A Few Things You Don't See Often

Another mixed basket today with the SPX gaining +.14%, the NASDAQ at +.10%, the Dow at -.01% and the R2K at -.03%, I would call that more or less, unchanged and the market has clearly lost momentum. 

We do have the ECB's second LTRO tomorrow, I think everyone is curious as to what the reaction will be, too big of a take up and there may be some bank solvency fears, too little of a take up and again, there may be some bank solvency fears. From what ECB insiders said last week and today (I'll get to that in a minute), it sounds like this could be the last one; they say because they don't want the bans leaning on the ECB too much, but I think it is because it didn't produce the carry trade (buying sovereign debt) like they had hoped for-instead almost all of the money went right in to the ECB's deposit facility for a negative carry for the banks of -.25%.

Nowotny from the ECB said the following today as reported by Bloomberg:

• NOWOTNY SAYS SMP IS MORE OR LESS ON HOLD
• NOWOTNY SAYS 3-YEAR LOANS WILL NOT BECOME A REGULAR FEATURE
• NOWOTNY SAYS NOT `CONVINCED' ABOUT CASE FOR HIGHER FIREWALL
• NOWOTNY SAYS ECB HAS PROBLEM OF ADDICTED BANKS

This was around 3:30 and may be causing some trouble for the markets which HATE uncertainty.

Furthermore, theS&P ratings agency cut Greece from CC to "Selective Default"and why?

It may sound familiar...

"We lowered our sovereign credit ratings on Greece to 'SD' following the Greek government's retroactive insertion of collective action clauses (CACs) in the documentation of certain series of its sovereign debt on Feb. 23, 2012."

This is what I've been talking about for weeks, Greece may default before their default date just because of the CACs.

As for broad market action internals, volume was mixed, but close to average, the real change has been in the advancing/declining issues, they have steadily deteriorated day after day. Last Friday the NYSE A/D's were nearly even with a slight edge to advancers, today... decliners outpaced advancers (NYSE 1465/1522 Nasdaq 1137/1372), another notable change in character in the market internals.

Treasuries

TLT in green (Treasuries) closed up +.89% as noted earlier while the SPX closed up +.14%, TLT is certainly not what I would consider a high beta stock and it has an inverse relationship, so it's strange to see it even green. You can see some intraday inverse correlations, but the outperformance of treasuries or as I said, even being green even with a .14% SPX close, is rare. As I have speculated, the yields don't seem to be an incentive, so I'm guessing it is a flight to safety trade. See my earlier post on Treasuries for more details. There's a longer term change in character in treasuries in the linked post above, but in the short term it was noticeable that something was up last week as treasuries were still headed down as they rallied late in the day and then reversed their short term trend.

Commodities tried to hand with the SPX today , but just gave up at the end of the day, the broad commodity index was down -.40%, USO down -1.98% and more on that next.

Earlier I noted the channel buster in USO, not that it was or is a turning point, but as noted these breaks of the channel often result in reversals.

 Here is the upside channel buster mentioned earlier today

And here USO was definitely being watched at the channel as volume surged as it broke down through the channel today.

GLD was mentioned in this update with some 3C negative divergences that sent it closing lower. The red trendline is the area we want to watch, a break below that and GLD could move quite quick on a downside move. If you have alerts I would set them for a break of the trendline around $171.20, it may very well pay-off if you get in early on a break below that trendline as it will represent a head fake move.

The VIX was also green today, even with the market green, even though it wasn't a big gain in the SPX (+.14%) the inverse relationship was not present in the VIX either, which suggests traders are moving from complacency and grabbing some protection (hedging possibly).

The Dow is kind of an interesting story as it just cannot hold $13k

It dipped above and below all day, but gave it up toward the close. I really don't think people give the Dow transports divergence enough credit. I would think in a risk on environment, the first break of $13k would lead to a huge move on volume, it just hasn't happened.

The SKEW Index remains elevated as well (remember the SKEW tries to measure the probability of an improbable even, a market crash or Black Swan event and the higher it is, the higher that probability is. The SKEW has been elevated for nearly 2 months.

As for late day sector movement...

It wasn't surprising if you saw the earlier sector rotation post...

I said Industrials seem to be sliding, which they did and that the more defensive Healthcare looked like it was coming back in, as it did. Financials were clearly in the best rotational position. During the afternoon, Energy, Basic Materials, Industrials, Tech and Discretionary all lost further ground.



I'm going to poke around some more, as well as see what's on deck for earnings trades tomorrow.