LEADING INDICATORS

So after looking at Index futures with longer term charts improving and the cash market averages with the same, but both needing the short term timing charts to improve, it would only make sense that the market should pullback and fill today's gap which would create a situation in which the short term charts "could" fall in line, go positive and give us a strong timing signal on top of strengthening underlying trend signals suggesting we have a base here for a bounce.

Leading Indicators are not jumping off the charts, but for the most part in any type of counter trend move which this would be since the SPX has done nothing but make lower highs and lower lows since May, I wouldn't expect many leading indicators to jump off the chart except the ones that are levers of manipulation like HYG, on occasion a VIX-whack/beat down, etc.

There are some interesting trend signals and there are some interesting shorter term signals. In my opinion, the way things are sitting now between Futures, the averages and Leading Indicators, if the short term charts went positive (timing charts), I'd have high confidence in a pretty substantial bounce. To get those charts positive, the market would need to pullback and fill most of today's gap, maybe even a stop run, smart money simply doesn't chase prices higher, neither do we, they do things like hit stops and create massive supply on the cheap.

Charts...

 This is our custom SPX:RUT Ratio, it has shown improvement since yesterday and in to today.

Our VIX Inversion Custom Indicator has had a remarkably accurate track record when there's a VIX inversion which is a buy signal labelled on the histogram and price in white. This is a 60 min chart of the local VIX Inversions we have had, they are in the general base-like area since about the start of July.

Just to show you the track record on a daily chart...

 This VIX Inversion daily chart vs. the SPX shows a bounce of some sort after EVERY signal (white), a bounce here would be the first failure of this chart in I don't even know how long.

 This is HYG, you already saw the 3C charts for it in, BROAD MARKET UPDATE earlier today. This lever looks like it's being pulled. Yesterday HYG was flat even as the market came down, this morning it gapped up and just look at the correlation between the SPX in green and HYG in blue. as they say, "Credit leads, stocks follow". and on that note, I'd be remiss if I didn't tell you that on a daily chart, HYG has been in a primary downtrend nearly all year and maybe some, leading much lower than the market so bigger picture I expect the market to absolutely catch down to credit's reality much lower.

 As for pPro sentiment indicators, they haven't been on fire, but personally if I were in their shoes managing large positions that take time and liquidity to get out of, I'd rather wait for a bounce and short in to it than try to ride a bounce and then sell and short in to it. Their positions are much larger and they take more time, it's not like ours where you sell a round lot of 100 shares and that's that.

That being said, the near term chart looks like price should come down as it has the last several divergences , but...

The overall trend in to the base area (as I said looked much stronger coming in to this week)  is still in a positive position.

Our secondary confirmation of Pro sentiment has led the SPX up off Wednesday lows and has held up through yesterday's intraday pullback and is right about in line with price with a small negative divgerence suggesting, in my opinion a gap fill pullback which would be interesting here and probably very helpful as far as getting a bounce going and having the confidence to feel timing is strong enough to pull the trigger on any new or additional bounce positions.

 30 year yields which we have long used as a leading indicator until their trend was turned around this year, seem to be working as leading indicators once again,  the old risk on/risk off /flight to safety, flight to risk correlation. At the white areas you can see yields led the SPX (green) to an upside move and at red areas you can see yields led the SPX to downside moves. Currently Yields are sitting higher. I like to think of them as a leading magnet that pulls price toward them.

A closer look shows in line status at the green arrow, negative divergences at the red arrows and a leading positive divergence at the white. This would suggest the bounce theory is still on.

 HY Credit's longer term trend vs the SPX is still in a positive position,  this is probably the first positive divergence since the May highs sent the SPX lower.

In yellow is the May SPX head fake highs with HY credit diverging negatively and bringing the SPX lower which has been the trend ever since with a deep leading negative position overall, but within that you can see the short term positive in white as seen above this chart.

Again my impression would be a bounce, something worth selling/shorting in to followed by a new low with a decisive break of the SPX 200-day, so this could be played as a long and then short (given the proper signals) or just wait and look for a bounce and short in to that as that would be the higher probability, larger trend trade.

And the TICK trend, note what looks like a downside flameout at #1 or short term selling event otherwise called capitulation which opens the door for a bounce which we see improvement in breadth at #2.

All in all, I think my opinion of the market is more than anything and more than ever since Tuesday, solidified in the probability of a bounce. However I'm still not budging on the concept that is always in place, not just now and that is that we have objective evidence that we base all trades on. So far we have good objective evidence for a trend or the trend of a base, we need the timing signals in the short term charts, that's the prerequisite for adding here and for a high probability, low risk trade.