Hot, Cold and a NFP Leak

Well  you probably have heard the news of the day, I heard about this years ago, the G to O to V has had this system in place that has the power to store EVERY piece of information including all Digy_tall since the dawn of mankind, I never doubted it, I'm just a little weirded out about why all of this is coming out at once considering We, the peeps are more apathetic than ever.

I think I'll be switching my Sell Carrier ;) if you know what I mean. Why do you think I write, "F_E_D", because they disclosed they have one of these neat gadgets too.

So could the NFP be "leeked", yeah that's a bit paranoid, the spelling not the subject (but that's the hallmark of a trader, that and superstition) . Um, well considering the F_E_D's mailing list for minutes a day and a half before they're released, my guess would be yes and if I weren't looking at 3C data, I might be a bit more paranoid about the outcome than I am.

In any case, here are a few charts of interest.

Credit leads, equities follow ...

 I'm not changing the thesis put forth Monday, flashed out last Friday and Sunday. The dates of accumulation this week would be the 3rd, the 5th and 6th, the 4th was the "Goodbye Kiss of Resistance" on all of the averages' triangles so I wouldn't expect any accumulation on a bounce and I didn't find any,

This is HYG vs the SPY for this week, retail doesn't trade credit, except we have a few HYG calls, the 3rd it was up, the 5th and today, which was the best day of the year for HYG are in the zone.

Some say the closing ramp of the last 30 minutes was SPY arbitrage levers, specifically HYG and VXX, well whether lever or not, this is one of the biggest Arb. differentials in the SPY model I've seen.

 From about 3:30 to the close, the SPY arbitrage model which is specifically based on TLT, VXX and HYG, went VERY positive at a $1.00 SPY positive (model) differential. Normally I'd think that levers were pulled causing the late day ramp, but remember the model is based on the prices of the 3 assets, not the 3C charts, they'd have no way of seeing those.

So the question in my mind is, was this a ramp (manipulation for the close)?

You my be surprised by my opinion...

This is the intraday VXX, usually if there's manipulation, it's very clear on the intraday 1 min chart, this is just about as weak of a divergence as you can possibly get so looking at the intraday data, VXX definitely was headed down and would cause the arbitrage to go positive, but it doesn't look like "lever pulling".

Instead, remember yesterday I closed a UVXY equity long? There was a reason for that.

This is the longer term 10 min (institutional timeframe) VXX chart, this is why I closed the UVXY position. From what I gather here, VXX/UVXY have been under real distribution this week, not manipulation, it just happens that price action makes it look that way, 3C doesn't';t agree and we've seen a lot of this lately.

What about HYG, HY Credit?

 If we look at HYG, which had it's best day of the year today, we see an important 15 min chart going back the entire year of 2013, we have 3 major positive divergences, you can see all 3 above, the most recent is the largest. This doesn't mean HYG has been under accumulation the entire time of the divergence, it would just mean that the divergence this week has more underlying flow than all of the time in the box, nearly including HYG's highs of the year, so once again, I don't think this is 3:30 Arbitrage manipulation, but a measure of how strong this week's positive HYG divergence has been.

 Here's a closer look, the divergence is largely in the white box, the stuff to the left is showing that the underlying flow in HYG is significantly larger now than it was when HYG was significantly higher, in other words, strong accumulation this week and we know, HYG is one of institutional money's risk assets of choice.

So far it seems like someone knows something.

What about HY Credit, the illiquid type? Here I show why it's called a "Leading Indicator", it didn't participate in the past bounces and the market fell, "Credit Leads, Equities Follow", however this week is the first significant divergence in at least a month.

 Here's a closer look vs the SPX, while the SPX is falling, the illiquid HY Credit that is usually the first out the door when there's trouble because liquidity is so low, is moving higher. This doesn't exactly fit with smart money running scared does it?

The averages?

 Again, not all of this divergence suggests the entire time was accumulation, it does suggest that what happened in positive divergences this week had a higher underlying money flow than the SPY when it was at much higher levels, again suggesting this week saw some serious underlying action in what I suspected would be a bear trap on Monday that has played out exactly as explained Monday.

That's a 15 min chart by the way.

The same is true of the IWM on a 10 min chart. Distribution is clear and so is a very strong positive divergence.

We don't see this often, but that's a 1-day move in the IWM on a 30 min chart, we rarely see a leading positive on a chart this long in a single day unless there's serious underlying activity.

 And the QQQ 10 min.

I think you know what my opinion of events are moving forward, it hasn't changed since Monday.

Volatility...

Take a look at Japan's Nikkei

 That's a parabolic climb, it has been insane, but this is why I never trust parabolic moves on any timeframe.

The Nikkei the last  2 weeks now down 20% with a 1-day -7.32% move, now that's volatility!

It looks like downside volatility has run out, it would be interesting if the Nikkei bounced tonight.


Now, you can see from my last post if you are unsure of my opinion, but basically, set up retail to get them emotional, bearish and short, then swing the bear trap door shut and squeeze them sending the SPX to if not a new high, a very impressive one and then create the same in reverse, a bull trap that has its door shut (we aren't there yet, maybe we start tomorrow) and that sets up the real and definitive break of the market lower.

Just to give you some idea because I've been talking this week about the immediate future, but I've been making the bear case for some time and quite strongly so I don't want there to be any confusion. I looked at breadth indicators tonight, every one was hitting new lows for the year, here's just 1 example.

 This is all the percentage of all NYSE stocks above their 40-day moving average (green) vs the SPX (red). In a healthy rally the percentage should rise, in January the percentage of NYSE stocks was 85%, it went down from there, yesterday , even as the SPX sits near the all time highs for the year, we had the lowest percentage of the year, less than 36% of all NYSE stocks were above their simple 40-day moving average, that's a market ROTTING from the inside out so have no doubt about my bearishness on this market, it's just when and where are the proper places to enter and/or exit positions?

As far as the 3C charts in the trend timeframe of 2 hours, I think the chart is self-explanatory, that would be a new leading negative low for the year and done in less than a month.

Any chance I have to short quality set ups at higher prices, I'd be taking and I think this will be the last good opportunity to do so, if all goes as I suspect, this will be a gift.

If all goes according to plan, sell the calls on a pop higher, a strong one and then set up shorts or fill out partial positions, after that it's mostly management and dealing with those killer counter trend rallies that either make you a lot of money or take you out feet first.