Daily Wrap

Tonight's post is going to be a bit shorter for two reasons, 1) I've essentially covered all that is material to both near term trade and the larger perspective probabilities with the March resistance trendline being tested several times being an attractive head fake breakout area for a false breakout/failed move, which I'd pretty much welcome at this time just for timing and tactical entry purposes. The second reason is I need to finish updating and transferring programs, indicators, easy scans, etc to the new machine which should enable me to look at more faster which I'd desperately like to do right now.

I'll just say broadly that my gut feeling is that we see a SPX head fake move for reasons I have laid out for years and more recently, numerous times over the last several weeks as the March SPX trendline became more obvious and as the resistance at the trendline became more numerous.

I view this as a positive event for trades and for market timing and to get to the next swing as these occur just before major reversals both up and down, but down in this scenario. I don't have solid evidence, but I think the concept has proven so durable, it would be hard to imagine a primary trend change in the market without this concept having taken place and the numerous watchlist stocks that are "almost there" as shown with NFLX as a proxy for the watchlist, would suggest to get "there" they need an extra little push and I think they need the broad market to do that.

We have tagged this trendline's resistance so many times, it's a perfect set-up, it's free money for smart money, it's easy last minute dumping of a lot of shares without anyone questioning who's on the other side of the trade. My gut says, "It makes sense", if I were the crooks with the invisible hand, that's what I'd do.

SPX triangle-like top and much broader Broadening Top that we are well under.

Now for something beyond "Gut feeling", but pay attention to volatility, it's important.


Internals...
Yesterday's Dominant Price/Volume Relationship was the exact opposite of Friday's, while this would normally lead to a next day close in the red which 3 of the 5 major averages did with with the NDX outperforming and the Dow underperforming,  I also suggested that I believed there was a good chance that this was the developing internals trend in the market which would actually be a weak element to the market, not that we don't already have tons of confirmed weakness.

I've explained as best as I can the head fake scenario, the probabilities of it which in this case would normally be very high and the lack of Evidence to create the scenario, still we're not that far away from the trigger that would hit limits and get breakout buyers chasing the market, thus creating the head fake scenario without any investment from Wall St. In addition in the Leading Indicators update, I showed you how pros in HY Credit are going the other way, but I'm still leaving this scenario very much open as it would be a fantastic tactical entry and a great timing trigger for a downside pivot of this move that is essentially exhausted as it keeps crashing in to SPX March trendline resistance with just about everything we were looking for having turned already.

MY LAST POST, Quick NFLX/Market Overview GAVE THE PROBABILITIES BEST AS I CAN GAUGE THEM NOW WHICH IS TO SAY THAT INDIVIDUAL WATCHLIST ASSETS LOOK VERY CLOSE, BUT ARE MISSING THAT FINAL POP, WHICH IS PROBABLY THE BEST CASE THAT CAN BE MADE FOR A HEAD FAKE MOVE BEYOND THE HIGH PROBABILITIES OF THE CONCEPT ANY TIME IN ANY ASSET.

As for the Dominant Price Volume relationship tonight, THERE IS NONE, NOT EVEN CLOSE.

The S&P sector performance was very "BLAH" as well with only 3 of 9 closing green led by Health Care +.66% and lagging was...ENERGY @ -1.06% which is now red on the week. It seems crude does have quite a bit of influence and I think you know my opinion on the matter, if not, here's this afternoon's update, USO Update-Swing Position and I shall have more to say on the subject in a moment.

Of the 238 Morningstar groups, only a "BLAH" 137 of 238 were green, VERY middle of the road readings, not implying any strong next day bias, but more in line with price action since the gap up this week, which has been largely lateral in the reversal process area (the price trend for the April forecasted move has also turned largely lateral.

 The major averages intraday today, largely lateral with NDX leading and the Dow lagging.

And the averages on the week after Monday morning's gap up. Transports which were in need of a bounce for a decent entry ( and are leading on the week since Friday as the Dow is lagging)were up yesterday on higher oil prices and up today on lower oil prices,  in other words this had nothing to do with oil prices, but the oversold condition in Transports which is why we don't chase them at lower prices, but wait for them to come to us just as we are with numerous other sectors and individual stock assets. If you saw the AAPL and NFLX updates, you can see we are VERY close, but looks like a day or so of patience will be well worth it, at least from a tactical entry and timing point of view. From a large picture point of view, I think there are a lot of assets that may make slightly higher moves, but in the past I would have had no problem, in fact I would have been quite happy to get trend entries in the area we are in when considering the larger perspective.

