Update

I'm not going to put out the daily wrap just yet because it's way too early to have any insight in to futures.

What we do know is that the market was a bloodbath worldwide, China has major liquidity problems that are hitting their banking sector hard, Japan has been in trouble for a long time, but things were only made worse by Kuroda and Abe's QE-Godzilla they released on the world, but most of all China. Europe of course followed suit, and the US today was another ugly day, but still well within the F_O_M_C Knee-Jerk response, if you've been here 6 months you know how often and how large the font and how bold it is, any time there's a F_E_D related event, but especially F_O_M_C events, they are notorious for knee-jerk reactions in which the initial move is wrong and followed by a storng reversal.

When QE3 was unleashed on Sept. 13 2012, the market rallied the 13th hard and half of the 14th, then it drifted lower for about 6 weeks, before completing about an 8% downdraft in to the November 16th lows. The reason I mention this is because the market first rallied hard as QE3 was announced, but we had negative signals and a lot of members were nervous about "Fighting the F_E_D", I was even nervous, I said, "I feel like just closing every short and going all long today", but that's not what the signals told us and for the next 2 months or so, the market was never higher than the highs of the second day after the F_O_M_C policy meeting/announcement, so the knee-jerk move was there, we followed the signals and were right not to go long and that was about 2 months, but a day and a half of Knee-Jerk effect.

Add about 6x the volatility now and things are a lot more extreme than any time since before March 2009. This is just how it has always been with the F_O_M_C, I'd guess about 90% of the time that knee-jerk reaction pops up and that's why I warn about it so consistently.

In any case, Asia and Europe aren't going to lead the US unless they have another QE-Zilla, the US leads those markets more often than not and at a day and a half of knee-jerk, it's not at all unusual, it's just very volatile, but that sword cuts both ways.

Other than individual charts, averages, futures, etc, credit to me was very interesting, it didn't have a good day at all, but almost all of that damage was on the open, the rest of the day it acted well (relative performance) and credit is finicky, it's the first to spook and especially the illiquid types of High Yield like DHY.

For now I'll show you a few charts, then later I'll look at the futures. I also want to remind you that one of the bigger events this week that few will notice, seems to be the 180 degree reversal of the currency correlation from USD/JPY to what appears to be either the legacy arbitrage $USD correlation or perhaps the same with a little emphasis on the JPY, but a complete u-turn there.

I keep thinking in my head, like a song that you can't get out of your head, Warrren Buffet's advice, "Buy when there's blood in the streets". I don't agree with that, I think you buy when you have a clear edge, not just when the market is down, but that being said, one of the hardest things to do is to buy when there's blood in the streets, even when you do have an edge, but it also tends to have less risk and higher probabilities of gains. 

We get paid to take risks, not silly ones or arbitrary, but to make the difficult calls when everything in your mind is saying "NO!!!", but the message of the market (not the mass message, your edge) is telling you, "You have an edge here, take it because it won't last long". That's hard, but that's trading; our emotions are most often some of the best reverse indicators and this is why I satay on top of retail sentiment thanks to several members.

One of the most shocking charts today is the CONTEXT ES model, we've all seen this chart right on with a 40 point differential and then ES reversing to nearly the 40 point indication exactly. Well I have never seen the ES model this far north of ES, neither have you.

We are now at a 70+ point positive differential, meaning the risk assets that Wall Street trades are indicating ES has about 71 points of upside before it even reaches fair value vs. other forms of risk assets, not compared to over bought or oversold, other risk assets that smart money trades that they've already bid up.

Here's a brief description of what CONTEXT for ES (SPX futures) is from their site...

"asset-classes tend to behave in highly correlated ways most of the time. The CONTEXT framework attempts to distill the world’s ‘risk’ asset-classes (interest-rates and curves, credit risk, FX carry, commodities, and precious metals) into a single-measure that can be judged against the US equity market in order to comprehend potential mis-pricings (or technical flows and liquidity impacts). Institutional and algorithmic clients tend to use CONTEXT as a confirmation tool for positioning against (or with) a trend. "

For now, the other charts I found interesting, beyond many I posted earlier because the process of accumulation or distribution is indeed a process, smart money doesn't chase the market, they lead it, much in the same way a reversal is a process and not an event.

 This is kind of a micro/macro look at how Credit leads the market, this is High Yield credit today vs the SPX, the type of credit smart money uses to express a long/risk on position. The fact that it found support almost off the open and held it all day says a lot for credit, especially this one in particular because it's so thin, they usually stampede in this asset first and well before the market follows, again because of the low volume.

The close may not look like much, but it seems they were keeping HY credit right at a constant accumulation zone and that last minute buying driving it higher, looks to be real demand. This might not happen in an HYG because liquidity is 100's of times better.

Here's a macro view, you can see HY Credit called every top or bottom by moving up or down before the market.

As for the 3C charts...

 5 min leading positive in a tight range which is normally institutional activity...

And a huge 15 min leading positive divergence that is showing a large head fake move as 3C made new leading highs on the move today, again the market is fractal, what you see on 15 min charts you'll see on 1 min or 1 day charts.

The more liquid, HY credit, HYG...
You may recall 3 weeks ago I had an idea of what I thought the market would be doing, if HYG is correct, that entire thesis will be correct.

 First of all, intraday HYG held up even better, it never made a lower low from the a.m. low, when it pulled back under intraday support, it went leading positive, that was my signal to take that position.

However this 60 min chart would be the real show stopper as this is almost exclusively an institutional asset, it was negative at the top, in line on the way down and now on multiple longer timeframes it is leading positive with the short end meeting the longer charts.

I want to show you one other chart, I will show more later, but many you saw so some will be updates, but this is the NYSE TICK chart which I said earlier to watch and compare to the market, if it is moving differently from the market it's giving you a message and I also said it needs to break +1000 for that message to be valid.

The NYSE TICK data is green (1 min) and the SPX is purple, note the first down channel with the SPX, then note the SPX pushing lower while the TICK makes a NEW trend moving higher and above +1000!

This is the number of all advancing NYSE stocks minus decliners so when you have the SPX moving down and a positive trend in the TICK with a +1000 reading, that means there are net 1000 more stocks ticking up than down and this is the kind of hint I was trying to describe earlier, except this is one of the strongest examples of it I have seen.

So these are all tools for your kit, but give them time, let them show you they work and you can decide if they are right for you.

The more you see, the better. It's often said, to make money you have to see what the crowd missed and often it's mundane, fleeting glimpses.

I'll be back in a bit with more. Right now the Index futures are leading positive, the largest one being the NASDAQ 100 futures.

NQ NASDAQ futures

 The intraday 1 min is not saying this is a failed signal, it is saying...

This entire area is or was under accumulation. One of the interesting things about 3C that few people realize is wherever the divergence first started, lets say around the 2910 level, no matter how much further it carries on, the reversal that comes from the positive divergence in this case, almost always FAR exceeds where the first sign of accumulation was so not only retracing this afternoon, but far above that.

The 5 min chart is leading positive.

More in a bit