The VIX, VXX or VIX futures typically have an inverse correlation with the market meaning almost a vmirror opposite relationship, yesterday there were very early initial hints that the VIX (encompassing all VIX assets/Index) was going to see weakness very shortly, today most likely.
As shown last night in VIX futures and quite often with VXX / UVXY charts, the long term "Big picture" rather, is quite stable so any downside is more tactical manipulation of the market short term than any changes in sentiment or major trend changes, even Spot VIX shows some very strong charts.
However as mentioned already today, VXX lower helps the SPY arbitrage which can be used as short term manipulation to influence a market. The mechanics are quite simple, when the VXX / XIX futures fall, algos interpret that as risk on sentiment and traders are not worried about protection, they are rotating out of protection and in to risk which causes an algo to buy, the same is true of TLT as a long term treasury/ "Flight to safety" trade. HYG is the opposite, it is seen as a risk on asset and any moves higher are interpreted by algos of confidence by smart money that the market is in for a move higher, this alone can, as Cramer said and probably wishes he didn't,
"Create a new reality by creating a fiction".
The charts...
This is the typical VXX (blue) relationship with the SPX (green) which is to say, inverse or nearly opposite each other.
If there's one thing more difficult than seeing a divergence, it's seeing relative performance differences between these inverse assets so I have a way of dealing with that.
This is the last (nearly 2 days in the VXX/SPX,
but what I have done is inverted the SPX's performance, this way the normal correlation should show up as trading virtually exactly the same as seen to the left, today specifically as expected yesterday, VXX is underperforming the SPX by some margin EVEN THOUGH the market is in the red most of this time.
This tells us VXX is seeing short term manipulation which the 3C charts suggested we'd likely see as of yesterday.
This is the Spot VIX in green and the SPY in red, look to the far right and even though the SPY is virtually unchanged in that range, spot VICX has dropped almost -6% today so far, it should be nearly the opposite of the SPX meaning nearly unchanged.
TLT above is also viewed vs an inverted SPX and although it doesn't look as obvious as VXX, it should have the same relationship as SPX, it should move together.
However days before TLT dropped we expected it and even hoped to see accumulation of the decline to look at picking up TLT long at much more favorable prices,
but the reason for the drop seemed to be in large part as an arbitrage manipulation to give the market a chance to bounce, something it would have trouble doing on its own.
Other charts...
High Yield Credit tends to lead the market, this form is very illiquid though and typically the first to run at any sign of trouble. I pointed out last night how it broke above it's intraday range close to the EOD (green arrow) yesterday, but today it is showing much better performance suggesting short term institutional traders are getting ready to trade a bounce like some of us are considering.
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