After running through some charts here are a few things that stood out, but the whole day was strange before I found any of this.
As mentioned earlier, today is the last day for hedge funds and others to make trades and still have them settle before the end of the month for next month's numbers or prospectuses. It seemed to be algo based trading meant to hit stops on the downside and the upside,
you may recall this post in which I wondered if this was where they were taking the market....
Sure enough, that clear resistance zone where a bunch of short stops would be was exactly where they were going with the market is a very parabolic way, that's not natural trade, that's parabolic/manipulated trade to reach an outcome which was to trigger shorts' stops and maybe trigger a few buy orders, check out the volume as price crossed the area (this is why I never put stops in obvious places, yo are just asking to be stopped out). You can also see by the light blue bid/ask marks next to price the SPY is down in AH trade right now.
Risk assets in general weren't following stocks, which makes sense considering what was going on today, thus it's hard to confirm today as a true risk on day when other risk assets didn't participate.
Context can show us this broadly...
As you can see both the SPY arbitrage model and the ES model were not as enthusiastic as ES and the SPY, that's because the risk assets that go in to making the model were not rallying with stocks, this is a form of divergence and a big question mark looking over today's trade rather than confirming it as a true strong day.
While CONTEXT is good for the broad strokes, our leading indicators are more specific...
This is yields in green vs the SPX in red, I often tell you yields are like a magnet for the market, the averages tend to gravitate toward yields, so at the far left they are in sync, then they move up, but the SPY overdoes it and comes back down, by this time yields are leading and the SPY makes another move higher, by the time it reaches its high, Yields are once again negative and the SPY follows them down until they meet up in the green box at the far right. Now the SPY is up and Yields are down, once again disconected with the highest probability being the SPY moves down toward yields.
Here they are again except the SPX is green and Yields are red, note the recent trend and recently yields have been moving down in line with our 3C divergences calling for the same move lower in the market.
Intraday as the SPX rallied, Yields wanted nothing to do with it and went the opposite direction.
Currency
As pointed out Monday BEFORE it happened, as the triangle formed in the orange box I said it was likely we'd see a head fake move up above the important EUR $1.30 level which we did at the red arrow, this set up the head fake and 3C showed the EUR/USD as being negatively divergence and likely to fall and they did. Below the apex of the triangle at the orange line some stops would have been hit (longs), note the bounce today stayed under that level.
Here's the EURO ETF in orange and the SPX in red, at the white area the Euro is stronger than the SPX and pulls the SPX up (arbitrage), then in the red box the Euro falls which puts pressure on the SPX which also falls until they meet up at the lows, from there today the SPX took off trying to hit those stops after taking out the earlier stops in the morning on the move down, however the Euro just couldn't keep pace, leaving the SPX open to more arbitrage downside.
I can't figure out why the market needed High Yield Corporate Credit to rally with the SPX today, but as soon as the stops in the market were hit, High Yield Credit sold off HARD (light blue line).
In fact applying 3C to HY Corp. Credit we see a similar "pullback" negative divergence in credit.
The actual selling in the last minute in HY corp. Credit was HUGE, this is over 1.5 million shares in 1 minute, that's about half the normal 200 day average daily volume so you get a feel for how big the selling was in credit.
Junk Credit also saw huge volume selling off in the last minute of the day.
Using the Clear Method (slightly adapted) we see a few reversal candles on higher volume making them more reliable, we also see each trend reversed with a noise candle in yellow, even though we had a bullish engulfing candle today, it was also a noise candle, each of the last 3 trends on this chart have reversed on the same candle as today.
Here's S&P futures in after hours as they turn negatively divergent (leading negative).
The larger trend and more reliable 30 min ES is also in a very clear leading negative divergence.
This is NASDAQ futures also going negative in after hours/overnight trade thus far.
And the longer term trend is clearly negative and leading, just like all of the averages on important timeframes. I really don't see how this market goes higher without pulling back and repairing the damage first.
For now I'm not changing any positions or revising any trend table expectations, I still think the weight of the probabilities is with a strong pullback move.
