It's All About Greece?

Strange thing today, China comes out with decent (slightly below consensus) PMI data, ES bumps a few points overnight, but gives them up and moves to a new low. However ES really starts moving on the European open and specifically on the news from a French newspaper that the IIF says the Greek debt deal will be done in a matter of hours. Yesterday I even mocked the number of times we have heard that the deal was imminent and then hours later was denied by an official source. In fact is seems hard to believe any such rumor when just yesterday the Greek Finance Minister said the talks were at an impasse over problems with the Troika and that an emergency meeting would be called at the earliest on Thursday, implying nothing is getting done between now and then. However ES grabbed on to the rumor and lofted the market overnight to our gap up. Being we've heard this rumor nearly every day for the last 3 weeks and the market hasn't moved much more then a half a percent either way, today's market seemed odd.

In fact yesterday the month of January ended with the lowest volume for the month in more then 5 years,  1 26% drop from last January and a 59% drop compared to January 2008, yet the NASDAQ 100 posted a 52 week high in volume today?

Not to get into a comprehensive analysis of the Greek debt negotiations, but the Troika and IMF specifically are now saying that what will end up being a nearly 70% loss to PRIVATE Greek bond holders, isn't enough to lower their Debt:GDP ratio (and GDP is about to get a lot worse). So the idea from the IMF (in a round the bush kind of way) is to have the ECB as well as the 17 national Central Banks that hold Greek Debt to participate in the restructuring, the only problem other then each individual central banks' outrage, is the fact that the ECB is prohibited from financing sovereign deficits, meaning they have an out from taking a write-down, other then the profit they made on buying Greek debt which won't cover the short fall.

Furthermore the ECB doesn't want to set a precedent that Portugal, Ireland, Italy or Spain could pursue. Besides that, the ECB's Draghi already ruled the option out over a month ago. In the mean time, the target they have been shooting for, to reduce the debt by $120 bn Euros has become a moving target and because of economic conditions is actually $135 bn Euro short fall. All of this being settled is the prerequisite for the Troika's next tranche of bailout cash to Greece, which will be the first developed country in 65 years to default if they don't get the money by March. Keep in mind this was all supposed to be wrapped up before the summit this week so the Troika could start deciding whether Greece meets the requirements for the next Tranche.

The point being, it's a black hole and today was one of numerous rumors, but this one set the market on fire?

To make matters even worse (the moving target), Kathimerini reports today:

About 160,000 jobs will be lost this year in the commerce sector, according to the National Confederation of Greek Commerce (ESEE) as the constant decline in disposable income has led to a sharp drop in turnover and a steep rise in the number of enterprises shutting down.

The jobs to be lost concern 60,000 employers and 100,000 employees in the sector, ESEE expects. Given the data for a 6.2 percent fall in household consumption in 2011 and the Eurostat forecast for a further decline by 4.3 percent this year, ESEE warns that soon Greece will be in a condition of absolute poverty.

With 60,000 enterprises having shut down since the start of the crisis to date, their number is set to double by the end of this year, ESEE estimates.

And that is a SINGLE SECTOR! 


So on to some charts, keeping in mind that the news that the deal would not be done today, but maybe next week, came at 1:41 p.m. today.


First it appears the story was leaked slightly before it was released.

 First there was a large drop in the Euro exactly at 1:42

 FXE showed negative divergences in both 3C and TSV prior to 1 p.m.

 The Dollar saw positive divergences at the same time in both indicators.

 The initial reaction saw safe haven bonds rise again, exactly at 1:42 p.m. (7-10 year)

 (10-20 year) again exactly at 1:42 p.m.

(20+ year bond) again 1:42 on the nose. So the initial reaction was to reach for protection.

At the very same time, the NASDAQ 100's Advance/Decline line started to decline which we rarely see on a day like today.

It's also the same time the NDX's MCO started trending down, even though today's strength in the NDX was during the longer term MCO moving down (this is a breadth indicator that measures advances/declines of the NASDAQ 100's component stocks).

So it seems pretty clear today was about Greece, but the market's reaction was way out of character for these non-stop rumors, which makes me wonder whether this was just a catalyst used to justify a move in the market with some other real reason.


As for intraday trade...

 The percentage of NASDAQ 100 stocks above their 1 min 50 bar average, clearly changed near the top, almost a mirror reversal.

 This is an indicator showing where each bar closed within its range, the higher the better, it also turned right around the intraday top.

Technology (as you'll see in a minute), had an abrupt change right at the top moving to distribution.


As for the close...

 The breadth/internals were worse then the closing price action.  Above is the % count of components making new highs/new lows on a 1 min 250 bar basis, which is close to a trading day. Other then the open, the new highs hovered around 20% most of the day, in to the close about 30% of the Nasdaq was making a new low on the day.

 XLE closed with a huge move up in volume on a move down, the second biggest volume was at the top and likely a distribution bar.

 This is the second day of enormous bearish closing volume, I also noted what looked to be a distribution bar.

 Which was at the same time 3C was showing a negative divergence.

 XLF closed on the second highest volume of the day, which was also increasing on the end of day move down and note what appears to be another distribution bar near the top.

Tech closed the same way.






