Market Update

Now is not the time for entering big trades, now is the time for trade management and analysis, we may enter some trades very quickly if this market looks like it has what it needs.

Some interesting things of note which make me glad I closed the AMZN and XLF puts as well as the VXX calls (all of these positions are 1-2 days old (Friday or Monday), this is the, "Hit and run" trading that we've had to use, but it has been successful, for those that don't like this kind of market, don't like using this kind of leverage, guess what, I'm with you. I don't like it one bit, but when the market gives a signal and the only way to make that position worthwhile is by using leverage, then that's the tool we use. The idea is to take what the market is offering, sometimes we have to use tools that aren't our favorites or we can stay in cash, but my job is to show you where the market is offering you an edge.

I'll put out the P/L for XLF, VXX and AMZN as soon as I get some time and know what's going on.

Keep in mind options are different than a stock or ETF position, once momentum dies in the trade, so does your edge so I think we got out of those positions at the right time, if there's good reason to believe there's more downside, we can always re-emnter them.

A few things I didn't/don't like about this market and we are strictly talking about the downside move expected that we have seen thus far and made some $ off, I'm not talking about the next trend I expect (short squeeze).

 CONTEX for ES is right at reversion between ES and the model, right about the exact same level, this hints to me that the downside is likely also just near the bottom, I can't say that based on one model, but that's what I take from the model.

SPY Arbitrage is almost non-existient, so that's the same message I take form CONTEXT above.

 As I said, watch the NYSE intraday TICK channel, it was broken, that doesn't mean there isn't more downside, but some consolidation is probable and whether it's just consolidation or the start to a turn is the question I'm trying to determine, the challenge is I never expected a short squeeze to see a turn that is more of a process and therefore more time to determine what we are looking at, from the first time I outlined this set up over a week ago, I have expected a sharp reversal.

TLT moves opposite the SPX, there are two thins that are going on with TLT, 1) I think a longer term, large position is being accumulated so it skews the signals a bit short term, but intraday it just didn't confirm, that was one of the reasons for closing remaining positions.

The 2 min TLT is even worse.

As is the 3 min

It's the 5 min that still looks very good. I'm not sure yet if the negatives from the 1-3 min charts will migrate to this chart and send it negative or if this is a part of accumulation of the larger position in TLT as it is at lows where they would be picking it up, so it becomes difficult to tell if this is part of the short term signals that have reached the 5 min chart or part of the longer term TLT long that I think will be a big winner .

As you know, TLT, HYG and VXX are the SPY Arbitrage assets and the ones used to manipulate the market short term, but as you saw above, the SPY arbitrage doesn't look like any of that is going on.

VXX 2 min is in line at the time of this capture 15 mins or so ago.

 The divergence to turn it negative would start on the 1 min chart and it has, VXX may have more upside and that is fine for a VXX or UVXY equity long, but the loss of momentum on the upside isn't good for the options hat were closed. Both charts since capture look worse, VXX also moves opposite the market.

 VXX 5 mins is not the same situation as TLT 5 min, although it wouldn't be too far off. This 5 min chart is similar to confirming the SPY 5 min negatives, I suspect this will start to fail.

HYG is one that moves with the market, often leads it as HY Credit and one of Institutional money's choice "risk on" assets. intraday we have an in line status at the green arrow and a positive divergence developing. This isn't really telling us much, but HYG itself is.

The 2 min chart was positive in to the lows, I suspect that this is smart money buying up the lows in HYG for a market short squeeze in which HYG should move north with the market or even lead it.

 HYG 15 min chart is leading positive, this is the most important as it shows a strong underlying positive divergence on the 15 min timeframe, same as most of the averages.

 Take the IWM for example during this entire bear trap.

 IWM 15 min

As for currencies... The USD/JPY is starting to lead positive in 3C, the same is happening in two other pairs I thought were done, the AUD/JPY and the EUR/JPY, these are the other the carry trades. I looked at individual FX futures and it is not the USD, AUD or EUR that are changing the dynamic, it is the Yen. Remember that 5 min Yen chart that I was worried about earlier? Well it continues to cause worry, if that divergence plays out in price, that would send all 3 pairs and esp. the USD/JPY higher and that would likely be the start of our bear trap move.