Again, this isn't anything I would be trying to trade on thelong side, but rather shorting in to any upside once we have strong probabilities and set ups, why introduce risk on less than ideal probabilities when we have positions that are aligned with high probabilities already in place?
I think the market is telling us a few things, one does anyone remember so much market volatility during the MENA Arab Spring or even events like Ukraine / Crimea? I sure don't, I remember thinking, "That's odd that the market or oil has barely moved on a regional uprising that kicked 40 year leaders out of power. However now, much smaller events, rumors and the like are having a far more profound effect on what I would call a "Nervous market".
There also seems to be a rotation from EUR/USD (formerly USD/JPY) back to USD/JPY, but I'm keeping an eye on both at present and the bigger issue seems to be the $USD which I'll get in to in some detail as we move forward, mostly on account of the Carry trade.
A little over a week ago I also mentioned that with our bounce which is likely more just coincidence of timing than anything, we should see an increase in market volatility as most of the time a stage 4 transition (DECLINE) will bounce around with a slight direction, but real direction and real downside moves don't appear and don't hold until the volatility that is not present in that early rambling period picks up which is why I have said more than even a bounce, watch for volatility to increase whether on the upside or downside, but eventually it will matter most to our stage 4 decline.
The weekend news that the PBoC is worried about the amount of fall off in Chinese growth and the hints that they may have to do something about that apparently caused a false or unsubstantiated rumor to be published by Shanghai Securities news, sending Index futures higher overnight with what they called an imminent (possibly today) RRR rate cut by the PBoC, of course that was mere speculation/rumor, but the market bought it and thus ran over the second small divergence (the first on Saudi/Yemen hostilities), but fulfilled the larger divegrence we have been tracking for a bounce which we expected to start today anyway.
There were a couple of short squeezes, right on the open and around 12:30, TICK shows them pretty well.
Large caps/Dow was the best performer today, but just missed holding on to the psychological magnet of $18k. Talk about volatility, now the Dow and SPX are green for the year, however they and the NASDAQ are red for March. As I said Friday, I don't know how many times I have said the averages are red or green for the year (YTD).
Don't forget about Q1 2015 Window Dressing (The Art of Looking Smart) as the quarter ends tomorrow.
Earlier I posted that the Process of distribution in to the bounce seems to be well under way, which is pretty early compared to previous bounces, there's more on the topic right here, Process Has Begun...
Here are a few charts showing the close...
I'd say our expectations of selling in to strength or shorting in to strength are being met, remember though this is a process, so be patient, lets let the trade and the set-up come to us. The point is, it appears we are well on our way to what we expected and should be moving back to the stage 4 decline sooner than later, perhaps even sooner than I expected.
Gold
I was looking at Gold (GLD/GDX/?DUSt ) which was a short idea just March 23rd, at a slight gain right now...TRADE Idea (SWING) Gold Short or GDX Short/ DUST Long
Here's what I suspect we are looking at in Gold on several different trend/timeframes and I'll use GLD and gold futures' charts...
I believe on a swing trade basis, GLD has more downside to go, in fact it's likely just getting started.
Again on a daily GLD chart it looks like this...
From left to right... Our call for a pullback and eventual probability of a bounce buy as the pullback ends, the bounce higher and the most current negative divegrence, I suspect this pulls back toward the recent pullback lows in white and this is why this is not a bounce trade, but slightly longer swing trade.
30 min gold fuures shows the same negative divegrence that caused me to post the trade idea linked above.
While I suspect VERY near term we may get something like a gap fill, on a swing trade basis, I'd expect Gold to pullback likely at least to the former base lows around $109.50-110.
Leading Indicators...
Our leading indicators like the SPX:RUT ratio are still supportive of more to the bounce. However a few are starting to lose some of that support early on which is another indication that we may be dealing with a much shorter bounce than anticipated and I didn't anticipate a lot beyond a typical corrective counter trend bounce.
HYG gave up some support in to the close, although still broadly supportive, the decline that may be a divergence soon looks to have started. VXX and TLT didn't show much different from our earlier Leading Indicators post. Both Pro Sentiment indicators fell off hard in to the afternoon, another indication of perhaps a weakening or even weaker than expected move.
Yields barely moved at all, they were in a +1/-1 bps range today. which puts them pretty close to the SPX reverting to the mean short term so they shouldn't have much of a positive effect like they had just before the bounce started today.
Internals...
The Dominant Price/Volume Relationship was mixed somewhat today with 16 Dow stocks closing at the most bullish relationship, Close Up / Volume Up, however, ironically this also is most often a next day short term overbought condition.
The SPX had 281 stocks in its dominant relationship and the NDX had 68, both were the most bearish at Close Up /Volume Down. This isn't a strong next day bias relationship, but it is a strong indication of what kind of bounce this is.
Again, like we have seen so often over the past month or so, the Russell 2000 has a conspicuous lack of Dominant P/V relationship.
Other internal measures also suggest a strong overbought condition is already developing with 9 of 9 S&P sectors green with Energy leading at +2.15% and Consumer Staples lagging at +1.01%.
An amazingly strong 218 of 238 Morningstar groups closed green. The market was obviously near term oversold as reported last week on a 2-day basis looking at internals and is running to the other side of extreme very quickly, while seeing distribution in to the move.
Finally Futures...
USD/JPY looks like it's going to see some overnight downside, this should weigh on the averages if it carries through until tomorrow and being the divergences on the single currency futures are pointing that way both on the 1 min, 5 min and 7 min charts, I suspect that's a fair possibility (see the ES correlation with USD/JPY the last several days - above).
Index futures don't look good either. They saw distribution intraday and that has put them in a worse position as the day has gone on as we have seen in the averages as well.
And these keep going through 7 min charts, and even on 10 min charts .
The bottom line is this looks like the kind of bounce I suspected and it sees to be falling apart rather quickly, perhaps because it didn't have that base, but again, this was expected to be more of a counter trend bounce, a normal corrective bounce rather than the other types we have seen earlier in the year which had specific targets and goals like to break the 2015 range and create a bull trap.
Have a great night, I'll likely be throwing some ideas out there sooner than later, sooner than maybe I even expected.
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