Daily Wrap

I'm really having a hard time finding much that hasn't already been discussed for the last week and a half, that wasn't covered in last night's market wrap which had some good stuff in it and especially that wasn't already posted today, especially the 3C Index Futures charts.

To me Japan will be interesting to see how it trades tonight, the BOJ minutes were released just before the Nikkei opened and the initial reaction wasn't great.

Nikkei 225 1 min 3C futures and a negative divergence on the minutes with the average losing ground on the open, but it's still early and this average can put in 9% intraday swings like it was drinking lemonade.

Most of the other stuff is just showing you the results of things already posted, a lot from yesterday and last night's daily wrap.

 First this is a VERY typical look of a short squeeze, volume tends to be low unless a cluster of stops is hit, but more importantly there tends to be a nearly diagonal intraday trend with very few pullbacks and none of any significance.

At the EOD we see price peel away from the day's trend to the upside a bit, that's about the same time WSJ, F_E_D unofficial mouthpiece Hilsenrath came out with some reassuring words that the F_E_D isn't going to raise rates any time soon even if they alter the $85 billion a month QE asset purchases, seems like a strange day to need to put Hilsenrath out there unless...

 There was one bump of volume, it was right about $164, I didn't see anything obvious, but I didn't look all that hard either, I assume it's just stops congregated at a whole number, perhaps Hilsenrath as well.

 Another Sell signal in the VIX today or rather the last two days so if the VIX moves down, then the market moves....?

Up

However note that except for 1-day, there has been no significant activity over the close of a very important day, that was the day the market put in a Key Reversal, one technical price pattern that still holds value.

Other than that, volatility is insane as I put it, last night? Today was the best day for the market this entire year except for the first day of the year, that's not based on anything but volatility and a short squeeze. In fact if it were just up to retail, the better retail sales and Initial Claims would have normally sent the market lower as good news gives the F_E_D an early out, so you can see this was something well planned in advance. When's the last time I opened 6 or 7 options positions in 1 day? (Yesterday) so it was pretty clear as it has been since this scenario was described a week and a half ago.

However, I really need to stay on guard, because this scenario has played out almost exactly as described, you or rather I can fall in to an assumption that everything else will continue to fall in to place, but the market sometimes changes its mind or sometimes you are just wrong about your theories. It's just a reminder to stay vigilante and not get lazy.

 HIO intraday was risk on as we saw last night FCT was telegraphing today's move, it seems HIO or risk sentiment was on, but not willing to buy up there and I wouldn't either, perhaps this is telegraphing a pullback very near term, like tomorrow.

 HYG, High Yield Credit is the one asset that makes me a lot more comfortable, first it has led the market as credit is supposed to do, but more importantly right now, it's hanging in there, the 3C charts look good for HYG so far, I'd still say next week they really turn up the heat.

 It's a bit strange, but the much less liquid High Yield credit which I featured last night as telegraphing market strength today, pulled back hard at 3 p.m.,  Since it is much less liquid and since volume was quite large on the pullback, I'm guessing this was someone who had a position there and perhaps was trying to get out at better prices, but still low liquidity and either panicked or might have been picked up by a predatory HFT noting an Iceberg order in an illiquid market.

I'm really not sure about this one, but I'll be watching it closely.

TLT saw some end of day gains, that was specifically on the Hilsenrath piece in the WSJ, bonds across the board pretty much gained on the reassurances. I still think something big is going on in TLT and I'd like to find a way to play it leveraged for a trend trade.

Typically TLT would move opposite the SPX, it also had ZERO arbitrage effect on the SPX.

As mentioned for nearly a week, but a lot recently, especially last night, the former risk currencies like $AUD above and EUR below, seem to have specifically got all dolled up just for this event and when I say "This event", I don't mean just today, you saw those longer term Index Futures charts.

 Euro vs SPX.

Last night I pointed out very clearly how yields were an equity magnet, you can see where both closed yesterday, today, REVERSION TO THRE MEAN, that's why we call these "Leading Indicators".

I think in a lot of ways, tonight's post is best compared to last night's post, there are a lot of concepts that were pointed out that made good today.

 Commodities was one of them, I mentioned how they looked ready to support a market risk on move, and the next day we have it and commods moving directionally with the SPX. Again this chart alone isn't very enlightening, but combined with last night's which you can find RIGHT HERE.

 I mentioned I'd show some more breadth charts so you know just how bad the big picture really is, I'll finish with that. Above we have the Percentage of all NYSE stocks trading above their 40-day moving average.  Note when the trend first started earlier this year we were at 85%, that number should hold or rise in a healthy market, we were at 32% of all stocks (NYSE) above their simple 40-day average!  The SPX is in red.

This is the same, except the PErcentage of NYSE Stocks above their 200-day moving average. from 81% to 53%? That's pretty close to the figure you'd expect to see in a bear market.

If anything pops up tonight, I'll let you know, but I'm kind of feeling like tomorrow (whatever it is on an op-ex pin) doesn't matter much, I think next week is what will matter when psychological pressure can be kept on the shorts. We will look at the market tomorrow for any opportunities of course and to take the market's temperature. Other than that, I'm kind of interested in the Nikkei tonight.

I know some of you did very well today, that means you took some VERY hard trades to take yesterday, congratulations, your best decisions are the ones where emotions take a back seat to charts and probabilities.