Market Wrap

Nothing much changed from the overnight session through the regular session. I thought it was amazing that the S&P futures ended trade at $1513.25 Friday at 4 p.m. and opened trade today at 9:30 at $1513.50, a mere twenty-five cents more when talking about over fifteen hundred dollars.

The close today for S&P Futures at 4 p.m. EDT? Equally as amazing at $1513.50, the exact same price as the open!

The range for the entire day was 4.5 points or 0.003% (and that's rounded up), putting in the narrowest day session range in 6 months, along with that came the distinction of lowest volume of the year for the day session. I thought something like this would be the case earlier today when a lot of the  Far East was out of the market, there was no major macro news and a few other items I listed near the open.

Even the EUR/JPY carry trade I mentioned as the only catalyst to even try to move the market at the end of day failed miserably.

 The EUR/JPY EOD ramp to try to move stocks, note after the close that was the end of the ramp.

That left the pair looking very fragile here with a lower low and perhaps a lower high, maybe even a little H&S top pattern (not good for the market if the pair falls).

It was a clear ramp attempt as the only currency not openly being beaten down the last few days that matters any way is the $USD, guess what it was doing as they tried to get the algos. retail or anyone to bite?

The $USD seemed to be providing natural resistance against the market as it has been up the last 6 days now (the market/stocks and most risk assets move opposite the $USD, not with it). The problem for locals in a thin market is, no volume, no Range, no spread=no money.

Not that you can read a lot in to a market that is not operating at full capacity, but all the normal risk ramping element failed to move the market off its opening prices! Then, if you like, if you think it's worth it, you can discuss the concept of follow through or you can discuss the implication of a Doji that doesn't get any thinner than the open and close at the exact same number. You can even talk about how none of the risk ramping assets like the VIX which has worked all year and then some, currencies, etc. could be used today in a low volume, easy to manipulate market.

Or you can take the middle road as I would and not read too far in to any of this, but consider all of it.

I looked at and posted the 3C charts for the averages and for the Futures and really can't pull much more meaning out of today, I said I thought volatility would pick up and the ATR would pick up, but we'd be spinning our wheels, none of that increase in volatility would translate in to an increase in prices and so far it really hasn't, which gives the feel of churning.

When you have bullish sentiment at such huge spreads to bearish, you have macro data falling at a time of year when it is easiest to manipulate and a low volume market with a number of risk ramping mechanisms including AAPL, all fail on very low volume, something just feels a little strange and I'm VERY happy I didn't face a total waste and 20+% time decay on Friday's call options that were closed at a 2-something percent position loss which is a fraction of a fraction of a portfolio value loss, again something didn't feel right there. The 5 min negative divergences in the Futures today have been the recent signal to buy puts for tomorrow, but with no movement in the market, there was no hedge of the risk, again even that didn't feel right and I'd rather miss the trade at this point.

The bottom line is, there are a lot of ways to look at today and we really can't be sure of anything other than they did at least try to get some movement toward the close and failed.

Despite 9-days of loitering in the area of a Bollinger Band squeeze for the VIX, it remains in striking distance of a sharp upside move, it also has several very successful buy/long signals in place that have proven themselves.

As for Dominant Price/Volume Relationships, even there it's hard to squeeze anything meaningful out of the market, I will say the only major average to close in the green, the Dow-30, had dual P/V dominance between Price Up/ Volume down and Price Down/Volume Down, the first is the most bearish relationship, the second doesn't hold a lot of meaning, but it is the hallmark of a bear market. The most bullish P/V relationship, Price Up/Volume Up was the least dominant and covered only 1 stock of the 4 different relationships on the Dow-30.

All of the other major averages were pretty solidly on the Price Down/Volume Down relationship for their component stocks, again the least meaningful of the 4 relationships and the thematic dominant relationship during a bear market (I'm not calling this a bear market, I'm just telling you about the relationship).

Not that it's a screaming signal, but it is one of the only Black Swan warning indicators we have; from the CBOE, the SKEW Index.

The SKEW tries to assign a probability to an improbable event, specifically a market crash or Black Swan, the historical range for SKEW is 115, elevated levels indicate increased risk, the $140 level or so ha seen some pretty bad crashes, what's interesting about the SKEW now is first, how fast the R.O.C. moved it up and secondly, how long it has been elevated in this area, taken with the VIX just recently coming off  nearly 6 year lows with sentiment indicators pegged at some very wide Bull over bear spreads.

As I started last night's post off with comments from Peter Worden which is something you know I NEVER do, but I agree, it's worth posting again... "I'm willing to sacrifice what I believe to be limited upside potential from here in order to be well positioned for the eventual downturn."

One of the other stocks recently discussed and a pivotal stock, especially in the past as a risk ramper, AAPL. Recently I've said, "There's something going on with AAPL, but I don't see the edge yet.

Although I didn't bring it up, I was watching it pretty closely to see if I could draw out the edge from trade.

 Long term the 10-min chart's leading negative divergence at the top and then at several bounce attempts has been stubborn, but a recent 10-min positive divergence has caught my attention after AAPL did just about everything we expected around a large descending price triangle including a perfect Crazy Ivan shakeout.

 Here's a closer loo at that positive divergence, it's interesting, but doesn't have enough confirmation to give us any sort of edge, today "may" be all it was meant for.

The gap was filled in AAPL today, I really miss good break-away or exhaustion gaps that you could count on, ever since HFTs have been dominating the role of middle man, it seems nearly every single gap is filled, especially the important ones like break-away gaps. 

Now why do I say it's possible that's all the 10-min positive was meant for? For one, it doesn't go much beyond the 10-min timeframes, it's not building and migrating, although there's still a chance it builds a larger base and if so we'll know that by seeing accumulation in to a pullback.

 Secondly the timeframe just before 10 mins., the 5 min chart went negative a the gap was filled, that would be what you'd expect if that's all the divergence were there for, we'll know if that's the case if the 10-min chart starts falling apart and the faster charts get worse.

As the gap was filled, the 3 min chart went leading negative, this migrated to the 5 min chart and if the 10 min sees the same migration of the divergence, then we know a whole lot more than we knew a day before and can decide if there's a trade worth taking there or not.


Beyond that, futures aren't doing anything impressive tonight and still have a more serious negative signal on the 5 min charts.

 ES futures went from leading positive in the afternoon to their attempted ramp and then just lost any sort of positive divergence.

 The 5 min ES chart is leading negative, this is essentially the same chart that had us buying weekly puts on the SPY and making double digit 1-day returns.

 The NASDAQ futures never really got a head of steam today, they look a bit worse right now as they are leading negative, but we do have a long night so I won't read too much in to such a small divergence.

However once again as it pertains to the weekly options and making double digits in a day, this 5 min chart shows the positive divergence and the same negatives we were using to trade those weeklies and we are in a negative position right now.

The EUR/JPY is probably one of the more important FX pairs right now and you saw that above, it's really teetering on the edge.

I'll keep an eye on the other pairs and futures, but I really think the currency debasement battle between a host of countries is really what's going to be the defining pivot this week and if the carry trade fails at that kind of leverage, they'll have no choice but to liquidate longs anywhere they can to close out the carry.

More as/if it develops