Daily Wrap

What a difference a day makes after nearly 2 weeks of rally and reversal process.

After a crackdown in China on shadow bank financing of stock purchases, warnings to retail investors about risk of the market and expanded short sale list as well as encouraging finds to lend shares out for short selling, China (futures) were hammered. I suppose the Bloomberg Terminal blackout didn't help, nor did the Greek Exit fears with German Bunds now trading a mere 5 points away from a negative yield which will have consequences on what the ECB can buy in their QE as well as the obvious flight to safety in bunds. The DOJ's also is leaning toward blocking Comcast's bid to buy Time Warner.

The effect, the Dow loses 18,000 and is now unchanged YTD, the SPX loses 21000 and is up less than 1% YTD, the NASDAQ loses 5000 and transports, well they just look horrible. This leaves US equities as the worst performing asset YTD vs credit, gold, bonds and oil believe it or not!

The major averages YTD with Transports (salmon) looking HORRIBLE).

AAPL wasn't pretty today...

And is now very close to breaking below its triangle's apex, this "should provide some upside next week on an oversold basis and a Crazy Ivan head fake, that's if we don't see continues follow through in a major change of character. It was volatility we were looking for more than anything after all and today's closing candle on the SPX takes out 6-days of longs, now you probably have some idea as to why I didn't like the thought of trying to piggy back this move up, volatility increasing, a large downside break when the move was done and this kind of unpredictability that changes the entire landscape of the market YTD is a single day. Most everything is about 1 to 1.5% lower on the week, so our Week Ahead forecast from last Friday was pretty well on track as we saw the move pretty much topping and reversing this week.

This all occurred on Huge ES/Futures volume as well.

All of this and the real downside break isn't even here yet. I suspect you'll know it when the VIX completes its Crazy Ivan Shakeout and breaks above its triangle and 50-day moving average, something we've been watching over a week now...

VIX tested the waters, but closed below the line in the sane, although I do believe it will be closing above the 50-day (yellow) very soon.

Bonds overall were down 6-11 bps on the week with the long end outperforming today.

Remember our $USD forecast, bounce and then lower on a larger move? The $USD's performance was the worst 4-day loss in a year and the second worst weekly performance since October 2011 and to think, it was just a few days back it was still in the forecasted bounce with a Larger move lower to follow.

The USD was forecast to bounce on the same day the market was, Thursday April 2nd.

You may recall the recent chart's and correlation in which the $USD has led the market I have posted numerous times...

SPX 60 min chart vs UUP (white) which shows the $USD in almost the historical legacy arbitrage, but still leading the market as it turned down earlier in the week as this relationship/chart was posted with today's move lower... hm...

Gold and silver were down on the week overall, we should be close to a new GLD trade.

Interestingly for next week , especially the early part, Today's Dominant P/V RElationship was SUPER Dominant across the board: 27 Dow stocks, 91 NASDAQ 100, 1141 Russell 2000 and 327 SPX 500, ALL CLOSE DOWN/VOLUME UP.

This is obviously a very bearish relationship, but it's also a strong 1-day oversold relationship and most commonly we see a short term oversold bounce the next day or so.

Of the 9 S&P sectors, ALL NINE WERE RED. Utilities were the best performer at -0.36% and Consumer Discretionary lagged at -1.48%.Of the 238 Morningstar groups, 226 were red.

Only 11 Dow stocks remain above their 50-day moving average, only 1010 (almost half) of the Russell 2000 are above their 50-day.

Overall, the market is at a deep 1-day oversold point so our forward looking analysis for early next week doesn't look so far off, a 1-day oversold bounce and INCREASED VOLATILITY sounds very reasonable here, that should be an excellent entry for positions, options/puts, etc.

However, I think if anything, this week demonstrates just how deteriorated those pilings that support the pier (market) really are, just a bit of impact and you might be surprised how fast and hard they break.

Have a great weekend.