Market Update & Leading Indicators

After a quick look at early leading indicators I think the case can be made that short term (as in today) they try to move the market as close to yesterday's close as possible, but I'm sure they have taken out some insurance policies of sorts at the lows of the day that can make up for any miss of yesterday's close (in other words if they have a loss on options they wrote because of the severe decline, they could have been buying ES all night and any upside will lessen their losses on contracts they wrote and the buying at lower levels through the night with a move up-even if it misses yesterday's close- should cover most of their losses).

In any case, I'd look at at any near term upside as a gift, just as taking profits on highly leveraged positions first thing this morning was a gift (as you can re-open them at higher levels).

Leading indicators seem to agree with the general idea of what was stated above as far as today goes while many are in a very negative place for the bigger picture and many more are set up perfectly to put in a negative signal, although it's not quite there (at least not as big as it could be the way they are set up now).

 $AUD already at a bad leading negative divergence with the SPX, any additional ground the SPX gains makes the divergence worse.

HY Credit at a negative divergence with the SPX, even though short term intraday it's up a bit, as long as the trend stays down, the divergence is locked in, any additional ground the SPX gains makes it worse.


All it takes is for the leading indicators to stay at the lows they are at and the SPX/market to move up, then the larger divergences are in place. SKEW will be updated after the close tonight by the CBOE so we'll see what's going on there.

If anyone is watching some of the bigger names like AAPL, GOOG, BAC, etc, it would be interesting to know if you are seeing any large buying of puts out in to Jan., Feb., etc. as there are likely still quite a few funds trapped with longs that they just can't get rid of here, thus they need to hedge with protection and Puts are one way of doing that.

The intraday charts so far are moving along this theme...

 SPY 1 min-the last update I said I thought the 3C signal on the 1 min would lead to a consolidation, thus far it has.

 The 2 min chart was trying early to move the SPY up, the consolidation is in line, which is what I suspected it would be, however...

At the 5 min chart, bigger blocks are moving, Institutional money seems to be using any strength it can find to move out of long positions.


Above I gave an example of how Wall St. can lessen losses by buying ES at the overnight lows and selling them in to higher prices, but that's a very general, broad concept. Thse guys have HFTs executing in micro-seconds so there's likely a lot of trades being executed, they could have several hundred trades in the same stock going long and short all within the same second if there were enough room in the bid and ask.

I think the takeaway right now is the longer term trend. I'll keep updating and throwing any ideas out to you as the opportunities arise.

This is why I prefer leveraged ETFs for moves that are fast and may last weeks or a month or so and why we have been putting these positions together lately.

I think we are about to see the next leg up judging by ES futures/3C