Market Update 2- The Algo Drivers

This is getting interesting, there are enough negative divergences in enough averages and futures in enough timeframes to at least send the market lower on at least an intraday pullback.

 I keep referencing the SPY Arbitrage simply because algos look at risk assets like HYG, they look at investor sentiment- fear or greed through VIX futures and they look at what traders are doing with rates like TLT, whether it's a flight to safety or a move toward risk and the algos respond accordingly, this is why these 3 assets are important: HYG, TLT and VXX.

If we look at the 3 assets there are short term divergences that are positive for the market(I didn't say every divergence was positive because a positive divergence in TLT or VXX would not be good for the market), however once you get out and away from the intraday or very short term timeframes, the trend of what has been occurring is crystal clear. This is one of the reasons the theory I put forth yesterday makes sense. Take a look for yourself....

Since the positive arbitrage message to algos as the Chicago PMI came out, we've been in negative model territory, but there have been a couple of recent moves across to the positive side and remember this is 30 mins delayed so we may even be at the positive side now.

 VXX today and most of yesterday except the open when they needed to support the market has been almost perfectly in line on a 1 min chart.

  min chart is largely the same with a more recent negative move to the far right which would be helpful to the market.

 However the trend (15 min chart) shows clearly the flow of funds toward buying protection, expecting a market crash lower.

 TLT-Treasuries/Yields is negative on the 3 min chart, again helpful for the market if price follows the divergence.

 Same with the 5 min chart

 However as I have been saying and as the Yields have proved (with new lows for 2013), there's a flight to the safety of Treasuries, again afraid of a market crash-this is the larger trend beyond intraday or 1 day manipulation.

 HYG/Credit (risk on) is showing an intraday 2 min positive divergence

 The same at 3 min, if price follows, this helps the market, however...

The longer term trend has been to unwind position in HY Credit as can clearly be seen here.

There's a big difference in what it appears is being attempted right now and what the trend is, all 3 of these assets show the same thing I described earlier in the week, "A thin shiny veneer on the surface and rot beneath", except the rot on these charts is a flight away from risk and to safety, a flight away from stocks, but not short term intraday.