Market Wrap

We had a pretty incredible overnight move, considering recent volatility until today's 2nd quarter GDP revision and Initial Claims came out, that let the air out of the market around 8:30. We still had a decent open, I posted we'd be seeing an intraday pullback around 11:30 which took place around 12:07, also at 11:20 (although I based this on 3C), the $USD/JPY turned down, obviously smart money stock traders were moving and 3C was picking that up as they knew what a lower $USD/JPY would mean, a lower market, I see this pretty often, that's why I check so many different assets.

The bearishness we saw earlier in the week based on market nervousness over Syria, as I always say, "The market hates uncertainty", seems to be fading as a number of events seem to keep pushing the strike date back as well as the evidence for the strike along with Hill politics, the market seems to be enjoying this bit of no worry, although VIX futures did outperform the SPX intraday, I figure a lot of traders will be taking a 4-day weekend leaving for the Hamptons tomorrow with Monday a market holiday, if they are going to grab protection, today would be the day.

VXX correlation vs. an inverted SPX to see the difference.

Meanwhile the SPX and rest of the market seem to be in a bull flag which would be 100% appropriate for where we are in a "W" base according to Technical Analysis textbooks, the world doesn't usually work that way, but I wonder if they'd rather see retail buy down here and get head fakes higher than make them skittish?

In any case, here's the bull-flag and it's really the only thing (consolidation) that can happen without destroying the "W" base.

IWM "W" with a bullish consolidation "Bull flag" in yellow.

However, we did see a quick change of character in VXX / UVXY today after very "blah" trade for several days, this doesn't just happen unless there's something going on.

Again, and as suspected, the averages are losing correlation, the Dow at +0.11% gain with the Russell 2000 at a 1.00% gain, at least the R2K is showing leadership, the R2K should lead all rallies/bounces.

I warned yesterday that Transports are starting to come alive, IYT may even be a long trade soon, I think they'll need them to convince retail as best as they can or they think that, I think you give retail a couple of 1+% days and they'll be as bullish as ever, "Buying the dip" and all.

Treasuries also strangely (according to normal market correlations) rallies with stocks on the day and the $USD, not a typical market at all, In fact treasuries rallied exactly at 8:30 a.m. when the eco-data was released and headed up all day to give a little back at the close.

Commodities got slammed toward the late afternoon, first crude was hit at 2:30 and then gold and silver to a lesser degree around 2:40

USO whacked

 the end result being...

Again, this seems to be an unwinding of the earlier war premium, it's odd, but these events too also tend to be knee-jerk, just look how quickly the market recovered after 9/11, I was surprised.

As far as some of the Leading Indicators we have a particular interest in, they keep acting well, better and better actually.

 FCT was not performing well, just to be in line was a big improvement in bullish sentiment, but now it's closing much better than the SPX and getting better every day.

 Our other Sentiment Indicator for pros, HIO is seeing even better performance on top of already stellar performance. These leading indicators have served us well in substantial reversals, there's a lot price doesn't tell you that you can find in all corners of the market.

I just wanted to show HYG credit today intraday which smoked the SPX, however it's even stronger than that and JUNK credit acted the exact same way.

This is HYG is context, leading the SPX.

HY Credit continues to hang in there and close better than the SPX, it's very skittish so it even coming along for the ride is something.

I have very little doubt we get a pretty strong bounce, there's no other reason to run one if you aren't causing movement in retail.

As you know we have a weekly Op-Ex pin tomorrow as Friday weeklies come due, usually the close Thursday is pretty close to the Friday pin until about 2:30 as most options contracts are wrapped up and the pin loosened, I kind of wonder if we get a surprise on the pin day with most likely low volume as most traders in NYC will be in the Hamptons tomorrow if they aren't already.

Monday we have a market holiday.

So far the market keeps doing as we expect, albeit seemingly very slowly, but that's just from watching every minute of the market, but if we hadn't, I might not have noticed a quick and severe change near the EOD in VIX futures to the negative, not sure what it's about, but I would have missed something that is probably important.

I'll check back in if futures get wild tonight.