"I showed late in the day how the averages suddenly started to improve, they have some work, but perhaps some late night Yen slam or EUR/JPY carry lifts the market"
So I more or less guessed a Yen slap down would drive the typical carry pair of EUR/JPY and do the rest of the heavy lifting for US futures in the middle of the night when volume is very low.
I really can't say for sure whether I really expected to be right, but the manipulation of the market has been so blatant, throwing the idea out there was not out of the realm of reasonable possibilities and don't you just know it...
I often say that "Wall St. doesn't do anything without a reason" and we noticed this on Tuesday, what could the reason have been, perhaps op-ex? I said ealry today since its a weekly and we noticed this Tuesday, I doubt very much it was that, what could it be?
Earlier in the week I mentioned how Dow $16k, SPX 1800 and NASDAQ Composite 4k were just fractions of a percent away, these are major psychological levels and there is money to be made up there as bulls buy the new high, there's demand to leave retail holding the bag, if volume is up then there's the bid/ask spread and volume rebates. As far as I can tell judging by the size of the accumulation (less than a day and a half, that fits the bill considering the moves to those levels were fractions of a percent
The Dow made $16k on a closing basis so that's one, the other two aren't far at all.
In addition overnight we had bad news which is good news, China and the Eurozone both missed on Flash PMI and both dropped then the US Philly F_E_D missed. Another pop to the market today was the Senate's (Banking) confirmation or vote for Yellen as the next F_E_D chair nominee.
However as far as QE assets that were definitely QE off/Taper On yesterday, here's what they looked like today.
As far as the 5 min positives in the Index futures that made me believe the market would at least open up today (although I thought it needed some overnight help), well they've disappeared.
"There are some 5 min positives in the Index futures, NQ (NASDAQ futures) look the best, and we saw late day improvement in the averages as I posted."
Typically they need a little time to reverse, there's almost always that process, but there are signs in some already of that happening like ES and it was obvious in the averages enough to the point that I felt that taking a put position in to IWM options made sense as I want to enter while there's still upside momentum to get the lowest premium.
The SPY calls were closed today as again I want to close them in to upside momentum to get the best premium, not as they start to fail, it's very different than stocks.
The P/L for the SPY calls worked out as follows...
At the cost of $2.36 and the fill of $2.50 the P/L came out to +5.93%. not at all what I hap hoped for, but a decent 1-day win.
AAPL calls are still open as I think they have more to go, but I expect they be closed tomorrow or Monday as both were meant as very short duration positions for a short duration market move.
PCLN was mentioned last night as a possible short/put position if it opened on a gap up, while it didn't close as I had hoped it would, it did dhow the sign of distribution as I hoped in to the gap up and on a relative basis was completely flat against the market today intraday.
The market is still primed for a HIGHLY DIRECTIONAL MOVE, the VIX Bollinger Band Squeeze remains (I had said yesterday there are often fake moves or bouncing around before the actual directional move, but this is portraying a strong move, I have every reason to think up and the VIX moves opposite the market.
Even worse, I have brought up the fact that HFTs have replaced market makers and specialists as the suppliers of liquidity and the fact that unlike the later two, HFTs are not bound by law to provide liquidity meaning to take your shares so long as you put them out at market and are willing to accept the spread. Shorts are an integral aspect of a healthy market, they represent future demand so if the market were to go 1929 tomorrow, there would be no one there to cover which is to say, "Buy" from those bulls who are seeing their portfolio fall like a rock. Shorts represent that built in demand as they take profits and cover they are actually buying when a market falls, without them, a market fall has no natural buyers and market makers and specialists have been marginalized by HFTs when it comes to liquidity so could we have a 1929 type sell off or worse? Of course and this is another chart making the rounds...it's of the SPX vs the pre-1929 Dow and while I'm not going to post it as it's pretty much just entertainment for me, not solid analysis, it is eerily similar.
In any case, the question posed with this chart is "Who will the bulls sell to?" when I think the more pertinent question is what happens when the market structure is so decayed (along with the market) that there are no natural "break-waters" left?
Moving on...
While the 5 min VIX Futures were one of the charts that made me think we'd see upside at least early today, there was an absolutely stunning bid for protection near the end of the day that not only unnaturally bent the price of short term VIX futures, but put in one of the strongest leading divergences I have seen in its own timeframe.
Obviously something big was happening at the end of the day and there was a huge reach for protection in a very short time, IT ALMOST LOOKS LIKE SOMETHING CAME OUT THAT PERHAPS ONLY SMART MONEY KNOWNS ABOUT RIGHT NOW, it also fits well with the Spot VIX BB squeeze.
You can be sure I'll be watching this tomorrow and likely looking to replace that VXX call that I closed yesterday for an 8% loss.
Finally as far as leading indicators go...
Again there was no Dominant Price/Volume Relationship.
NYSE TICK data was elevated and positive mostly above +500 today, but no extremes hitting anything much more than +1000 which I found a little strange considering some of the price moves today like the IWM.
HYG and JNK (HYG is used for arbitrage manipulation) both closed strong in to the close hinting at early upside tomorrow, however HYG's 3C chart is not at all commensurate with HYG movement. High Yield Credit did NOT buy the move AT ALL today. Sentiment indicators aren't saying much either way, fairly neutral, the VXX relationship was extreme at the end of the day as mentioned.
Yields were down which is slightly bearish as they pull on the SPX and commodities as a group were in line with the SPX.
If I had to make a guess, my guess is that the SPX will go for the closing $1800 tomorrow and the NASDAQ Composite $4k to join the Dow $16k which is something we were looking for earlier in the week before the minutes sent the market lower.
Overall though, there's still a ton of damage, one of the areas I see the most is Financials...
Bonus charts...
The 15 min saw accumulation, then in line at the green arrow and above $21, pure distribution.
I'll check futures as usual before turning in and let you know if anything comes up.
Tomorrow is an op-ex Friday, usually the market moves to the max-pain pin which changes as contracts are closed out, but most are closed by 2 p.m., as usual that's about the time price starts doing what it wants, but it is the 3C positions that matter. Last week on Friday from the 3C charts late Friday we predicted the exact open and close of 3 of the 4 major averages for a bearish engulfing pattern, that's because unlike price, 3C tends to pick up right where it left off on the next trading day, even with a weekend in between them. I'd expect the SPX and NDX to try to hit their respective levels like the Dow did today, it's probably less than a 1/2% move for them to do so, however once again, it's what 3C looks like the last 2 hours that will make the most difference to any positions opened for Monday.
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