MARKET UPDATE

This is a different kind of update, but just as useful, maybe more so. If I was hiring traders and giving the choice between hiring someone with a MBA in finance or psychology, I would choose psychology assuming everything else is equal. Why? The answer is found in another question, "What moves markets?"

This is one thing Cramer said that I actually agree with, it was in his shocking interview with Aaron Task on the Street.com which he revealed some things that I think CNBC would rather his prime time viewers not hear about, but he also answered the question and showed, despite is clown-like performance on MM and his calls that may seem to be failures (in reality they are more likely there to benefit his Wall Street best friends), he actually is a pretty smart guy, but CNBC viewers are not likely to get the real truth from him and benefit from what he really knows.

In any case, the candidate with the finance degree would answer, "Supply and Demand move the market"

The psychology candidate (assuming he has studied the market a little bit) would say exactly as Cramer did, "Sentiment" is what moves the market.

In other words, while supply and demand are the mechanism that moves prices, the cause of that is found in "sentiment" or more blandly put, "emotion".

As I told a member last night, when I taught Technical Analysis to my classes for 3.5 years, the thing I hoped to instill in them the most was the ability to look at a price chart (it's much easier to do this in the present), especially historical harts because that's where you learn and put themselves in the "emotional moment" of the historical chart, rather then looking at moving averages and MACD. If you can do that, you can understand a lot about the market and how and why it behaves as it does today. You'll also understand while there is daily short term manipulation, the longer term charts are purely emotionally driven and that's why we see the same price patterns today (on a longer term basis) that we saw in the British markets over several centuries ago. It's the same reason Japanese CandleStick charting has worked for centuries whether it be in the rice markets 200 years ago or the stock market today.

So here's the point of the post, today either some HFT firms reprogrammed or shut down their legacy arbitrage algorithms or Skynet is still up and running, but human traders are overwhelming the machines do to Fear in the market.

Here's one of those "fleeting glimpses" of market action.

 Longer term the EUR/USD pair found some support at the bottom of the bear flag and thus has bounced from that support.

 This is the SPY (green) vs the Euro (white), the red trendline is the Euro, the green trendline is the market/SPY. Notice how the Euro has made 5 higher highs while the SPY still hasn't managed to make a single new high from the reference point around 10:15? That's sentiment.

Here's the ES correlation to the Euro which almost always runs at 1.0 meaning as they Euro goes, so goes the market in almost exact correlation. However we have several points in which the correlation during this mid morning-noon bounce has actually totally reversed, meaning the Euro went up and ES didn't just drag behind, but actually went in the opposite direction of down. The average correlation is at nearly half the normal so ES "should" be about 50% higher then it is (during the Euro bounce period). That is market sentiment talking.

I wouldn't say the FX based bounce is important or happening for any other reason then just normal market trade as it hit a support line, it's doing what you'd expect, there's nothing remarkable about this, just normal market action.

As far as the FXE/Euro goes, it continues to deteriorate from a quick, intraday long trade from support.

FXE/Euro accumulation as it nears support around 10:15 and subsequent distribution on the bounce.