Leading Indicators and Market Update

This morning the F_E_D's notable Hawk, Richard Fisher spoke to the Economic Club of New York and said Fiscal Shenanigans have swamped QE tapering. Of course we've heard this all before with 4 speakers in one day all giving a different message. Speaking of which, Evans spoke at 12:45, Esther George at 1:45, and Kocherlakote at 2:45 with the F_E_D's released at 4:30 today. Tomorrow Evans and Stein speak at 2pm and 4:30 pm respectively, it seems like a busy 2-days for F_E_D speeches right after the deadline. I haven't seen what the rest of them said yet, but it seems the market may not have liked something George may have said.


Goldman's worldwide leading indicators chart was released about this afternoon, it shows the largest decline in global leading indicators for the year for the last month. I would rather see the CITI Surprise Index, but that's gone for now. On the subject of GS, again I can't say how glad I am to have closed that call position yesterday at less than a 1% loss considering what it would look like today and unfortunately the target for a GS short was up around $170, not so sure we'll get there.

After looking around, there's no doubt the market is in way worse shape than it was earlier in the week and far, far different than the appearance of price, but this has always been the case, the 2007 top (SPX making higher highs and a new all-time high at the top and I remember well the CNBC cheerleaders and an interview with the author of Dow $20,000 just before the break),  the 2000 SPY top with a new breakout / all time high, the 2000 NASDAQ top with higher highs and higher lows, a new breakout / all time new high, even the 1929 Dow INDU with a new breakout high and all time high. Price is deceiving.

The main target for me (and this is not as of today or this week, this has been the target for weeks, is SPX $1729.44, intraday we've hit $1729.64, technically it's a hit, but if retail doesn't but it then it doesn't matter and I see no sign of volume on the move that retail bought it, this is why these moves often HAVE to be convincing, the same reason a Bear Market Counter-Trend rally is one of the strongest rallies you'll see, it's in the middle of a bear market, to get buyers interested it has to be convincing.

I'll go through my list of stocks that were "that close" and see how many made the move I've been looking for and how many now look like high probability set ups, these are not for short duration trades or even leveraged, these are meant to be long term trending trades.

CONTEXT hasn't improved at all, however the VIX Futures as well as VXX and UVXY have, not only in 3C divergences, but in the shape of price, "The reversal process", the same reason (of 2) we entered URRE the day before it ran +20%.

Yields look to be one of the most damning Leading Indicators today.

You can see how Yields (red) have led the SPX on moves up and moves down, the easiest way to explain them as a leading indicator beyond the actual leading signals they give is that they act like a magnet for the market (SPX in green), They are now below the Oct 9th levels where the VIX sell signal was.

As I said VIX looks better and better...

 VIX Futures 1 min, the 5 min is also leading positive.

The VXX itself which has no 3C correlation at all unless there's something going on, looks similar with its leading positive so November VXX calls will be held. I wouldn't have any problem with a UVXY long equity position so long as risk management is used and it's treated as a speculative position as many short duration trades should be in this market).

 VXX 5 min is also leading positive like the VIX futures...

XIV (the inverse of VXX) is giving a confirming intraday leading negative signal.

HYG Credit which is part of an arbitrage that doesn't seem to be in full effect because of TLT is leading negative on the 5 min chart, it's worse since this capture, but it's been my experience that HYG's price will typically lead the market negative at a reversal, I'm not sure if the same will happen here as it seems to be an asset being used to support the market.


High Yield Credit bumped up a little earlier as the averages crossed yesterday's close, but has given that gain up since.

TLT and the 30 year Treasury futures have signs of a pullback and very strong signs of a long term uptrend, thus the reason I'd like to get in to TLT long.

 30 year Treasury Futures 1-day leading positive.


TLT 1 day leading positive, the area I'd like to get in is around $102, but I don't think we should be myopic about it if you like the position.

Carry trades are effectively dead and that's because of the Yen as expected.

The intraday Index Futures charts are very interesting, they mirror the market averages and they are migrating.

 ES intraday leading negative

NQ intraday is as close to inline as any asset I've seen today, however the 15, 30 and 60 min are all leading negative, they were not earlier in the week.

TF intraday is actually one of the worst and it's moving to longer charts 5 min.

To give you an idea of the big picture, here's TF's daily chart.

Not pretty.

I have several alerts I need to check on.