and the same strong $USDX negative 5 min divergence, thus still suggesting that after any intraday/closing bounce, the next move will be back toward the downside in the pair, thus Index futures are likely to follow as they also confirm on the same timeframe.

 The stronger charts that connect through the 15 min to daily are all in negative position, so this 15 min SPX/ES chart going negative, is in line with the "trend" outside of any oversold bounce that we expected.

 Here you can see the small positive divegrence for the bounce, it is smaller looking here because this is a stronger timeframe (15 min), however compare the current and developing negative and it's size and strength to the positive to the left. Something is clearly going on that should not be this early in to the oversold bounce.

And again, the longer term trend for $USDX at 15 min is negative like the 5 min confirming that the path of highest probabilities after an intraday move will be back to the downside. The Yen 15 min confirms with an impressive positive divegrence as it should and these continue out to the 60 min timeframe, not positive for the USD/JPY or the Market Index Futures that track it.

Thus far it looks to me like an end of the day bounce intraday and the observations from yesterday that something has changed for the worse/negative in the market is true.

More to come.