ES Update 11:30 p.m. EDT

As you can see in after hours around 10 p.m. there was a negative divergence sending ES to new lows for today's trading session. We still have a long night ahead of us, but the apparent catalyst was the HSBC China PMI (not official Chinese PMI) printed at 48.1, this number is down from 49.6; anything under 50 is considered to be contraction and this would be the 5th consecutive month of contraction in the HSBC PMI data.

The fact futures were ramped in to the release and in to a negative divergence suggests the number was leaked.

For more from Reuters:

China factory activity shrinks for 5th month-HSBC flash PMI

(Reuters) - China's manufacturing sector activity shrank in March for a fifth successive month, with the overall rate of contraction accelerating and new orders sinking to a four-month low, the HSBC flash purchasing managers index showed on Thursday.

EOD

End of day internals looked lie this:



Trade was on lower than avg. volume (NYSE 726 mln, vs. 800 mln avg; Nasdaq 1498 mln, vs. 1741 mln avg) with mixed advancers/decliners (NYSE 1430/1531 Nasdaq 1268/1225)


As for the Credit/Risk/Sector charts...

 Commodities leaked all day closing just off their intraday lows, I don't think the commodity action had anything to do with the end of day decline, rather most probably a reflection of the worries over China that sent overnight sentiment in Asia sour.

 High Yield Credit was a bit interesting as it too sold off most of the day, I suspect this has more to do with the blowout in sovereign spreads in the EU after 3 month of relative quiet on that front. As I mentioned earlier, be prepared for the EU to come to the forefront. Yields in Spain and Portugal will likely be closely watched, although Spain is the main concern with sentiment drifting toward, "Spain is following in Greece's footsteps" and as mentioned earlier, the loan to deposit ration in the EU is the highest of developed nations, they are running low on pledge-able assets that the ECB will accept and the ECB seems to be clear on outright monetization, they aren't doing it. With few assets left to pledge as collateral, LTRO 3 is becoming a distinct non-probability; meaning if the rest of the EU gets worked up about Spain and rising yields (after the Greek Bond holders got screwed every which way and the ECB created a senior and subordinated bond market), the probability of bond traders stepping in to help  Spain is very unlikely and as we have seen, the LTRO Carry trade didn't go toward the purchase of sovereign bonds, it went toward a negative carry trade (LTRO interest rate 1%/ECB deposit facility .75%=negative carry trade of .25%) in the form of the ECB deposit facility to shore up tier one capital and after seeing their loan to deposit ratios, it's no wonder. A bank run in the rest of the EU wouldn't be anything like a US bank run, it would be many, many times worse.

 Rates diverged from the SPX and sent it lower several times today as TLT was one of the best performing ETFs today. What's the game in treasuries? That remains to be seen, although earlier today it looked like TLT was getting ready for a pullback.

 The Euro was synced with the SPX all day until the EOD plunge, the obvious answer to the question of the chicken or the egg is Apple.

 The $AUD was well synced as well until the EOD sell off, I'm still curious as to whether the $AUD is going to bounce, even if it does, the trend is pretty clear there as the carry trade seems to be in full unwind mode, but everything bounces.

 High Yield Corp. Credit was interesting, I do think this is correlated to AAPL in some partial way and certainly seemed to give a heads up on the EOD sell off, it closed at the intraday lows.

 Here's Energy, it was synced with the market earlier, but came unglued after noon time and wasn't moved at all by the AAPL initiated plunge.

 Note Energy stayed rangebound through the close.

 Interestingly Financials weren't moved by the end of day plunge much either, although they were not strong performers any way. It is interesting how they came unglued from the SPX around noon time as well, there's something there, I'm just not quite sure what it is yet.

 Financials coming out of the triangle, it remains to be seen if we get a head fake move here, the initial one wasn't very impressive. In yellow Financials were rangebound through the close.

 Tech did move with the SPX, in fact a bit before the SPX, again, it's AAPL.

 Here's Tech today.

As for sector rotation today, it's mixed, Financials clearly leaked lower as did Energy and late in the day Tech. Utilities were somewhat flat, but the defensive Healthcare and Staples were in rotation today which raises some questions, Basic Materials maintained today as did Discretionary. 


To my surprise, there was NO dominant Price/Volume relationship today, yesterday's was very strange and we may be seeing why today. 


