Daily Wrap

Last Tuesday after a down day we saw some accumulation, one day, nothing too strong and assumed back then it was for the Dow to hit $16k, the SPX to hit $1800 and the NASDAQ Composite to hit $4000, all the other averages made pretty quick work of it.

The next Wednesday was the F_O_M_C minutes and the knee-jerk reaction was not favorable, but even during the last hour of the day I noted some accumulation building, not strong enough on its own, but we also had 1-day 5 min positive in the Index futures, still probably not enough so I said I thought they'd smash the Yen overnight when no one is looking in low volume trade, they did smash the Yen in the middle of the night just as predicted and that gave the market enough strength to rally in to Thursday/Friday, but the COMPQX still couldn't make it's psychological level.

If there was ANY doubt in anyone's mind that NASDAQ Comp. 4K is what this has been about...

After 27 days in striking range, today finally hit 4k+.

I showed today how short squeezes in the Russell were used, but if you still have doubts about what today and the week have been about, then...

Today's closes: SPX +0.03%, Dow-30 +0.02% the NASDAQ 100 +0.57%, R2K +0.86% and NAS Comp +0.61%, only the average that needed to break 4k and a subsection of it (NASDAQ 100) as well as the short squeeze average, were up today, the SPX and DOW were pathetic next to them and I think it's pretty clear this has been the goal and a hard fought one for whatever that's worth.

This price pattern is a textbook short squeeze, earlier in the day even volume was textbook as it faded (later some spikes in volume threw the fade out of proportion).

IWM short squeeze, they are characterized by low volume and a nearly diagonal price trend with few to no significant corrections. The Squeeze lasted until things started going wrong in Leading Indicators, The Index averages, the regular averages and of course the TICK as mentioned.

At the end of day there was some unusual activity...

 The normally, super-glued ES vs EUR/JPY correlation was totally broken(ES purple)

Suddenly as ES was in the distribution zone (when considering order fills using VWAP for institutional clients) and 3C was showing this in not just the averages, but Index futures as well, suddenly ES came crashing down through VWAP again (yesterday near the close). What is important about this activity the last 2-days near the close is it's a well known fact retail or amateurs trade the open, pros trade the close (this is why I don't put much weight on the open).

This suggests pros are selling at the close.

Although some think it has to do with the EUR/JPY correlation, I don't think it matters as the BOJ's jawboning hasn't done anything for the Yen (downside) and the Nikkei 225 closed red last night as I suspected when I posted the 3C charts of the Nikkei futures last night.

"15 min Nikkei 225 futures with 2 accumulation zones and 1 large distribution zone."

The 30 min chart of the Yen looks like it's going to be hard to keep down (bad for the market), in my view this suggests carry trades (mostly EUR/JPY) that are used by hedge funds to leverage up their AUM  are being closed as the last part of closing a carry cross (with the Yen) is to buy the Yen and that causes demand.

I think at this point the BOJ has done all it can do without actually making a policy shift to lower the Yen again.

 This is the SPY in yellow today vs the EUR/JPY, this is why some think the market was catching down to the EUR/JPY correlation.

 Once the COMPQX was comfortably above $4k and wasn't likely to lose it like yesterday, things took a more dramatic turn everywhere, like the NASDAQ futures intraday above.

Or the Russell 2000 futures where a lot of the short squeeze seems to have come from.

As far as credit, once again it was almost a reflective response to try to stave off a decline by pumping HYG.

 HYG vs SPX (green) and HYG was again pumped like yesterday, but there doesn't seem to be any 3C support  there at the old, faithful and true lever of manipulation.

HYG's intraday 3C chart.

If someone asked me what one or two assets that could predict the market based on what smart money is doing, I'd tell them first and foremost, High Yield Credit and/or investment grade credit, HY is for a risk on position and IG is for a risk off position.

The Wall St. saying is, "Credit leads, stocks follow".

