Wouldn't you just know it, a 14th day and officially 3 trading weeks...
For 14 days now the SPX has closed up then down, then up, then down, etc... I'm going to say there's a larger reason behind this, if not intentional.
Other than multi-day, daily divergences are the strongest of all, here's the SPX in that area with a staggeringly strong negative divergence, ever hear of churning? Usually it's on a daily basis (1 day), but the market is fractal.
Now before you just throw out my algo argument, consider these facts... I was expecting a move higher as of my first post this morning, when said move came, I immediately said something wasn't right or normal with this move, it was too "Forced" as seen in this post, "Not 100% sold on this move" .
Now consider this, TODAY WAS THE LOWEST VOLUME (NON-HOLIDAY) DAY OF THE YEAR! PERIOD! That means it's exceptionally easy for an algo to push the market around or just normal algo's trading is exaggerated in the market.
For those in the "Every gap is filled camp" which is increasingly true at an accelerated pace, all of the major averages completely filled the gap down from last Friday's Non-Farm Payrolls gap down.
So LOW VOLUME + SHORT TERM MARKET LEVERS + CARRY CURRENCY JPY = THE MOVE WE GOT TODAY THAT WAS NOT TECHNICALLY SOUND JUST BASED ON VOLUME ALONE AS WELL AS AVERAGE TRADE SIZE EHICH FURTHER PROVES ALGOS WERE AT WORK.
So here's a look at what seems to have been a truly beautiful example of what algos can do on THE LOWEST NON-HOLIDAY VOLUME DAY OF THE YEAR.
There seems to be no doubt about what triggered the algos, while everyone thinks the SPX is the index everyone in the market watches, it's actually the Russell 2000, even in Bernie's Congressional testimony he doesn't say "Look at the gains in the S&P", he said, "Look at the gains in the Russell 2000" because its a broader array of stocks more representative of our economy, so Bernie let it slip, although there was no harm, but you see what he's looking at.
So the R2K futures along with the NDX futures crossed VWAP at the same time...
TF-The Russell 2000 Futures cross VWAP and the market takes off, we could do a whole post on VWAP and how institutional traders, Hedge funds, investment banks, etc all judge the fill a particular market maker or specialist got them by judging against VWAP, to sell at the top of the channel is an excellent fill and those middle men will be getting more business and it appears that's exactly what was happening up there, this is why I didn't want to chase the market (I never do) and at the same time I didn't see this as a massive distribution event either,
volume was extremely low in the market, it was easy to move it.
Here's the NASDQ breaking above VWAP, the SPX futures had already moved above VWAP, but didn't spike to the upside until the R2K and NDX futures crossed.
As for distribution at the top of the channel...
This is the negative divergence in the R2K futures which is indicative of selling at VWAP.
The NDX futures also seeing selling on the way and at the upper VWAP channel
And SPX futures selling at VWAP.
As for some of the market levers that were used (although it doesn't take much on such a low volume day)...
The Yen is questionable whether it played a part or was just picked up by some arbitrage program, but I suspect the Yen in orange played a part as it made a pretty steep new low as the SPX was making the opposite high and ended down 1.8% on the day vs the $USD-that's a bit too convenient.
The Euro as mentioned earlier today is in a very supportive position, this was one of the charts cited earlier today when I was expecting a move higher (but this is not the way or the move I am expecting). However later I'll show you why I chose to hold and be patient here as the Euro was helpful, but also giving some near term signals that suggested we just be patient.
As I said, Volatility via Short Term VIX Futures (VXX) was definitely used (this is 1 of 3 assets that makes up the CONTEXT SPY Arbitrage model, the other two being TLT and HYG). You can see VXX was definitely used as a lever to help push the market up as you compare the SPX high to the left at the green trendline and today's high and then compare VXX with much less fear as it is lower while the SPX should be making a higher high than the previous one on the 2nd, so VIX futures were sold to move the market.
HYG supported the SPX all day as we saw earlier today, but lost some support as the Futures hit the top VWAP band and distribution signals started rolling in.
High Yield Credit was supportive erlier today as mentioned as well, but it too was only going to go so far and not follow the market past the upper VWAP channel as you can see the SPX is at the same level as the 3rd and HY credit is actually higher at that previous level where as it refused to make a new high in the late afternoon.
As for some assets that cautioned us...
Commodities were initially supportive early on in the day, but they
as a risk asset had no intention of following a ramped market higher.
Yields made a new low on the year this morning before joining in (via TLT) to help ramp the market higher, however even they weren't going to be pushed to those extremes and I say extreme in a technical health sense, not in a SPX +0.61% gain sense.
The USD started rising which probably drove commodities more than anything and creates a situation whereby the short term extended market doesn't have short term $USD support, in fact exactly the opposite as the two typically trade opposite each other.
The Euro which is overall in a supportive position lost all support intraday, this is why I felt taking some off the table in a profitable position was wise and reducing short term risk. By 1:30 the Euro was working against the market, but it didn't matter on such low volume, however it may matter tomorrow, this is why I suggested
PATIENCE.
Even non correlated risk sentiment itself which was positive earlier in the day, turned down as seen in FCT above and HIO below.
You can probably guess what today's dominant Price/Volume Relationship was, if you said Close Up/Volume Down, you are correct, this is not the relationship between the averages, but among all component stocks in each of the averages, it was very dominant, this is
the most bearish of the 4 correlations and suggests a 1-day overbought condition which most typically sees the next day close down, which would fit with a 15th day of up down in the SPX.
I'll be back with more and the futures in a bit after I look around and update my charts and scans.
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