It seems we have a little intraday tug of war between formerly highly correlated multiple asset classes that are in many cases loosely correlated, but have shown strong correlation since March 10th. They have all been pretty much in line, but this morning some things changed and some are pulling at the market from below while others have been activated and are pulling from above, it all looks like typical gap fill kind of price movement and there are some assets with some interesting gaps that would make for interesting openings for new or add to positions, Financials are one off the top of my head.
Today, like most of yesterday has that dull, flat rangebound trade. Even for the averages that are performing better relatively to the others, they are still stuck within the recent range.
For example the SPY today, much like yesterday around this time.
SPY daily chart with the 4th small range body day and declining volume, more importantly declining volatility with a few snap shots of volatility here and there.
Even the QQQ which is outperforming on a relative basis is still stuck in the range of the last couple of days and still seeing small bodies and declining volume.
The size of the range above really isn't unusual for a reversal process given that bottoms are usually only about a 1/3rd the size of tops, meaning bottom reversals are much more narrow and top reversals are much broader, umbrella-like.
However this was not specifically the point of this post.
Looking at intraday NYSE TICK and once again, a very dull days like yesterday. You may recall in the Daily Wrap last night I showed the intraday TICK and it barely brooke -800 which is a normal range, even on the end of day sell-off.
While today's intraday NYSE TICK may look volatile, it hasn't done much outside of + or - 750 which is a normal, mellow , average day.
There are however some signs in Leading Indicators that the market is gaining some support as it loses some support, which in my experience is usually a part of maintaining VWAP to finish filling institutional orders.
This is ES 1 min / 1 day VWAP it looks a bit more sloppy than the price action really is.
An easier way to see it may be just to use a 50-bar 5 min moving average of the SPY...
And suddenly it becomes a bit more clear. Prices seem to have been lifted to the average from yesterday's late day volatility spike and decline.
Here's where the market has lost some support, exactly where we expected it yesterday and today...
As suspected earlier today, EUR/USD in candlesticks has lost ground intraday since around 9 a.m. or so. ES in purple is not holding the correlation suggesting there are some other forces at work. Not that this is a big deal early on an intraday, but it does seem to explain the intraday trade as we move along below...
The 5 min EUR/USD vs. ES correlation is much closer to reversion to the mean and it almost looks like the slight pop in ES and slight decline in EUR/USD are what this is about, however putting things in perspective, they are still very dislocated.
This is the 60 min EUR/USD in candlesticks, it looks a lot more like it's getting ready for that turn down that I expected yesterday and today as the $USDX 10 min chart is leading positive while the Euro futures are leading negative, at least near term 10 min, on a longer basis at 60 min charts I'm not sure the story is finished, but I suspect the $USD loses more ground in the months ahead, at that time who knows where the carry trade and correlations will be, it has been a long, long time since EUR/USD has led the market as you know, USD/JPY has held that title for quite a while.
As for the SPY arbitrage helping to support the market here, remember yesterday I said at the end of the day there was an effort in a couple of assets to support the market? One was yields and the other was High Yield Corp. Credit (HYG).
Taking a quick look at some of our leading indicators, where EUR/USD is giving out and the market is losing that support that has been so key to its bounce since the 10th, we have others along the lines of typical SPY arbitrage that are working on the other end of the tug of war.
For instance HYG mentioned above is leading the SPX here intraday and you can see the attempt late yesterday I mentioned in last night's Daily Wrap right in to the close as the market was losing ground (white box).
However when we look too close we get tunnel vision and miss the more important charts like this one of the bounce in which HYG in blue was initially pulling the market lower from the Feb. stage 3 top and then mildly supportive at each of the two accumulation areas for SPY,
but HYG has been unable to do anything since then.
I suspect big money traders in credit are not keen on chasing HYG up only to be left holding the bag when the bounce ends and probably see some wild card events on the table like Greece that could leave them holding the bag.
On a primary trend basis, you can see HYG has been in a primary downtrend making lower highs and lower lows, this is the key chart for anyone with a time horizon of 6 months or more and a primary trend view to trading the market.
Here the short term VIX futures are underperforming their correlation with the SPX in green (I've inverted the SPX prices so you can see where the correlation should be.
This looks like the VIX and VXX are being used to slam the VIX so to speak to ramp the market or whatever you want to call this , I'd say support.
This is the bounce with SPX prices (green) inverted, remember it started off the 10th. Most of that VXX performed as it should have according to the correlation, there are a few spots in red where it underperformed and one where it outperformed the last couple of days. To the far right you can see today's underperformance. HYG, TLT and VXX are the SPY arbitrage with HYG up and VXX/TLT down, it is supportive of the market in short term manipulation.
More interestingly intraday, Spot VIX looks like it has been slammed, I use that term on a relative basis as this is an intraday chart, but the slam hasn't done as much for the market as you might think or expect. SPX prices are still inverted, but also note to the left the outperformance of VIX right around the flat top and resistance area I've been pointing out on daily charts and even mentioned at the end of last night's post in a "Wish-list " trade set-up based on that light resistance area, but visible.
This is the 5 min chart of the VIX alone today, note the slam down.
Yields as I showed yesterday were supportive in to yesterday's close although you can't see it on this chart as the market lost ground (green and not inverted) after the bond market was closed. Today they are in near perfect sync.
However once again, you look too close and you get lost in the lines. This is yields vs the SPX since the bounce found a base to present, there's a massive dislocation and yields which act like a magnet for equity prices are pressuring the market lower on something larger than intraday trade.
I suspect this dullness will slip later in the day and volatility will peak out its head again.
Some of the assets that I thought might be worth a look in this environment would include Financials (short) which I'll cover and I'll add others.
Looks like we are already seeing some volatility pick up and the market slipping since I started this post.
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