JPM Front Run

I wanted to take a look at JPM leading up to their 3 p.m. front run of the F_E_D, it appears they may have front run more then the F_E_D...

 This is JPM yesterday just before the 3 p.m. announcement. The red negative divergence makes sense as they lost about 20% of that move in after hours,  but just how early did thy know?

A case could be made for the 9th, sending shares a bit lower to be accumulated, but that's speculation, it appears the 12th would be a pretty good bet as there's a leading positive divergence followed by another on the 13th.

Today's action in the failing banks is also intriguing. Of the 19 tested, C, STI, GJM and MET failed.

While the trading action in these 3 today made sense...

 Citi

 Ally

MET

The action in Suntrust didn't make a lot of sense.

In other strange trade, GS which came in at 5.8 and 5.7 on the stress test (the first number assumes no changes in the bank's dividends, share buybacks, etc after Q1 2012 and the second number is the capital ratio with any proposed changes to dividends, etc through Q4 2013), banks needed a ratio greater then 5 to pass, by comparison, JPM was at 6.3 and 5.4 (the second number is lower as JPM announced a dividend hike and share buybacks) and to give you an idea of what the strongest looked lie, State Street at 15.1 and 12.5. In fact, here's the chart...

In any case, GS looked like this today...

There were some other banks with worse numbers that looked a whole lot better, so what is up with Goldman Sachs...

Greg Smith, a 12 year former Executive Director from GS released an op-ed in the NYT 

Why I Am Leaving Goldman Sachs


This is a must read. I as well as many others have noted GS's reputation for cannibalizing their own clients, this 12 year veteran tells it like it is and it's just as bad if not worse then I thought. If you want to know what Wall Street is, take the time to read this 2-page op-ed from someone who knows.

TZA

Here are small, mid and large cap performance today:

 Small Caps down -.87%

 Mid caps -.80%

 Large caps +.30%, I think this is all pretty clear in the divergence between the IWM and DIA (-.92% / +.11%).

TZA looks to be an interesting candidate shaping up, I personally would not enter quite yet while the averages are divergent.

TZA 30 min

TZA 15 min

TZA 1 min which has been mostly in line today or trend confirmation.

Either way, TZA looks like it is preparing for an upside move.

A Quick Look at Internals

We can see how stocks overall performed today by looking at the NYSE TICK data. As a reminder, TICK is the number of advancing stocks over a 1 minute period minus the number of declining stocks, so obviously above zero shows more advancers, below zero, more decliners. Readings below or above +/-1250 are fairly rare.

TICK

 I drew in trendlines for zero (yellow), +750/1000 white and -750/1000 red. You can see most of the day's action has seen moves below -750, there are very few above +750. There are several moves below -1000 and even -1250, there was 1 move above +1000 and that just occurred with the Dow below support

Here's where the +1000 move came in.

Dow Breaks Support Again

Well at bare minimum, you can say today isn't a strong follow through day.

This is the DJ-30, a little after 11 a.m. the Dow held yesterday's closing support, before 2 p.m. there was a break and right after which recovered, note the 3rd red arrow which technically was a break, but this is why I can't stand when commentators say "Support is at $13177.68", support and resistance are zones or areas and they are created because of emotional responses by humans, of course the machines play their part as well, but it is best to think of support and resistance as areas, as you can see that break recovered. Will this most recent break recover?  It's testing resistance now.

Quick Market Update

1:30 still is a mystery

Yesterday I noticed what looked like a breakdown in small caps, this was before the 3 p.m. JPM announcement. In looking at today's returns on the major averages, it seems like that breakdown I noticed in small caps was for real as the IWM is the weakest on the day:


IWM -.92%
SPY -.24%
QQQ w/ a Doji star +.12%
DIA w/ a Doji star +.07%

 After looking a little more, the DIA did catch the 1:30 negative divergence, but still it was a sharp move, you can see a recent positive divergence formed as the Dow crossed in to the red, right now it's not too far off support from yesterday's close.

 The DIA 2 min shows the "pre-F_O_M_C" announcement and after 2:15, in the yellow box, there's no positive divergence at the JPM announcement, which indicates to me it was a surprise to most of the market, probably not JPM though. I'll look at their chart later, I'm sure they front ran their own announcement. The 2 min chart isn't looking good here, but we are near the close and the Dow is near support.

 Here's the move on the 1 min SPY, the negative divergence isn't there, it happened too fast, although if I drop down to a Tick chart I can see it.  There was a 2:15 positive intraday divergence and in line at the green arrow.  The SPY is moving down a little now, 3C is in line (meaning moving with price, not divergent).

 The 2 min chart showing yesterday's F_E_D action, in yellow no positive divergence on the JPM announcement, similar to the 1:30 move today. Overall, not looking too good here.

The 5 min chart, again JPM in the yellow box, the weakness from the 2 min i moving in to the 5 min.

VXX Calls from yesterday up 22%

Remember yesterday I added VXX Calls, they are now up 22% in a day.

PCLN Follow Up

I already had started a position in PCLN puts in the model options portfolio and this morning I added to that position.

PCLN is moving down, but close to some support right here.

 Here' PCLN looking toppy and the 1 of the reasons I started a position there.

 Here's the triangle I was watching yesterday, again no participation in yesterday's 3 p.m. rally. PCLN is at first support in the area so a bounce is certainly possible here.

