Leading Indicators

In last night's Daily Wrap I showed a number of charts of Leading Indicators that weren't on a micro basis, but a macro basis, I think it's important to see those and have an idea of the bigger picture as well as the short term.

For the most part, there's noticeable deterioration in Leading Indicators today, except one that is standing out which is PIMCO's HY Fund, however something else standing out is the 3C charts of HYG. I don't know how many times recently we have picked up on a base for a bounce in this choppy atmosphere or even back at the October lows, in which HYG accumulation was one of the first give-aways or HYG distribution was one of the first give-aways of what was coming next in the market, in fact I've started saying, "There's only 1 reason to accumulate HYG", implying that a base was being built, the reverse would be true as well so the signals on the HYG 3C charts are also of great interest, especially when taken with the longer term , trend views of the Leading Indicators, again posted in last night's Daily Wrap.

 Pro Sentiment Indicators are giving ground today on an intraday basis.

Also since the Jan 14th-16th base/cycle started, there's a noticeable change in character. Last night's macro charts are very interesting, very negative.

 This is the PIMCO HY Fund that is standing out as it is leading positive intraday, one of the positive signals vs most of the rest that have a negative tone and have some deeper interpretations on the 3C chart, especially HYG.

This is HYG intraday lagging a little, not a big deal, but when you see the full story, it is part of the puzzle.

This is HYG in to the second January base after the first one failed, you can see HYG is STILL leading positive, so it looks like it wants to lift price near term, but I don't think that lasts for long.

Perhaps an F_O_M_C knee jerk reaction?

It's HYG's 3C charts ad progression that get more interesting. Remember it has always been the accumulation or distribution of HYG that has given us the earliest cluse, thus the reason I would say, "There's only 1 reason to accumulate HYG" and that was part of early analysis as to a newly forming bounce/base, the implication being HYG is a commonly used lever to ramp the market, thus there's only 1 reason to accumulate HYG, to ramp the market.

 Here's the positive HYG divegrence ,  it's in the same area as the broad market divergences from 1/14-1/16, except HYG is a bit bigger by a day to the 20th. The most recent 2 min chart signals are pretty clear as to the change in character in HYG's 3C trend.

Although this is still a short term chart, it's the trend change in 3C that is notable.

 The stronger 23 min HYG 3C chart shows the same base area, and the same change in character, but notice it has gone from a weaker relative negative divegrence (red arrow) to a much stronger leading negative divegrence (red box) over the last 2 days.

Especially interesting is the 5 min HYG chart, again the accumulation zone is easy to see, it's the deep leading negative divergence now that is especially notable , given this is a 5 min chart, even more so.

 And here we see the first January bounce attempt and smaller HYG accumulation, this lasted less than 2 days before failing, the second base/3C divergence is a bit larger, the most important part though now is a 10 min chart leading negative in a pretty big way, again it's the last 2 days that have seen the most damage.

This is VXX, Short Term VIX Futures, it is also giving some interesting signals.

 The 3 min chart shows a negative at the 14th-16th as it should as VXX moves opposite the market, so at the market base we have a VXX top. Note the current divergence to the far right, positive.

We see the same on a 3 min trend of VXX which looks like the recent action since mid-Janaury is more or less a pullback in VXX and that pullback looks to be seeing a constructive reaction/accumulation.

I can't say this is completely unique in front of the F_O_M_C as hedgers would be active, but given the consensus for the F_O_M_C is so dovish, I doubt the hedging activity would be that strong.

 VXX 15 min larger trend with quite a large base, lots of gas in the tank, again here it looks like an uptrend with several pullbacks that have all resolved favorably for VXX and the current one is underway in doing the same.

 TLT intraday vs inverted SPX prices (in green) to show the normal correlation. You can see TLT (20+ year bond fund) is leading or showing strength, essentially moving up with the SPX to the far right (remember SPX prices are inverted, the normal correlation when inverted would be for the two to move exactly together).

 And a larger view of TLT leading the SPX.

This shows up on the charts of 30 year yields, the longer term ones posted last night are of particular interest.

We use yields as a leading indicator (SPX in green is NOT inverted here), because yields tend to pull equity prices toward them like a magnet.

 Intraday the 5 year yields have dropped which has apparently been part of the early weakness in the market from this morning's gap.

The same with the 10 year yields.

The 30 year yields are even sharper, leading lower, remember yields move opposite bond prices so 30 year bonds or TLT up and yields down.

This is the 30 year (red) vs the SPX since the base at the 14th-16th, note the severe dislocation, which tend to confirm our contention that this move was to be a bounce and one that would be sold/distributed in to.

I'll try to get out as much as I can before the F_O_M_C,  as ALWAYS, beware the knee jerk reaction, we see them much more often than not and they are wrong much more often than not.

During the policy statement/etc. I'll be on radio silence as I watch everything that the market does in reaction to the announcement, we often find interesting nuggets that way.