Volatility and Catalysts

The market and retail money ALWAYS love to be told WHY the market did something, it's almost never the truth, but they need to hear it for whatever reason, I guess so things make sense when in reality the market is far more complicated and an unsavory place.

In any event, I hadn't even thought AAPL may be consolidating (waiting) for earnings tomorrow. I told a member who asked about some earnings this week that it would depend on the market sentiment, if it is bullish, then bad news will be spun to good news, if bearish even the best report will see the stock lower. If CAT is any indication and the most important part isn't they missed on Revs and EPS, its that they guided lower, yet the market can forgive that and rally the stock, then they are in a pretty forgiving mood. Imagine what AAPL earnings could do! They'd also provide the CNBC viewers an easy reason to believe, even though we have been watching this base unfold for about a week!

As for volatility, it too tells a story. I'm going to use VXX (short term VIX futures), UVXY ( a leveraged version of VXX for confirmation) and XIV (the inverse of VXX/UVXY), it moves opposite both and moves with the market.

 VXX 1 min intraday is showing a positive divergence, this is confirmation to the intraday market averaages' negative divergences as these move opposite each other.

 2 min VXX is still in line right now so the divergence on the positive side isn't very strong as of right now, just enough to turn the market around going in to the afternoon, again this may very well be to hold the market until AAPL earnings come out, that's a gut feeling based on AAPL's own holding pattern identified earlier today.

 UVXY 5 min is the same as VXX, but a different (leveraged ETF) so it is used for confirmation. Here it is showing a larger negative divergence which is market positive, at today's action, it could go either way.

 XIV 15 min is the opposite of the two ETFs above and essentially trades as if it were following the SPY, the longer term 15 min positive divergence in this area is the sam,e as the IHS positive divergences in all of the market averages, so we have good confirmation between volatility and the market.

Long term, UVXY shows a heavy bid for protection on a 30 min chart, much like the long term TLT charts, this is a bigger picture of fear and a flight to safety.