Leading Indicators

Again it's always better to see the closing stats, but these are helpful now as well. I usually don't like spending this much time on market analysis through trading hours, I'd rather be looking at stocks and set ups, but this was a very strange move, one we luckily caught in time to make some adjustments and get out of the way, but I want to be SURE this is an anomaly, a ploy or a tactical move rather than the start of a new strategic change. We don't want to be stuck on the wrong side of a large strategic move so it's absolutely necessary to follow this, make sure nothing happens that would undermine our probability factors and nothing is going to catch us by surprise in a big way. I'll try to give you ideas and opportunities as we go as well.

Credit-(HYG) High Yield Corporate 

 As I said in my first opinion of what we saw develop Tuesday afternoon in Tuesday night's "Initial Impressions", even if we left all the 3C charts out of the picture, the way Leading Indicators were acting, especially credit, would have raised red flags for me.

At "A" on Tuesday HYG is in a positive divergence with the SPX (green) warning of something not right as Credit typically leads stocks. At The lows we see credit is at a larger positive divergence. Yesterday at "B" it seemed Credit was rolling over and putting in a negative divergence with the SPX, but in last night's Market Wrap I showed you specifically how HYG rallied toward the end of the day and had 3C support, telling me we'd likely see more upside in this move. At point "C" we see Credit moving with the SPX in confirmation, what we need to see is credit at a negative divergence with the SPX as well as a lot of other signals, but that needs to happen and it hasn't...YET.

 This is HYG with 3C 2 min on it, this is the exact accumulation late yesterday in HYG I showed you last night and HYG is higher today, but look at the leading negative divergence as HYG is near a test of the highs, this is good because it may lead to the negative divergence in credit I'd like to see.

 Since the move up started on 11/16, you can see the 10 min 3C chart of HYG has gone in to a leading negative divergence, this too tells me 1 of 2 things, either the positive activity is a VERY early change in the strategic sentiment in the market or more likely the positive divergence which doesn't show up here is more of a short term local event to trip up traders, hit stops, who knows what or why, just as long as we are on the right side of the market.

Junk Credit

 Junk did essentially the same thing as HYG above, it went negative yesterday at the highs, but continued up and in line with the market today, this may be good because it is in line rather than leading positive so that would be some deterioration from where it was Tuesday, we need a clear negative divergence between Junk Credit and the SPX (green).

High Yield Credit

 Here's HY Credit vs the SPX, it has a negative divergence early on the 3rd and send the SPX lower, THAT IS WHAT WE WANT, then Tuesday afternoon comes the positive divergence vs the SPX, yesterday it remained positive suggesting more upside today and today it remains in the same area, this need to deteriorate to a negative divergence like the red arrow to the left.

If the 3C chart of HYG is any indication of Credit, than I suspect we will see that negative divergence/deterioration soon.

 Yields since the move started, these are like a magnet for stock prices and this is a large negative divergence, it's much like the 3C 60 min charts of the averages, both suggest high probability of a nasty move down in the market.

 Yields specifically today, you see they are moving down, they may have put some pressure on the market and that may be part of what helped bring the market down just recently.

Euro

 The Euro isn't a great leading indicator, but a good confirmation indicator, here it is vs the SPX (green), for part of this week the Euro was lending support to the market (white) as they typically move together, now the Euro is off from the SPX and negative, it should at some point soon (usually a day or so) start to exert downward pressure on the market, we are already seeing it in commodities.

 The Euro in orange and SPX in green and today's trade, the Euro is much weaker, this is NOT supportive of the market and will eventually be a head wind against further gains if the Euro keeps on this path.

 Here's the EURO/USD and as I said most of this week, there was distribution in the Euro, it made a head fake move above $1.31 and spilled last night, but a lot worse today.

This is commodities vs the SPX (green) and they usually move together, but because commodities are sensitive to currency fluctuations, they are trading down on the weaker Euro/stronger $USD, stocks have the same relationship so it will be interesting to see how long stocks can hold out against the Euro's decline and the $USD's advance.

So far nothing that conflicts with our theory and now you know what we are looking for and what is influencing the market.