Everything looks to be on track after the entire week being very opaque until yesterday post F_O_M_C when signals started coming in. I'm sure the F_O_M_C nervousness before the statement played a role, but the most crucial change this week is the USD/JPY which has been almost the only risk leader (market leader) to an total 180 degree flip to the more historically relevant $USD/SPX (market) inverse correlation.
It seems it may be that the JPY at present, might be even more important than the $USD, in any case as far as longer term market views or primary trend views go, this was the last "Carry Trade" standing after EUR/JPY and AUD/JPY were taken out. Now USD/JPY is out of the picture, this means that the mechanism of "Carry" that allows hedge funds and others to leverage their AUM through these trades, have unwound their leverage and thus their positions (long) in the market and they are ready for a primary trend market collapse. That doesn't mean we won't get noise and bounces, shakeouts, etc in between.
As far as I can tell, we are still on track from out analysis of almost 3 weeks ago which has been spot on up until this point, I expect it continues , meaning we'd have 1 more powerful/convincing upside move-the reversal of the F_E_D knee jerk effect.
Lets look art a few charts, you need to understand what's going on and see it to have any confidence, then at some point I'll try to deal with Treasuries separately which are also greatly impacted by F_E_D policy.
First, the SPY Arbitrage is at +1.33 differential in the model, this is a pretty big and bullish model differential.
The positive ES CONTEXT model differential is now an astounding 62+ points, this is a move I don't want to miss considering the positive divergences are there.
This is the 1 min $USD, it seems to suggest intraday upside, that could create the market shakeout, but as mentioned already, I think the Yen might actually be more of a driving force.
This is the $USD 5 min, negative and ready to move down, with the legacy arbitrage back in style, that means the market moves opposite the $USD.
This is a 5 min chart of Yields, I always describe these as an "Equity Magnet", as stock prices are pulled toward yields when there's a dislocation like this, making yields a leading indicator.
Longer term you can see the reversion between Yields and the SPX (green) at the white boxes. Just like CONTEXT suggests, Yields suggest a pretty strong upside move, which has been our expectation after the bear trap was sprung.
Even uncorrelated sentiment looks good as the second bottom of an apparent "W" base forms.
This is the relationship between the Yen and SPX recently, again I suspect this is the leader right now with the USD looking similar.
The Yen 1 min positive
Yen 5 min positive.
As for sector rotation, the Flight to Safety sectors are rotating out, the "Risk on" sectors are rotating in, Financials being a big one.
ES
NQ
TF
I'll be looking at last minute positions.
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