As for the market, some averages like the SPY have now put in an intraday positive divergence, most of the other averages are very mixed, but even that is a big improvement over the clear leading negative divegrences that had before the 11:20 a.m. decline this morning.
I'd say that it appears to me that levers are being pulled, in some cases not only intraday, but along the lines of what would be needed to support the "W" base actually breaking out.
Here are some examples.
HYG is a High Yield Corporate Credit Bond ETF, it is very liquid, it is used by smart money a lot since putting together a basket of HY corporate bonds and creating your own trade is very difficult since the banks have been taking these assets off their balance sheets since 2008 so if smart money wants a balanced HY Credit instrument, this is their choice as the real credit is hard to find and has low liquidity.
As such, this is a risk asset, one that has been destroyed lately, but it is 1 of 3 SPY Arbitrage levers and when HYG is manipulated up, it is like short term manipulation of the SPY on the positive side. ARBITRAGE ALGOS READ THE ACTION IN HYG AS BEING CONSISTENT WITH SMART MONEY TAKING ON RISK POSITIONS AND THE ALGOS TREAT THAT AS A BUY SIGNAL FOR THE SPY.
The 15 min chart is like some other 15 min charts I've shown you like the SPY's, seem to suggest that smart money is also getting ready for a hit and run trade, the advantage they'd have here is not only are they long the risk asset, but by being long the risk asset they are helping to ensure it's profitable move higher.
However once again we are faced with, "What's in between this chapter and the next? How are we going to get there?" If indeed this holds up, then the "W" thesis is correct, I believe it was correct from the start, it's just a matter of whether it can hold out as the market's volatility and unpredictability rise.
This is a true leading positive divergence by the way.
Longer term, the big picture, you've seen the HYG vs SPX charts and seen the damage in HYG, any move to the upside is no different than what we are doing with hit and run trades,
they are not position trades, they are short term trades to take advantage of shakeouts, head fakes and otherwise emotional warfare.
The 4 hour chart is horribly leading negative, HYG's serious position traders are long gone.
TLT which is the 20+ year Treasury ETF, the one I think is going to make a huge move to the upside (did you see last night's post on Treasuries?) Although prices are moving down, which is positive for the SPY arbitrage (as this is the second of the 3 levers), we see exactly what you know I'd expect to see, accumulation of lower prices.
We are near a support region that
I will guarantee is broken to the downside (head fake) just before TLT makes a big run up.
I will continue building the TLT long option position started yesterday, I think this will be a huge trade.
TLT 5 min is showing where TLT was sent lower, I believed at the time to help send the SPY higher and at least a 1 week period that was true, but now I wonder if this isn't part of a much bigger trade as TLT has been under accumulation most of 2013 DESPITE the market rallying.
I think this is a last chance opportunity for smart money to accumulate Treasuries while they are out of favor and very cheap, I believe this entire move served both purposes, but most important is to buy the last bit of T's as cheap as possible.
VXX is the Short Term VIX Futures ETF, when it moves down in price, it also helps the SPY as it is the 3rd of the 3 arbitrage assets. The market reads selling here as complacency or lack of fear and buys, the same with treasuries. The 1 min chart looks like VXX is being worked lower.
This is the 30 min chart. Beyond the fact that the VIX which made at least a dozen new lows last year to the point we were at 7 year new lows, has not only found price support, but look at the 3C trend.
Again, if the "W" base really fires and can complete its mission which is to scare the hell out of shorts and convince longs that buying the dip is still the only trade in town, then VXX could make a head fake move below the trendline, if so, that's where I load up-probably bigger than my max trade size and I'll sell some on the first big move.
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