 This is HYG vs the SPY since the 10/9 cycle low started

 This is HYG (reddish) and HY credit (yellow) vs the SPY for 2013, you can see there's a clear divegrence where there was confirmation, Credit players haven't been buying this rally, this has been a much larger distribution area than I think I've seen, although 1929 was actually longer than most would think.

The May 22nd Key Reversal Day was a shift in thinking in the market among smart money, I said on that day, "Technicians will look back at this market and May 22nd will figure prominently in the big picture."

 Near term HY Credit's action vs the SPX.

HY Credit vs the SPY, note the head fake areas are where Credit really diverges, it seems to know and isn't getting involved.

VIX Futures were prominent as well the last several days/week...

 Spot VIX should be giving Bulls nightmares, I know I'd be very nervous with a mature Bollinger Band pinch around volatility.

The last 2-days as we have seen what is likely professional selling at the close, we've also seen a reach for VIX protection.

 VXX intraday with the SPX price inverted so you can see VXX's outperformance of the correlation.

 And another way to view the same.

These are the real VIX futures and that 15 min charts not only leading strongly, but has a nice rounding price pattern. This is why I couldn't pass up UVXY or any long VIX exposure.

As for other Leading Indicators which have been very insightful lately...

 Yields, the equity magnet, took another hit today causing a larger dislocation between them (red) and the SPX (green), eventually there's reversion to the mean, but this is a very forward leaning leading indicator. Right now this is suggesting a stage 4 (off the 10/9 cycle) decline to the $1750 area to start.

Sentiment, professional.

In many ways this is like 3C except 3C is revealing the underlying or hidden movement whereas this is showing straight out price declines that are similar to 3C in many ways, just out in the open.

 the last several days, today's closing action sure fits well with a move following this leading indicator.

This is the second one.

 This is sentiment as the SPX makes what I'd consider a smaller head fake move to be revealed as a bull trap, especially with all that dumb money pouring in from fixed income.

Consider the longer term 3C charts and then the longer term sentiment charts for 2013, this again is price action that has taken place.

Money Stream never recovered from the 2007 highs, 3C went negative after QE2 ended, the leading negative here is not that different (in 2013) than the sentiment indicators above that are based on price movement, not underlying trade. Since they have no correlation or manipulative value, they are pure.

As far as Breadth, still stinky.

 The NYSE Advance/Decline line STILL can't pass October's high.

Nor can the NASDAQ 100 (Nov. High)

I thought we'd take a longer (5-day) look at some of the "% Above Moving Average" indicators..

This ABI is stunning, we are at the lowest low since the crisis first started on the fastest, largest move down, you can see a move toward the top signals a bottom and toward the bottom signals a top, I think these breadth charts are fantastic, they are just pure fact.

The MCO crossing zero (bearish) and clearly divergent.

% of NYSE stocks > 200-day ma on a 5-day chart.

 Those that are 1 standard deviation above their 200 day.

And those that are 2 standard deviations above their 200 day.

Other than that, I'm not sure what is driving gold because it is usually inflation expectations, it has been out of sync as a QE asset for some time, but still knee-jerks like one.

 Gold early in QE as a QE asset until we called a top in 2011.

Gold now vs the SPY, inverse, it seems to me Gold has a good foothold right here, it acted well today back to unchanged on the week and I think it's going to move up from this area.

The strong 30 min Gold futures 3C signal is impressive and the longer trend signal...

60 mins is very impressive.

We had a lot of strong intraday signals too.

As for futures tonight, pretty quiet, although the 1 min negatives in TF and NQ continue in to the night, not sure if they'll hold until the a.m., but it is interesting.

If anything, the Yen looks like it will see some near term upside tonight based on current signals rather than the usual slap-down and the charts are getting stronger there, unless BOJ does something dramatic.

The Nikkei futures looked negative last night and they were down overnight, right now they have a slight positive bias, not huge, but I wouldn't be surprised if they retraced a bit.

Other than that, thus far it's pretty quiet much like last night.

I'll let you know if anything changes