In any case, not much help from internals tonight.

VIX volatility is increasing and as mentioned earlier today, we saw some unusual strength in VIX futures on their 3C charts which rarely move out that far with divergences.

This VIX triangle and what I believe was a head fake move-possibly a sort of Crazy Ivan shakeout below the triangle's apex and just below the 50-day , seems to be building tension like a coiled spring, remember VIX trades largely opposite the market so a move up here means a move down in the market and this is starting to look like a lot of pent up energy. VXX and UVXY are on the watchlist.

As shown in Leading Indicators today and even worse by the close and bad on a larger term Leading Indication, our SPX:RUT ratio deteriorated even more intraday or non-confirmation of the market intraday and now through the reversal process as well.

Both Pro sentiment indicators saw a slight boost (positive intraday for the market) at the 2:00 p.m. breadth lows mentioned earlier today as the NYSE TICK hit an extreme of -1325, this was not the normal increased volume flameout, but an extreme in the TICK reading on an otherwise somewhat dull day. If anything, I suspect those 2 p.m. lows are the place the market can try to build off the toe hold it gained at the intraday lows.

HYG is slightly supportive and otherwise mostly in line, however the 3C charts for HYG are atrocious and it looks ready to fall at any moment, although I suspect it's still supportive for a reason VERY near term.

I believe I also mentioned in the Leading Indicators update that VXX (Short term VIX futures) were lagging the SPX at the 2 p.m. lows, almost a sort of SPY Arbitrage, but a hint that the market is trying to make a short term or near term stand off those lows.

This is the 1 min intraday VXX chart vs the SPX (green) and I have inverted the SPX prices-the "apparent" 2 p.m. SPX high is actually a 2 p.m. SPX low, I do this so the correlation and relative performance of the Leading Indicator can better be seen.

In addition Yields were supportive today with the 30 year leading at +6 bps since Friday.

Again, intraday 30 year yields are higher especially at the 2 pm SPX lows, this gives the market near term support, but don't forget to check the recent Leading Indicators posted including today's, Market Update and Leading Indicators,  for the larger picture as these yields are severely negatively dislocated. Translation: near term support for the market in to a larger decline. It's more important now than ever to know what the near term intraday signals are, but more importantly what the larger signals/implications are so you can use them strategically and tactically.

Here's an example that I think distinguishes the probable short term from the highly probable bigger picture...

 DIA 1 min intraday and a positive at the 2 pm lows, the "toe hold" I suspect the market will try to work form.

And the bigger picture, but not so far away that it's irrelevant, it's very relevant.

DIA 15 min chart, remember the 15 min timeframes were all positive (except the IWM) in early April, now look at the DIA's 15 min leading negative divegrence, it JUMPS OFF THE CHART, THIS IS THE KIND OF CHART I DON'T IGNORE.


Commodities I suspect are going to fall off, however GLD near term has been very choppy with few short term edges as it trades in a tighter and tighter triangle. I will continue to look for an edge, but it makes sense that there have been few near term edges as the price trend itself has been choppy and pinching, not an ideal trading environment, but it should break and we should have a good signal before the break.

When 3C isn't giving a strong signal, it can be frustrating as it happens, but upon reflection and looking back, you can see why and appreciate the fact that it didn't get you involved in a triangle range like this that is choppy and narrower each day.

I thought I'd add a quick peak at breadth charts, a little update.

I found this chart of US Economic Macro Surprise Data hitting a 6 year low pretty interesting and thought I'd post some breadth charts to show you how hollow the market truly is.

 Macro Economic Surprise Index hits a new 6 YEAR LOW!

And the F_E_D is moving to hike? they are a lot more worried about something they are not saying than what rate hikes will do to the economy, at first either real or perceived.

 The Percentage of ALL NYSE Stocks Closing 1 Standard Deviation Above Their 200-Day Moving Average... which were hovering around the +60% level of all NYSE stocks last year around this time and are now in a tight range between 30% and just under 40% at best while the SPX in red is near ATH's, Problem? You bet, this is cold hard math, not an indicator, not an interpretation of an indicator, pure statistics.

