I've had a few questions about adding to short positions here and my answer has been basically to be patient, first I never trust morning trade, it's deceptive, manipulative and largely meant to take out stops and hit orders, a lot of which come from people who work full time jobs and have to place the orders out of normal market hours.
However the bigger reason is it's way too early in my opinion for a move to just fall apart and hold, furthermore,
you know from this post yesterday I'm looking for something very specific from the EUR/USD which could fulfill the other things I've been looking for that have yet o manifest like a new high above the head fake high, certain divergences in credit that will take a bit more tim, etc.
Lets take a look,
first with this post from yesterday...
I showed you the parabolic drop in the EUR/USD, I also showed you a lot of evidence that suggested we'd see a parabolic reversal to the upside today (this was one of the potential catalysts for strength today or the first half of today at least0the other was the NFP print).
Take a look at the EUR/USD...
On a 5 min chart over the last 45 mins or so, we are starting to see a move higher in the EUR/USD as predicted yesterday.
The longer term view shows the parabolic drop, I predicted we'd see a retrace/correction with a parabolic rise in the pair and showed you evidence as to why, the pair is even higher now than you see above.
Here's this morning's positive divergence in the pair, although I showed you many that were already in place yesterday and told you about the FX ETFs and how they give a signal one day and move the next no matter what happened overnight!
As for leading indicators, they are also supportive of the view I've had about some fast/strong move and that being followed by a sharp reversal (whether that reversal is today or a day or so, I don't know, I think today would be most powerful in the afternoon).
Leading Indicators...
Overall FCT which has been very reliable is still VERY negative vs the SPX (which is always the comparison symbol in green).
Here's FCT today, it seems like someone knows how things are going to end, there's not much gain in going long FCT to try to take advantage of any move up intraday or on the day with a Beta of only .39, there are many other assets that would perform much better. This means for every 1% the S&P moves, FCT typically moves .39% with it, deep underperformance, but an excellent leading indicator.
Yields, the magnet for equities are throwing a strong negative divergence, this is the big picture, however intraday they are up as the market is pretty flat suggesting a risk on move is coming, I would think it would have to be pretty strong for them to come out of this asset. Also look how flat trade in the SPX is in yellow, this isn't the volatility we see before a reversal, the market wants to trap and trip traders up, it needs to create emotional extremes, this is why we see the head fake move so often just before a reversal.
Yields intraday are almost in line with the SPX.
Here's the $AUD currency, it shows a leading positive divergence at SPX lows sending the SPX higher and a leading positive in the box that sends the SPX higher, we want this to diverge negatively and a little of that has started today.
Intraday though on a much smaller scale, the $AUD seems to be leading the sPX, suggesting an intraday move higher in the SPX, just as I said I was looking for from the start, but specifically the last few nights and today.
Commodities were in line with the SPX and then fell out hard yesterday as the Euro/USD plunged, today note they haven't moved any lower from that area even though the EUR/USD moved a bit lower overnight, it seems commods know there's a FX reversal coming as we predicted yesterday.
High Yield Credit is another we want to see diverge negatively in to SPX strength, it's starting to do that today as the two move in opposite directions above.
Here's the intraday look.
HYG-Corp. HY Credit is nearly perfectly in line, it is not leading which is good, now it needs to turn negative in to SPX strength.
THAT'S WHEN WE WANT TO ADD TO SHORT POSITIONS!
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