In the E-Mini Futures (ES), they saw the smallest average trade size of the entire year today, again interesting, but I'm not sure what to make of it quite yet-are the bigger traders pulling out? 


The ICI report came out today and Domestic Equity Retail funds saw another $2.9 bn in outflows despite this "stellar" rally. This is the 4th consecutive outflow of funds and the 23rd outflow of the last 27. 



As for the AUD/USD pair that seems to be fairly well correlated to the market...

 The trend is clearly down.

This is the intraday trend line I was watching for a possible breakout, it hasn't done much yet. There was a 3C positive divergence there, but as I mentioned, it wasn't that big and could have simply been enough to halt the slide lower and start a consolidation. On the other hand, a bounce can't be ruled out. If the AUD fails to move much overnight I'll check 3C in the morning and see what's going on there.  A bounce would likely bounce the market a bit (there still is a gap in the Dow), but the trend here is clear and bounces are a normal part of any trend.






I'll be checking on the $AUD and ES later and if anything exciting pops up I'll post it.

Pennies in front of a steam roller

You've heard me say that many times, it is because the underlying technicals and breadth of the market are so bad that it is like skating out on ever thinner ice, a train wreck waiting to happen.

Last night's Price/Volume relationship was the strangest I have ever seen, whether that is leading us to something bigger, we'll see. The extreme volatility today in an otherwise divided and relatively flat market probably was another signal of something nasty to come and as always, quiet markets always have me on the edge of my seat.

For right now, we can see how fear is stronger then greed and how markets fall a lot faster and harder then they rise.

 AAPL closed down .57%, it was up earlier .61%, that means nearly the entire move and then another .57% was wiped out in 25 minutes and look at that volume.

 Sadly the Dow didn't have long enough to test and or break support

 The IWM from yesterday's close

 The Q's had a gain of .56% and closed at a gain of 0.01%

The SPY closed down -.16% taking out nearly all longs and it looks like it's going after the rest of them in AH at the red arrow.

QQQ Update

The Q's have been the strongest and that is because of AAPL, thus the reason I posted this early today specifically on AAPL and the Q's

Here's how the Q's looked in to the break

 QQQ 2 min

 QQQ 5 min, notice how quickly the 5 min went negative...

 The QQQ 15 min showed it was already skating on thin ice.


You may recall I updated ORCL yesterday and said the Edwards and McGee Technical analysis doesn't work anymore. ORCL was breaking below the lower trend line, Technical Analysis says it's a short right there and then, I warned that there's almost always a volatility shakeout when important support is broken, ORCL did exactly that today and in the process took out 3 weeks of longs in 1 day.

AAPL Update

AAPL has just about taken out yesterday's close and erased all of today's gains in 10 minutes.

For Those in the ORCL short...

This is what we've been looking for...

Incredible head fake bull trap

More on AAPL

This post from earlier today shows several of the AAPL timeframes, basically it looks like it has been standing on a thin ledge, for more AAPL timeframes see this post from earlier today.

AAPL Update

I was just looking at AAPL and preparing a post that would have said, "Watch AAPL here, it could get interesting below $608". As a matter of fact, I just emailed a member that exact sentence and moments later, alerts were going off.

FXP Trade Management

For those trading FXP rather then taking a longer term approach, I think it's time to take profits, this was a good run, but the downside risks for me are enough to take the profits and reposition.

 If FXP moves higher, there will still be plenty more opportunities. For now, I'd like to reposition around the yellow 10-day ma

 The 60 min trend channel is nearly broken on the downside, it's close, you may want to watch that level around $25 on a closing basis.

This is what I mean when I say there will be plenty of opportunities in FXP. 60 min

AIG

Keep AIG on your watchlist, it's near the area where I'd like to consider selling it short.

 AIG daily and the gap area in yellow

AIG hourly and the gap area in yellow, right in the gap or maybe slightly above is where I want to look at AIG short.

AUD/USD

I'm keeping an eye on AUD/USD as it has a good correlation to the market.

Here's the trend in the AUD

 The AUD is in a downtrend and selling off

 Looking at today, I'm watching this area for either a breakout above the red trendline, which would lead to a bounce, nothing abnormal, within a downtrend. Or a break below to new lows.

 This is what the longer term trend for the AUD looks like, very negative

Short term though there's a small positive divergence which could either be a consolidation or a bounce...

