Update & Retail's View

First I was getting ready to update HYG again, because there's a concept there about the larger move expected and the shorter term timing factor, I'm still not sure what this washout move this morning was about, but treasuries seem to have been connected as it came right as POMO ended this morning-again 180 degrees opposite from conventional wisdom over the last 4 years...

HYG alone would be interesting, right now it is more than interesting, it's actionable and adding VXX to the mix is what makes it so.

This is exceptionally rare to see a price move like that and no move in VIX futures, NO REACH FOR PROTECTION, NO REACH TO RIDE THE DOWNSIDE MOVE, TRADERS (PROS) ARE APPARENTLY READY FOR SOMETHING ELSE.

But first an email I just got as I was putting this post together.

"Hi Brandt,

You know it's amazing I see hundreds of tweets a day and no one ever mentions HYG, currencies etc, they are all focused only on price the the traditional moving averages, cross overs etc."

If you know me and what we are trying to do here, then this statement above should be enlightening with regard to why and how Technical Analysis is so easy to turn on retail and why price action and thus emotions can be so very deceptive.

HYG, currencies, VIX Futures, Futures in general are the things that move the market, not "ISM beat today" as CNBC would have you believe. 

In any case, this is where we find our clues and answers, lets take another look...

 This is a 60 min chart, as mentioned earlier in the week, these don't look visually as impressive as shorter timeframes, but they are much more powerful in reality, this is a 60 min leading positive divergence in an institutional RISK On asset, as I said it takes these large funds time to gather up their position and that is why events like reversals are a process and not an event.

This tells us smart money is prepared for a big move to the upside.

The shorter term is not only acting better than price which any one who knew to look at HYG would automatically have an edge, but the short term divergence is less of a trend assessment and more of a timing assessment, so it looks good.

 Because the 3 most important SPY arbitrage assets are HYG, TLT and VXX, it's crucial to keep an eye on them. HYG is telling us there's a large upside move to go and both relative price action and 3C short term action tell us we are at a pivot point.

VXX is used as confirmation in this case, again with the market slipping as fast and hard as it did this morning, NO ONE WAS SCARED AND BID UP VIX FUTURES? No one wanted to make money on riding VIX futures higher?

Because VXX has an inverse relationship with the SPX...

VXX in Green / PSX in red. This is why I added a VXX put yesterday because I expect the SPX to make a strong move higher, thus VXX lower.

This 60 min chart clear;y shows the inverse relationship between the two, but if you look even at this 60 min chart (it is more apparent on a 15 min) you can see that the VXX has not responded in kind or proportionately to the move in the SPX.

Why? Supply and demand. VXX didn't move higher today because there is more supply than demand and there would only be one reason for that, smart money has the answer, but they are unwittingly sharing it with you if you know what to look for.