Taking a Quick Look Around

So today is what I've been calling a 'TOFU" day, the only thing on the US economic front today was a 3 and 6 month bill auction, the main event is Bernie speaking at 7:30 tonight. Europe was closed o there wasn't any bad news (of which I expect plenty) today. Today was a perfect day for the market to do some backing and filling, but whatever happened around 3:30 happened pretty fast and it still isn't clear to me what exactly it is.

As mentioned earlier, ES quickly retreated BELOW its VWAP starting around 3 p.m. and really picking up pace minutes before the close, by 4:30 ES was trading at 1374.25 which is only about 1 point off the intraday lows after having reached 1382.75. Think about that, ES gained 8.5 points and then lost all but 1 point in the last hour of the day.

ES actually moved below the CONTEXT model and quite sharply as you can see to the far right.

 The SPY arbitrage model lagged the SPY all day, which isn't surprising as I don't believe this was anything more then a technical move (backing and filling the gap), but look how fast the SPY model fell apart toward the end of the day, easily moving to a new low, although the SPY didn't see quite the same momentum.

The VIX actually had somewhat impressive day, but is still very far below the implied value.

 Here's the descending wedge behavior in the VIX I mentioned today and many times in the past, the first move was a false breakout as that is what technical traders expect to happen based on years of indoctrination that Wall Street uses against them. The VIX went on to do what wedges almost always do, form a base. Today the VIX was very close to breaking above that base.

 The daily 3C positive divergence in the VIX now is much stronger then the last divergence that sent the market lower by 20% last July.

 The VIX also broke above its 50 ma today.

Look at the momentum in the VIX in the afternoon.

Some other important averages and their 50-day moving averages...

 The Dow-30 broke its 50 day today.

The Russell 2000, which should lead any risk on rally, broke its 50-day decisively.

You might expect with a little intraday bounce to see yields rise and bonds fall, not the case...

TLT was flat all day, for at least today, there was no rotation out of bonds and in to stocks.

As far as the sector that carried the day, it was Tech as you might imagine, but remember what the Q's and AAPL looked like on 3C today (and when I say Tech, I pretty much mean AAPL).

 XLK's relative momentum vs the SPX...

XLK vs XLF, but even Tech retreated pretty quickly at the end of day.

The 3 main risk groups broke down like this: XLF -1.48 ,  XLK -.66,  XLE -1.26.

HYG (High Yield Corp. Credit) broke below its 100 day moving averge today for the first time since November.

 HY Corp Credit was not excited about stocks' attempt to bounce.

 Longer term as I suspected, Credit made a new low here.

High Yield Credit which considering its beta and its cheapness would be an obvious place for risk on money to flow to, yet it made a new, lower low today as the market started to turn down. Credit is obviously worried about something and has been for some time.

The move in the $AUD was definitely interesting (see last post), but the retreat in ES and the market in general can't really be attributed to dollar strength.

While supportive of a bounce earlier, it didn't see the kind of upside momentum later that would turn ES like it did.

For those in to Dow Theory or Dr. Copper, the divergence between both and the Dow-30 is obvious, but this is what I've been showing you in the underlying trade for some time so it's not surprising, it is however a red flag.

 Transports in Green/Dow 30 in red

Copper in green/Dow 30 in red.

I've been saying (generally speaking) I wouldn't be long anything in this market right now, the worm can turn too quickly to get out of the way. So much for Goldman's long the Russell 2000 call discussed last night.

As of today's close, up to 43 days of R2K longs are now at a loss, that's nearly 2 trading months (22 days per month)

R2K as of today's close.

In any case, something odd seems to have went down today, maybe Bernie' speech will shed some light or perhaps this is just the continuing change of character.

The dominant P/V relationship in the major averages was Price Down/ Volume Down which only tells us the market is not in an oversold position, although that is to be expected on today's light volume.

Today's movement came from lower than avg. volume (NYSE 725 mln, vs. 805 mln avg; Nasdaq 1330 mln, vs. 1699 mln avg), 


Decliners outpaced advancers (NYSE 640/2387 Nasdaq 466/2079), and for the first time I can remember in a long time,  new lows outpaced new highs (NYSE new highs/new lows 23/59 and NASDAQ new highs/new lows 28/72).


The A/D ratio however is enough to create a 1 day oversold condition, that is unless we are t the edge of the cliff and then 1-day oversold conditions won't matter.


I have a feeling something is going to hit the wires soon, maybe from Bernie' speech, maybe on the EU open, but today's market action just didn't feel right toward the end of day, or in other words, something is changing. You know where I have stood on this market and a snap wouldn't surprise me, when the snap comes is often a surprise.


The last month and a half or so have seen the underlying trade deteriorate badly, not only in 3C, but breadth, margin, flow of funds, insider selling, credit markets, carry trade unwinds and now the re-emergence of EU problems and that apparent problems in the US and China as well.


I'll probably update again after Bernie speaks or if anything unusual happens in ES or currencies.