 A closer view.

 PCLN 2 min, this is another reason I started the position here in Puts.

In the red box, note the sharp fall , usually a negative divergence would form like the former ones. It appears something triggered this move at 1:30 nearly on the dot

The Bond Market and Greece

From Briefing.com:

"Greek Finance Minister Venizelos expected to resign from post after taking control of Socialist party"


I really don't think that is the catalyst.


The 1 p.m. 30 year bond auction came in at a very high yield which was conducted starting at 1 p.m.. The 30 year hit the highest yield since an auction that came 2 days after the US credit rating was downgraded. We have a trillion dollars of issuance over the next 10 months and China is a seller with $100bn in sales in December. The latest TIC data coming out soon, perhaps there's something in the TIC data that is showing the nightmare scenario of the US needing to issue $1 Tn. in bonds and China accelerating sales of UST's.


Or... perhaps it's just....

The Market Reversal Was Sharp

Usually we don't see too many "V" reversals whether intraday or daily, this I think qualifies and there's usually a trigger (for instance JPM yesterday). I'm looking for what the trigger was.

 Here you can see the reversal was quite sharp around 1:30 EDT in the SPY

 The Q's may have been even sharper, the market is now at intraday lows or within a few cents of them in all of the major averages.

 As usual, day traders were stopped out on the break of the 50-bar  5 min moving average.

The only thing I've seen yet that may be the reason is an intraday reversal in AAPL, but I need to check Briefing.com to see if there's some news out.

ORCL Follow Up

Yesterday I presented ORCL as a trade idea (short), the post can be found here.

Like PCLN and RIMM, ORCL didn't do much of anything yesterday, it's moving today.

 Here's the long term top as a reminder...

 And here's the channel that had several options for different trade entries in yesterday's post.

 ORCL is moving down and moving in to the gap, the gap is also near the bottom of the uptrend channel, note in the red area ORCL did not move with the market yesterday (one of those breadth incidents). I take that lack of participation as weakness in the stock, but again, see yesterday's idea for more details.

 Here is ORCL moving down and in line or trend confirmation.

The 2 min chart is leading and looks worse. See yesterday's post for all of the charts.

Credit/Risk Assets/ Sectors

Since I have received 2 emails about the Twitter (StockTwits) stream being full of talk about concerns regarding market breadth (something I posted well over a week ago), I figured I'd show you a quick chart that sums it up neatly.

First what is market breadth, it is more or less confirmation through multiple different indicators that either confirms a move (up or down) in the market or calls it out as being suspicious, it depends on the degree of the divergence in the market breadth indicators. I want to say in essence, but as my market breadth post showed definitively, the market can be manipulated higher even while a majority of the individual stocks (components) are falling apart or trading lower, it is because the way the averages are weighted, the Dow 30 for example is not weighted in such a manner in which each of the 30 stocks have equal weighting; in fact IBM accounts for the highest weight at 11.7% while Alcoa and Bank of America account for the least at .59% and .49% respectively. However this condition usually can't keep up long.

I use this proprietary indicator that uses % change at various levels to show market momentum and when it is failing. Unlike MACD there is no moving averages used (whenever you apply a moving average, you lose data).

Here is the indicator just before the July 18% market sell off.

Here is the same indicator now, however I would say this is a worse reading as the above chart is between two relative price levels (they are essentially the same), whereas the chart below is in to an advance.

 In January stocks averaging 5% weekly advances were around 70%, now at about 22%. This is only 1 breadth indicator, but it sums up breadth fairly well.

Now, the post...

 These are all relative comparisons against the SPX always in green, commodities have fallen off today.

 Here is a commodity index in green vs the $US dollar, there's a long standing historical inverse relationship between the two as most commodities are traded in $US dollars. When the dollar advances, commodities pull back (the same is usually true of stocks as well) and vice versa. Yesterday's JPM announcement saw that relationship briefly broken in red as both commodities and the dollar advanced.

 Commodities relative performance since the bounce started...

 High Yield Credit selling off today

 A close up of the intraday Euro/SPX relationship, note the Euro divergence early in the morning and the resulting move in the SPX.

 Since the bounce began...

 This time I also included the $AUD as it is the carry trade used to finance risk on rallies, the $AUD falling shows the carry trade is being taken off, the $AUD rising is the carry trade being put on. Again note this morning's divergence and the resulting SPX action.

 Since the bounce started, it looks like the carry trade is being taken off.

 Longer term before the bounce started, the $AUD started selling off leading to last week's Dow drop of approx. -1.5%. The trend here looks pretty obvious.

 High Yield Corp. Credit today is not performing well vs the SPX. We watch the credit markets not because we trade them, but because they are huge and almost exclusively traded by smart money, as the saying goes, "Credit leads, equities follow".

 This is XLE today, it has been the biggest laggard of the 3 most important industry groups (Energy, Financials and Tech).

 Energy vs the SPX longer term.

 Here's the downtrend that started in Energy as well as Crude around the same time, the area in yellow was questionable as to whether it is something changing in the trend or just a counter trend bounce which are common and to be expected. It appears it is a counter trend bounce.

 XLF momentum intraday , you can see why the second positive divergence in the market formed at the white box.

XLK intraday

While I was writing this the SPY reversed off the last intraday positive divergence.