TLT

Taking a quick look at TLT, it looks like it's going to pullback. It appears it still has upside left in it, but it has gotten a little parabolic.

Increased Volatility

Considering the Dow is at -0.19%, the S&P +0.05%, the NDX +0.36% and the Russell 2000 at +0.32%; volatility has been very high today.

Here's the TICK Index

Much of the volatility has been on the downside, but usually on a day like this the TICK would be between +500 and -500 with a spike here and there, we have seen +/- 750 as the average with some large moves both up and down, but more extreme down moves. The up TICK count has hit around +1100 a few times whereas the down tick has hit -1500. That's a lot of volatility for not a lot of price movement.

Europe Back in Focus

It's been what seems an eternity since the troubles in Europe have been at the market forefront (it really hasn't been that long, but with the amount of news flow from the EU several weeks ago and it all of the sudden drying up, it seems like an eternity). Guess what, they're coming back.

Something was already going on around 5:30 this morning (EDT) as ES topped at 4:45 a.m. and sank from there all the way to the 11 a.m. lows. This morning Citi's Willem Buiter, gave an interview on Bloomberg radio, the gist? "Spain is at greater risk than ever before of debt restructuring", if you recall, about a month ago the Potugese Finance Minister asked the German Finance minister about doing something with their debt, to which Schauble replied, "After we are done with Greece, we will help you out", so Portugal is in some trouble as well, but Spain is the one that could really bring down the house of cards.


The Euro in the wee hours o the morning...

From there EU equities fell.


And one of the great financing problems for the EU...

You may recall in the past I have noted that US corporations count on banks for about 30% of their financing, whereas EU corporations are closer to 70%, this chart illustrates that.


And the banking sector problem...

Bank Loan to Deposit ratios, if you click on the chart you will see to the far left in dark blue, it is the EU banks that have the highest loan to deposit ratios, many around 200%. So what happens when you get a Greek styled bank run on deposits?  Trouble.


As for financing further LTROs, the banks have very few assets the ECB can accept, so funding is going to be drying up.


How is this effecting the EU?

 Today the EU Sovereign debt (after coming under control the last few months), saw their worst day all year! Note how they all exploded wider.

Italian BTPs added 300 basis points this week, note the spike today.


Get ready for the rotation in th news cycle and fear to head back to the EU.

Credit/ Commodities/ Sector

 Interestingly, as the DIA went negative to move toward a re-test, many other assets warned at the same time, like commodities  today.

 Here's what commodities look like long term vs the SPX, this is partially because of China as well-FXP had a nice move yesterday of nearly 4%.

 High Yield Credit also warned, a little later then commodities, but still there.

 Here's HY Credit longer term, it hasn't been able to make a higher high for months and it has recently turned down as we have been in this sticky area of the market.

 Here's ES warning, you saw this earlier, the divergence is deeper now.

 The Euro only followed the SPX/Market so high in the morning bounce and wouldn't go any further.

 However the $AUD carry trade seems to recently be one of the best leading indicators as it started to sell off as the SPX had bounced and went flat.

 Here's a little longer view of the $AUD carry trade, in green it was in sync with the SPX, in red, selling off.

 This is much longer term, in green it was in sync, in red it has been selling off as the rally made this push higher, something we were looking for in AAPL specifically but the market as well as a blow-off/head fake top.

 And the long term vie of the Euro which use to be in sync with the market in 2011, it too has recently seen extra downside pressure.

 High Yield Corp. Credit warned intraday on the bounce too.

 Longer term, Credit has been selling off, it is especially divergent since March 14

 This is Energy vs the SPX today, it also warned, although it has not been an enthusiastic risk asset.

 Longer term, Energy's momentum has fallen way off vs the SPX, this is one of 3 important industry groups for any rally, the other two being tech and financials.

 Here are financials which were showing leadership, today they look pretty flat and unenthusiastic.

 Tech thus far has been the only of the 3 groups that has held its own today.

As for sector rotation today, obviously Financials are moving out along with Energy. Moving in, we see defensive Staples and Healthcare; Treasuries have been catching a bid as well since 2 pm yesterday.  Basic Materials are holding up, Industrials are holding up thus far, I think because of the Dow bounce off support, Tech, Discretionary and Utilities are somewhat stable.