First we're going to look at Leading Indicators because they were predictive for today's trade and they are probably somewhat predictive for either this afternoon and maybe in to tomorrow or part of tomorrow's trade. I'm not looking too much beyond that.
Then I'm going to show you about 5 different QQQ charts that should, if you are still having a hard time visualizing multiple trends at the same time and how to rate their probabilities (which is understandable as this is a particularly complex set of signals currently) help you understand the different trends, what their respective strength and probabilities are and how that ties in to Leading Indicators, at least in the near term.
Leading Indicators (*With Leading Indicator Charts, the Leading Indicator will have its own color, it will always be compared to the S&P-500 which will always be green unless the comparison symbol is noted to be something other than the S&P-500*)
Commodities
Looking slightly longer term at commodities we see where they are roughly trading with the SPX as they generally should as they are both reflections of investors/traders sentiment toward risk, either buying or selling. However recently with the SPX making that triangle Friday the market seemed to be short term manipulated and Commodities outperformed the SPX by a wide margin, this was a hint that there was a risk on sentiment in the market and that the SPX was likely being artificially held back for a short time (as they can't manipulate the market too long without really setting that trade up in advance).
Our view that we'd see a near term attempt at least for the market and especially the QQQ to try to take out that clear resistance level was confirmed by strength in Commodities while the SPX was weak at the moment; this also tells us (with enough confirmation) that the trade in the PX is likely being manipulated. You can see why now after that triangle from Friday fell and the shorts who were trapped covered and help send the market higher earlier today.
Commodities 1 min chart intraday show a positive divergence between them and the SPX, they are headed higher as the SPX breaks below the triangle late Friday afternoon. Today commodities and the SPX are pretty much in what I call 'reversion to the mean", meaning the bullish divergence in commodities short term has now vanished as the SPX has caught up with commodities and commodities have failed to make a strong move higher, instead they have just met up with the SPX, this is short term negative for the market or at least tells us a consolidation is likely.
FCT
FCT was brought to me by a member and I'm eternally grateful because for whatever reason, I have found that it tends to lead the market in a number of timeframes. Here on about a week's worth of trade FCT held up much better than the SPX at the white area and suggested a positive divergence that the SPX would have to catch up to by moving up as we suspected any way.
Again, like commodities today, intraday trade shows FCT making lower highs as the SPX was making higher highs, FCT is in a short term negative divergence which should send the SPX lower or in to some sort of consolidation any time now.
Yields
Yields are like a magnet and they attract stocks/SPX to them, the positive divergence in yields in white suggested we'd see some near term upside in the SPX and we have.
Intraday yields are still holding up pretty well, we'll have to see how they close.
Currencies
The $AUD is a great leading indicator among the currencies because it reflects to some degree whether the FX carry trade is on or off which effects the market. The $AUD was leading the market on the 14th (Friday) and suggesting the SPX moves higher today, that happened, the $AUD lost strength today and the two met at reversion to the mean, that means as of now there's no divergence, but it also takes the wind out of the bullish sails short term.
The Euro is a better confirmation indicator than leading indicator, but it has been leading the SPX, these two usually move together so the SPX had some catching up to do on the upside as of Friday, it looks like it still does so it's possible that we get a short term pullback/consolidation and then a continuation of the short term market move to the upside.
Intraday you can see the Euro has lost some steam and this is certainly having an effect on the SPX, as I said, they tend to move together even on an intraday basis with the Euro leading longer term, this is because of arbitrage traders/HFTs.
Credit
As they say, "Credit leads, stocks follow" or "confirm". This is High Yield Credit, it is a risk asset rather than a flight to safety like Investment Grade Credit, HY credit is used when credit traders expect a bullish environment, but because Credit is so big, they tend to unwind trades before the market does and thus give us a leading divergence. Here in white Credit is leading the SPX and the SPX moves higher, but then Credit turns to a negative divergence and the SPX moves lower, it looks like we still have some near term downside.
A closer look reveals a positive divergence in HY credit late Friday at the white arrow and a negative divergence intraday today at the red arrow.
High Yield Corporate Credit works much the same way as HY above, in green the SPX and credit are in line and moving together, no real signals there, today however HYG Credit is not as enthusiastic to move higher with the SPX at the red box.
Junk Credit is high yield because of its risk as being junk, so this is used to express a risk on sentiment. Last week we see Junk Credit outperforming the SPX at the white box as Junk refuses to move lower with the SPX, Junk still is leading the SPX over the bigger picture (meaning several days-maybe a week).
QQQ-trends
This is the 1 min intraday trend, it is the fastest chart to react to new information such as an intraday divergence as we see to the right at the red arrow and the QQQ has lost ground since then. We can also see a preceding positive divergence at the white arrow suggesting the QQQ moves higher short term as it did today.
The red trendline above is the resistance zone I think the NASDA 100 will try to break to trigger orders and make $$$, but for now this is signaling a pullback intraday until it turns positive again.
The 10 min QQQ 3C chart shows a positive divergence a couple of days long, also a leading positive divergence so all in all, being this is a stronger, more important and higher probability trend, even though the short term 1 min chart shows a QQQ pullback, this 10 min chart is still in effect and still suggests the QQQ will head higher, which tells us even though there's a pullback now, it's very likely it ends at some point soon to finish what this chart is depicting until this 10 min chart turns negative.
The 15 min chart is even more important than the 10-min chart and we have longer trend here. On 11/16 we have a strong positive divergence in the QQQ, this tells us a significant move up should come, it did, then we see a leading negative divergence telling us that even though the QQQ are still holding in this area and still might see short term upside volatility, the strongest trend and highest probabilities are the QQQ follow this leading negative divergence and likely make a new low below the 11/16 low. This doesn't mean in the short term the Q' can't move higher, it just means they are not likely to move too high and they definitely are not likely to hold that move, so it makes any upside move in the QQQ worth looking at as a short as this trend finally executes to the downside.
The 60 min chart is even more impressive and stronger in trend and probabilities, it also says QQQ goes down so while other trades may see the QQQ breakout and chase it thinking it is going higher, we have strong information saying , "NO IT DOESN'T-YOU WERE JUST SUCKERED IN TO A BULL TRAP!!!"
THIS IS A MCH LONGER 30 MIN TREND AND WE ARE NOT THERE YET, BUT IT IS POSITIVE, IT'S BEEN BUILDING SUPPORT SINCE LATE SEPTEMBER, BUT JUST LIKE BASES WE HAVE SEEN, THEY CAN MOVE UP AND DOWN, EVEN THOUGH THEIR EVENTUAL PATH IS TO THE UPSIDE.
When more data comes in and the trends we expect play out, we will cross this bridge when we get there, it's too early.
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