For whatever reason it seemed throughout the entire ,market that it was purposefully being held in a range, it seemed to want to move a bit more so the action seemed more like for some reason they wanted the market treading water.
HYG credit outperformed the SPX on a relative basis, even the illiquid High Yield Credit acted better than the SPX which closed up +.95%
Whatever happens in the interim, and you know what signals have been pointing to, it's my job to remind you (since we are watching every move of the market every day), what the big picture looks like, this is where out concentration really needs to be, any lift in the market is just a means to this end.
As for today, while it was rather hum-drum, sentiment (not retail) ramped up around 11 a.m. and like credit, outperformed the broader averages, again they all seemed to be in some kind of consolidation, no that's not the right word, "Pause" mode.
Strangle there was a former carry pair that seemed to be running tick for tick with the market, the AUD/JPY, why? I have no idea, but it has good correlation with the market today. The Euro did not have good correlation, it underperformed the market.
I mentioned Yields being a magnet pulling equities toward them, very short term they've reached reversion to the mean, longer term (probably along the lines of the 30 min positive divergences in the Index futures), they are still leading the market, right now they are suggesting a move just to make it to reversion to the mean of about $1645-$1650.
Commodities overall were what appeared to be "weak" vs the SPX for a second day, but again they had a fairly tight inverse correlation with the $USD, not as tight as yesterday's and as I mentioned today, the entire market ddid not have the tight $USD correlation we've seen since last week. My guess is the $USD was behaving a bit better due to today's better than expected macro-economic data and for whatever reason there was a sort of dichotomy , in one sense the market should have been lower with the stronger $USD, in another sense, even though it was acting stronger than its expected $USD correlation, it still had this "air" of being put on "pause". An interesting day for sure, I'd really like to find the one pice of data that explains it as I think that piece of data would be invaluable for near term trade over the next day.
Sector rotation today wasn't all that interesting, the safe haven groups like Utilities, Healthcare and Staples would be expected to dip, they all did except Utilities. The only interesting "Risk on" standout was financials.
One impressive area today, was the carry over from yesterday in Precious metals. SLV and GLD especially follow by GDX, look like they are ready to blast off for at least the kind of hit and run trade we have set up with options.
If I were a betting man (and I guess that's sort of what we are in a sense as long as we have an edge), I'd say these go tomorrow.
Here's what I mean even though I posted a more comprehensive update earlier.
I'm not convinced of their staying power, but for the option and 3x leveraged trades set up, these are perfect with this kind of market volatility. I'd set alerts if you have positions in any of these so you know when they move and are able to take out the largest slice of the pie. It was odd seeing this one group so different than everything else and I'm REALLY excited to see what kind of gains we can pull out of these. I'd take a good look at the price ranges, these are what you want to look for, this is where the institutional action is happening and it's the exact opposite of what most people would think.
I think USO has a good chance as well at another quick move and I was able to achieve the goal of taking USO profits earlier today at $1.70 and ended up reestablishing the position at $1.63 allowing me to hold on to a good chunk of the gain and still get back in to the position, this is real "Hit and run" trading, but with that volatility screaming like it is, the moves up and down can be sizable, even if the market essentially goes nowhere by the end of the week. Options trading is very different fro equities trading.
Beyond that, those 30 min charts are still looking very good, those are also the kind of charts I don't ignore.
However, right now, the Nikkei futures are looking pretty bad, we started out like this in Asia last night as well, not that it means anything, it just goes to show it's a long overnight session.
I think tomorrow we're going to take a much closer look at TLT 20+ year treasuries, I have stated for at least 4 months that I think something big is happening there. I took a core long position in TLT become seeing negative divergence short term and closed it at a gain, but have been looking forward to starting another one, tomorrow may be the day I do that or at least start, this "should" be a core position that aligns with the major market trend which will be down, interestingly they haven't had the best correlation with the SPY whereas they use to have a very tight inverse correlation, this is part of why I think something is going on, beyond the strong positive signals.
The truth is, today I didn't feel like I pulled anything useful out of the market for near term trade as in tomorrow or tomorrow for the first half of the day, I would expect that to clear up, but this wasn't the same opaque non-existient signals before the F_O_M_C last week as the USD/JPY carry trade flipped 180 degrees, the signals were clear, they were just hovering right in line with the market and when I backed out to look at the larger intraday trend, I found the averages were scattered, at least on the intraday charts.
I hope something big appears in the futures tonight or pre-market tomorrow, right now as mentioned already, the Nikkei doesn't look great as of now. The $USD short term looks like the market did on intraday charts today, so not much help there and Index futures are scattered short term (1 min) with ES positive and leading, NQ about in line and TF negative! What they all do share in common is that 30 min divergence which I don't think is far off and I do think it will surprise a lot of people, even if only for a short time (with volatility this high, it doesn't need much time to create an emotional hurricane).
There are a lot of reasons I trust these, they are all leading and confirming, they are leading at the same time and at the same place. In fact I drew a chart today showing where the ES divergence started around $1600 and showed the price pattern there with the start of a left shoulder of something like an inverted H&S base, if you look at NQ and TF, their divergences start at the exact same place, that's smart money making a move across several risk assets at the same time and it's fantastic confirmation for what will be a supper move.
In fact, these divergences are now on the 60 min. timeframe too, I have very little doubt this is going to set off a move that will surprise even me.
AFTER NEARLY A DECADE OF USING 3C, I'VE LEARNED NEVER TO IGNORE SIGNALS THIS STRONG WITH THIS MUCH CONFIRMATION, WHENEVER I HAVE, I'VE REGRETTED IT. This is why I can see a nasty day down like Monday and not sweat it, I know what's stored up, what's coming and that it will make the wait and any short term frustration worthwhile.
It always reminds me of what Jesse Livermore (considered to be one of the best traders of all time) said,
"It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine--that is, they made no real money out of it. Men who can both be right and sit tight are uncommon."
Every time I post that I get at least one, "Yeah, but..." Again, in my experience, if you have a real edge like those 6 charts above and you get run out of your positions because of emotion (not objective data, but market volatility that causes emotion and panic) you are doing yourself a great disservice, it would be better to take a 1/10th normal size position as to lower any emotional reactions and make the money that comes with signals like that than to have confidence looking at the chart and then folding at the first sign of market volatility, it's always going to be there because that's Wall St's job.
Like they say in boxing, "Every fighter has a fight plan until the first punch lands", trading takes discipline and that means both discipline in your technique and management and discipline over your emotions. I guarantee you there are VERY few people who have the knowledge of those six charts above, except those that created them and they are the same ones creating emotional chaos because this is a zero sum game, for them to make it, you have to lose it.
I'll see you later if anything develops before midnight of interest, otherwise I'll see you pre-market.
Please take one more look at the very first chart posted at the top, even though we have these 6 charts above and this should be a fantastic trade, it is still just a means to an end, keep your eye on the real prize. And I'll help you do that by adding more core short set ups that you can prepare for and let the trade come to you.
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