As for the top 20 performing industries today, again, they were strange. They weren't led by the strongest industries, but some very weak performers and odd balls.

Many of these formed tops on 2011 with sharp declines, for example:



Computer Peripherals saw a  -42% drop during 2011
Heavy Construction a -46% drop
Staffing and Outsourcing  a -33% drop
Home Healthcare a -50% during 2011
Long-term Health Care facilities a -55% drop
Technical Services -35%
Security Services -33%
Movie/Production -32%
Investment Brokers -42%
Residential Construction -40%


These are the top 20 performing sub-industries today, while AAPL with blowout earnings a few days ago closed in the red. It almost seems like a Cats  and Dogs rally, why bother with AAPL as it's already high.


If I had to guess, I would think this may have been a bull trap for Friday's NFP. 


This has all of the characteristics of a bear market rally, the two charts below would suggest it will be a lot worse then 2008.

 The daily 3C chart shows how bad it actually is, I might be inclined to second guess the chart if the one below didn't look nearly identical.

This is MoneyStream, created completely differently, but looking very much the same and this is the crowning achievement of the man who literally invented money flow indicators.

Late Day Selling on volume

Why is this important, because the pros trade the close.

 The Dow is now below its open

 The pace of selling is picking up into the close

 QQQ selling on the close on volume

SPY as well.

And as expected, ES broke its VWAP on the heaviest volume of the day.

Sectors

Late Day Sector Rotation

 Afternoon sector rotation shows financials, energy and industrials fading while the defensive healthcare,  utilities, and staples strengthen.

 Commodities, which should normally move well with Euro strength are now below yesterday's close.

Credit, which is a larger market then equities, has seen the risk on, High Yield credit also move below yesterday's close.

Think about it.

Here Comes the ES VWAP Test

USO moving in to trouble

USO has shown a pretty long stretch of distribution, despite all of the geo-political developments that would suggest otherwise. It is now moving to an area in which it could see a very serious move.

 USO breaking important support today

 Intraday, it put up a small fight at support, but not much.

 This is indicator shows the weekly close within the range (think where a candlestick chart closes within the high/low range.

 Daily 3C

 Hourly 3C

New leading 15 min low.

Basically there's been heavy distribution over the last couple of months, I would assume there's been a lot of shorting as well.

The Euro Arbitrage Correlation

Should take effect soon, certainly at this trajectory, ES will break VWAP in the next few hours.

 The larger picture of the correlation.

And more recently. There always seems to be a lag, the Euro moves first, then the market. I assume it's due to positions being realigned.

BAC

Yesterday I mentioned BAC looked like it was setting up again for a downside move and my preference for playing that with March in the money puts. 

With the majority of stocks following the market and their industry group as a general rule, BAC got a bit of a free ride today, thus I like the trade even more.

 BAC has heavy overhead resistance nearby as a top 5 holding in many funds last year.

It looks like some on Wall St. have used BAC's price strength today to their benefit.

Day Traders Predictability

Ever since I can remember, day traders have used the 50 bar average on a 5 min chart as a stop...

The DIA is the first to break it today...

Note the large candle breaking the average as well as the large volume at the same point.

RSI has also been negative, but that's to be expected as the DIA has been lateral most of the day with the exception of the early morning.

Sewing Circle Back At It

The rally today was based on rumors the Greek debt restructuring would be complete today, despite what I already pointed out as a direct contradiction from official Greek sources, like the finance minister who said they are at an impasse and will hold an emergency meeting "as early as Thursday".

Now the IIF that seemingly is about as trustworthy as Greece itself, says the deal will not be done in hours, but maybe next week.

Euro's reaction

And why it matters, because the market is moving because of the FX correlation

AAPL Still at .04%

AAPL moved up a bit, but has now broken its trendline

AAPL going red on the session should have an impact on the NDX as its largest component

ES to test VWAP?

With the Euro starting a decline, it looks like ES may test VWAP before the day is over, a break below VWAP... well we'll look at that when we get to that bridge

GLD Update

GLD is now at the Apex of the Triangle, this is the typical move seen after a top breaks "Kissing the channel, Top, Resistance, etc Goodbye".

 The 150-day moving average continues to be a key level GLD traders are focusing on, just look at the size of the candle and volume on the move above the average, which historically over the last several years has held on every test and has been a great buying area. However volume suggests a consolidation, the only problem is the slant of the consolidation is all wrong.

 GLD intraday is not performing well.

 In the shirt term we can see what looks like a move down coming in GLD

Longer term since GLD bottomed in December, there is nearly a complete cycle from accumulation, to confirmation and now distribution.

I'm not opposed to gold long or short, but if GLD can't break above the apex of the triangle (and it doesn't look like it will), it will not be able to break the intermediate trend which is still bearish. For some time we have watched thus top develop, the question really is whether it is a bubble or an intermediate top .

AAPL NASDAQ Bellwether

Keep an eye on AAPL which is close to unchanged on the day at .04%, as the NASDAQ 100's heaviest weighted component, the lack of any relative performance is strange to say the least.

AAPL on the open...

Also  keep an eye on XOM, it's breaking it's intraday trendline, it is the 6th most weighted stock on the Dow-30.

In addition, the market in general, are getting ahead of the Euro, which s what they have been following all morning.