Mildly Wild Day

Volatility an ATR are still not where I expected them to be, but honestly I expect the amplitude and duration to be best expressed on a multi-day chart, perhaps 2 or 3-day, but that is just a best guess right now.

Yesterday I talked about volatility and breadth, the point being that volatility had previously been bid and with breadth dropping to very weak levels, the moves in the market averages were not producing the typical moves in the VIX (amplitude) that one would expect. The point again being (and this doesn't make sense without first accepting that volatility was already well bid and market breadth is very poor), that the failure of the VIX to move in a way that is commensurate with past experience (the relationship between the market and the VIX) leads me to believe that stocks are being sold (we know for sure insiders are selling big time) and as they are, the protection via options is being unwound which is skewing the movement of the VIX, in which case we'd expect the VIX to make shallower moves on days up as we saw last week and as I showed in examples yesterday.

Today I felt very unorganized in my posting because there was something going on, but I couldn't quite put my finger on exactly what, if I don't understand the edge we have, I'm not going to commit to position until I do.

Looking back today, it seems obvious to me that a few things are happening, 1) retail isn't entering the market as they were early in 2013, in fact they were moving in to the market during the first 7 weeks of the year which is the exact time I described the market as "Dumb Money Friendly"  because it was steady moves to the upside, volatility wasn't crazy (you'll see as volatility increases retail is driven away) and as part of the volatility story, there were no corrections in the market-not even healthy ones as Wall Street didn't want to scare dumb money away as they are needed to be the "patsy".

 The area at the white arrow is the "Dumb Money friendly" market, note how low the ATR (light blue) was, then it increased as we had an event in which volatility/ATR picked up, I still believe this area will be found to be a significant turning point in the market when we look back. Watch as ATR/Volatility rises around 2/20 - 2/27...



 We have the first seven weeks of retail inflows and the week ending 2/27 we have our first outflow, the same time volatility and ATR picked up, it became a less friendly market environment for dumb money, the question is how much did smart money hand off to dumb money during that period?

So today's oddities in the market really came down to a volume-less market in which several different methods were used to try to ramp it. Currencies were used, AAPL was used and the VIX was used.

 This is a "Crazy Ivan " shakeout of the VIX, whether intentional or not.

 The VIX made a new closing low of over 6 years, 2/26/07 was the last time the VIX closed lower.

 Here we see where the VIX closed Friday (white trendline) on a +0.45% move in the SPX, even at a new high the VIX refuses to make a new low, today that changed though on a +0.32% move in the SPX, I'm nearly positive this was the VIX being used to lift the market as they had a hard time today.

Here you can see how much the VIX moved today vs. how little the SPX (red) moved from Friday's close (bottom of the white rectangle).

 The Q's had a very hard time moving in to the green today, here AAPL in green was used to lift the Q's (red) in to the green, note how they trade together as AAPL breaks out with momentum.

 Volume in AAPL increased as multiple resistance levels were taken out.

 As you can see by the 2 min AAPL chart there were a couple of intraday accumulation areas to help lift AAPL.

However a longer term chart like 10 mins shows there was no previous positive divergence so it seems like AAPL was accumulated today in order to move the Q's specifically after the VIX failed to lift the Q's.

 This is a custom volume indicator (cumulative) applied to the Q's, in green volume is moving as it should with price, this is also the time dumb money was moving in to the market, at the yellow box we had a warning as volume dropped in to higher prices and then the volatility area where I think substantial damage was done market wide, the last week or so has seen some higher prices on falling volume, in essence the entire 2013 period goes from healthy to warning to a problem.

 The QQQ 1 min intraday chart shows that the NASDAQ had a very hard time moving above Friday's close, it only did decisively once AAPL broke out.

Here we see the VIX used today to try to drive market prices higher, note how the close is slammed to support the close of the market.

Currencies were also part of the mix, whether these were manipulated or not, I can't say for sure.

 Note how the SPX (green) tracks the Euro (ornage) nearly perfectly today.

 The Yen's normal inverse correlation also helped a bit as it made a local low, but not a new low, this also helped the market move a bit higher.

