ES Update

 You may recall ES from earlier today, on the first update this morning pre-market it started leading negative, at point "A" the negative divergence was quite clear. Just before the open, the ES lows saw a relative positive divergence. As Es moved off those lows, there was another smaller negative divergence and ES dropped in to the 11:15 a.m. lows, since I would call 3C on ES "in line", although when comparing where price and 3C are between points "A" and "B", 3C has a much firmer tone.

The CONTEST model for ES has shifted dramatically, this is CaptialContext's proprietary model and I don't know exactly what components are in it and how they are weighted, but the last time I looked (this morning around 7:45 a.m.), the model was DEEP in the red, it has improved considerably since then, currently ES is slightly over-valued compared to the model (although this model is not real time and lags by about 45 minutes).

The point is, the model looks VERY different than it did this morning, I suspect because of the distortions in the Credit markets because of JPM's hedge gone wrong and the effects of that (which could include front running by other funds in anticipation of JPM trying to unwind the monster position; JPM's activities in the Credit markets related to the position and numerous hedge and pair trades) CapitalContext may have re-weighted the CONTEXT ES model.

As you may recall yesterday when looking at our own Risk Asset Layout, I was distrustful of some of the credit charts because of what is going on with JPM. I can't imagine that the situation, even if JPM already unwound it (which is doubtful), they haven't confirmed it so there would be a lot of activity trying to front run them as they look to cover their credit shorts.

In retrospect, the HYG Credit trend that saw what I believed to be an upside shakeout of the downtrend channel, may have been part of JPM moving things around in an effort to unwind the position without giving away their problems before they announced.

As you may recall, we looked at JPM when they came out with the news and it appears VERY LIKELY that Wall Street firms or at least several large ones had already known about JPM's problems as early as April or even late March.

This is just one example...

First I have backed the chart up two days as to not reflect any 3C activity AFTER the JPM announcement. This is a VERY typical (4 stage) move, the first stage is accumulation at the positive divergence at the white area, then Stage 2 in Green as 3C confirms higher prices, "Mark up" and then what is probably an early Stage 3 in red "Distribution". This is a daily chart, the initial distribution looks quite normal, although compared to the size of the accumulation stage, it looks like Mark Up was cut short and distribution set in earlier than it should have with as much accumulation as there was. The leading negative divergence in red that moved below the accumulation stage shows VERY HEAVY distribution and all of this on a daily chart and BEFORE JPM announced. I think JPM might have a hard time explaining selling their own stock short with the information they had, so I think it is very likely some larger institutional money knew about JPM's problems back in March/April as we have discussed before. Remember the 15 min chart also pinpointed the exact same timeframe as the daily chart.

This makes credit a little hard to completely trust, which is unfortunate, especially HYG that we use as it is a vet liquid, cheap hedge/trade.