Less and less stocks are participating in the market's moves, although they have been few and flat this year. As I have said, when looking at the market as a market of stocks and stripping away the weighting component, you might say we are already in a bear market.

 The Percentage of ALL NYSE Stocks Closing Above Their 200-Day Moving Average, which use to hang around the +80% level, then last year the +70% level, now between 30 and 55% !

The indicator in green vs the SPX in red shows clearly what's happened to stocks above their 200-day, there are fewer and fewer which is easily compared to being in a primary bear market.

 The Percentage of ALL NYSE Stocks Closing 2 Standard Deviations Above Their 40-Day Moving Average, I probably don't need to comment other than to say to the left it was about +40-+45% of all NYSE stocks, now around 11%!

 And the momo stocks, The Percentage of ALL NYSE Stocks Closing 1 Standard Deviation Above Their 40-Day Moving Average formerly around +60%, now half that at 30 -/+%

The deterioration for 2015 alone is notable and stands out.

 This is the NASDAQ COMPOSITE (not the NASDAQ 100) ADVANCE/DECLINE LINE. Note that it use to lead the COMP (red) and then the A/D line (green) tumbled below the COMP and is now leading the Comp to the downside. This is the broad index of NASDAQ traded stocks.

And the McClellan Oscillator. The MCO shows several smaller divergences that send the SPx (red) lower at swing moves and in to the October lows, those were specific moves in specific areas, note the broad negative dislocation for all of 2015.

Futures

Crude
In after hours, crude was slammed lower on the API inventories report coming in at 5.5 mn bbl vs consensus of 2.5 mn bbl. As I also mentioned yesterday and last week, Saudi Oil output is at record highs and the Southern fields of Iraq are increasing their output due to better weather, but it's really the Saudi record highs for output that are most interesting as I decided to not only stay with the first USO swing May Put, but to add to it last week, I suspect both will be at gains tomorrow.

 These are Brent Crude Futures ( a bit different than USO's WTI crude, but still..) you can see the API data after the market in to a negative divegrence earlier in the day and another right at the API release...LEAK? We've seen it in EIA which will be released tomorrow morning at 10:30 a.m.

This is the 15th consecutive build in crude for a new record.

The 30 min /CL chart leading negative badly, see the earlier USO update/Follow up linked above from today, I think we'll have a nice position there and when it's time, an even nicer long position for a primary trend trade.


Index futures have a slightly positive look to them going in to the overnight session...

 ES / SPX futures 1 min with a positive divegrence at 2 pm as mentioned numerous times in numerous indications above.

TF/Russell 2000 1 mi Index Futures also positive at 2 pm.

However if this leads to a head fake move, it may be VERY short lived.

Look at these 5 min charts. I use to use the signals of these alone for near term trade direction.

ES 5 min with a positive for this week's Monday oversold bounce and a deep leading negative condition since.

And the same for NQ/NASDAQ 100 futures, this is a huge negative divergence.

If these get higher prices to sell in to, they will migrate and the already horrible looking and accurate 7 min charts will fall apart more so like this TF/R2K 7 min Futures.

They need price strength to sell in to, but as you see from last week, price strength doesn't mean market strength and this week is already looking worse on the oversold bounce condition from Friday in to Monday.

With these 10 min Index Futures' charts, it's hard to get behind a head fake move higher, but they need something to sell in to. This was the 3rd condition, the 7-15 min Index futures go negative.

 ES 10 min compare last week to this week.

 NQ 10 min'

TF 10 min

And the leading (recently) $USDX bounce looks like it's about to roll back over and make a lower primary trend low soon.

And finally the important and final 15 min charts...

 ES 15 min

TF 15 min

NQ 15 min

IF I'VE DONE MY JOB IN EXPLAINING WHAT WE ARE LOOKING FOR AND HOW THINGS HAVE PROGRESSED, THEN YOU KNOW WHAT THE IMPLICATIONS OF THESE CHARTS ARE AND WHY IT'S DIFFICULT TO CALL FOR A HEAD FAKE MOVE, BUT THIS IS MY GUT AND THE CHARTS, IT DOESN'T END WELL FOR THE MARKET.