 A weaker $USD was also helpful to the market, but I have to wonder, without all of this help, where would the market have closed today? I'm quite sure the NASDAQ would have closed down.

 Here we see the Yen futures on a 5 min 3C chart with a large positive divergence, if the Yen moves as the divergence suggests, this will put major downward pressure on the stock market.

The USD futures were down, but they also had a positive divergence so they may not be down too long.

As for the futures...

 ES 1 min (earlier) saw a negative divergence in to the EOD, only the other correlations held it up, but it seems obvious that smart money was selling in to the price strength.

 The current ES 1 min shows there was no positive divergences at the afternoon lows, just signs of distribution as the market was held higher using other methods. As the VIX and market were banged in to the close there was a strong negative divergence, so it seems they are selling in to the strength and not willing to invest even small mounts to send the market higher so they can sell in to higher prices.

 ES 5 min also shows a pretty significant negative divergence in to today's move.

 The NASDAQ 1 min futures also saw distribution and in yellow no willingness to accumulate even a little to send the market higher intraday as we normally see.

The Russell Futures saw an early divergence in to very low volume, it sent the futures higher which we see a negative divergence in to all day, again there are no signs of intraday positives, not even small ones to help send the market higher.

As for Credit...

 High Yield Corp. Credit (HYG) closed lower vs the SPX (green) the trendlines are their respective closes from Friday, note how credit diverges from equities especially at the EOD.

 As I suggested a while ago, HYG looks like it saw a short squeeze, this 30 min chart tends to confirm that, accumulation to start the squeeze and an in line status followed by a negative divergence.

 HYG 15 min shows a strong lading negative divergence today as well.

 Junk Credit trades in a similar manner to HYG, it also saw and EOD negative divergence (distribution).

 FCT as a leading indicator went negative today vs the SPX and closed lower.

There was also a 3C negative divergence suggesting distribution in FCT as well.

 VIX futures intraday seemed to see accumulation around 2 p.m. through the close, here the 2 min chart is leading positive in VXX .

 The 5 min chart is positive during the same period.

 VXX 15 min is also positive.

 The leveraged UVXY VIX futures ETF also also shows positive divergences at the same time of day, this is why I decided to keep the UVXY trading position open.

 XIV is the inverse of the VIX, as it moved higher today it saw negative divergences around the same time period.

 Here's another timeframe in XIV going negative.

 And another.

As for Gold futures...

 The 5 min chart shows a run of the stops on the open Friday morning, this why I largely ignore or at least don't make important decisions based on a.m. trade which is often deceptive, game playing such as this, running the gold stops and accumulating the stopped out positions as you see.

This is a longer term 60 min gold futures chart, it seems gold has put in a bottom as I suspected as it continues to round as hoped, there can still be volatility that may cause you to doubt the pattern, but so far it has held up well in to strong 3C signals.

What's interesting is that today even with 3 of the 4 majors closing in the green (only the Russell closed red), the breadth indicators all went even more negative today.

The breadth indicators are green vs the SPX in red.

 % of all NYSE stocks above their 200 day moving average actually fell today, fewer stocks held their 200 ma today in to higher prices in the averages.

 % of stocks > 40 ma, the number of stocks above their 40-day moving average fell today.

 Stocks trading 1 S.D BELOW their 200 m.a. actually climbed today, these are stocks in bad shape.

 % of stocks trading 2 STANDARD deviations BELOW their 200 day moving average increased today, by 9.25%!!!!

 The % of NYSE stocks 2 channels below their 40 day m.a. actually increased a lot today, 17+%

 Stocks above their simple 200 m.a. fell today

And Stock above their simple 40-day m.a. also fell today and this as the market broadly moved higher, this is very much like what I wrote yesterday, except today it's worse because the market averages were up.

In my estimation, today was a day smart money wanted to raise prices, but put no money in to intraday trade as they usually would, they seemed to be selling in to any price strength and breadth was even worse, from my vantage point this doesn't look good for the market, especially if there's no reason to keep the market in a low volatility melt up as retail seems to be gone. In addition, the dominant Price/Volume relationship among the component stocks of the major averages was the most bearish, close up/volume down.

I'll check on FX and futures in a bit and see if anything has developed.