While the SPX is just now exiting its base area and thus is giving the market something to sell in to, we are already seeing distribution which was evident on futures charts as well as the averages themselves.
From left to right on the SPY intraday chart, Monday the 9th's "early week price strength " with distribution down to Tuesday's lows where we closed AAPL and QQQ puts on signs of a base/bounce building that would effect time sensitive options, especially these which had a March 20th expiration, gains of 22% and 48% were taken off the table in the two positions, AAPL Update and AAPL/QQQ P/L Next we have the building of the divergence which formed a "W" like base and today being the first day outside that base since last week, you can see the intraday negative divegrence. Still, if I had to pick a target on the upside and the F_O_M_C starting tomorrow through Wednesday wasn't a consideration, I'd say $210-$211 for the SPY.
ES/SPX futures have lost about 12 points since the cash close at 4 p.m. today.
The QQQ looked a bit better and both have a full tank of gas considering the divegrence...
QQQ positive divegrence last week with a head fake move/stop run Friday and not too heavy of distribution today. I'd say $107.60 is an easy target and $108+ is likely. NASDAQ Futures have given up about -.30% since hitting their intraday highs for the new week right around the close.
Price action today wasn't at all about a short squeeze as the Most Shorted Index closed virtually unchanged, but as the Hindenburg Omen tells us, the market is a bit confused internally as far as new highs/lows and advancers/decliners, it doesn't look as it should and I suspect the R2K rotation has a big part to play in that.
The IWM intraday was a very different reality...
However you already know this from the last post and really this shouldn't be a surprise at al as we have been forecasting it for several days and have had proof on Friday or lets say objective evidence, still forecasting market relative performance divergences this big is not a usual event, thus what we've seen has been very real and a bit uncommon and not healthy for a market at all, thus the Hindenburg Omen as additional proof. Still, the IWM had a full tank of gas and ran out, the SPY/QQ should be no different and I still suspect they move up right in to the F_O_M_C at 2 p.m. on Wednesday or thereabouts.
Right now barely 50% of Russell 2000 stocks are above their 50/200 day moving averages, hows that for breadth!
Since our last Leading Indicators and Perspective update this afternoon, EUR/USD which had a high degree of correlation with Index futures (as did nearly all assets last week) has dislocated a bit along the lines of the divergence in EUR/USD which is pretty close to in line right now.
EUR/USD (candlesticks) vs ES purple on a 5 min chart shows some dislocation.
As for Leading Indicators since the last update, the Pro sentiment Indicator has deteriorated a bit more intraday, our SPX:RUT ratio has seen a bit more deterioration, although not that much worse than this afternoon. HYG/HY credit remains divergent with equities, although still maintains a small positive divegrence. In fact High Yield Credit overall was not performing well today, just another aspect showing the risk on mentality is fractured not only in HY credit, but the very leader of risk on, the Russell 2000.
VXX which was weak over a period of a couple days at the two SPX relative lows last week repaired a bit in to the end of the day with the last hour, although spot VIX which was in line intraday saw some deterioration just in the last 14 mins of trade, like it was whacked to push the markets higher at the close.
TLT pushed higher the last 60 mins which would send yields lower although the bond market closes at 3 p.m. Of course there's a stronger divergence between the Euro vs SPX and the $USD vs SPX because of the relative weakness later in the day in EUR/USD which was forecasted on intraday 3C charts.
This is what 20+ year yields would have looked like intraday in to the last hour which is somewhat interesting...The typical levers for the market are not working together, but against one and another.
TLT inverted to show what 20+ year yields would have looked like the last hour, pulling away from equities.
Point of fact, beyond what was already covered in the updates today and above, there really isn't any smoking gun other than in the IWM that suggests anything other than what our forecast was for this week in to the F_O_M_C, which was for the SPy and QQQ to rotate in and IWM to rotate out and this to continue in to the F_O_M_C Wednesday at 2 p.m. or thereabouts, although I'll keep my eye on everything in case anything moves before then, thus far I think that forecast is stable for the moment.
This doesn't mean we have a strong market, the fact there's a Hindenburg Omen shows how screwy market internals are.
From a Dominant Price/Volume perspective, there were only 2 averages dominant, the Dow with 21 and the SPX with 266, both were Close Up and Volume Down which is the most bearish of the 4 relationships and is often seen at points in which the market is nearing the end of a run and overbought.
Also supporting the near term overbought were 8 of 9 S&P sectors green today with Health Care leading at +2.21% and Materials lagging at -.16%.
Of the 238 Morningstar groups, a whopping 211 closed green so we are nearing the kind of internals that would be consistent with the market finding itself in some trouble soon.
After a quick look at Breadth Indicators, nothing is standing out beyond what I've already reported, but I think it is worth reiterating that of all NYSE stocks, only 45% are above their simple 40-day moving average and 47% above their 200-day moving average, more than half the market is below those 2 averages which is a breadth problem in itself.
I'm not making any case for a strong market here, I still think we are in stage 4 DECLINE and I think it resumes, we just have rotation and it's the SPY and QQQ's chance to do what they should have done with the IWM last week, that alone is a point that shouldn't be lost on anyone. The averages diverging to the degree they did today (which was so obvious it was forecast last week), is not a small thing.
This should give us some interesting opportunities as the entire idea since closing the QQQ/AAPL puts last Tuesday and the UVXY long Friday was to re-enter them at better prices and positions, that can be done with the IWM just about now and I suspect with the rest of the market within a day or so.
I'll check on futures as always and let you know if there's any funny business, but from what I see so far on a very short term basis (1-2 days), I think this is a normal market bounce like the IWM saw last week in the SPY and QQQ, other than that, it's FAR from normal.
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