More on the Knee Jerk

Again, I want to be sure if we make a trade or reaction based on a knee jerk reaction, we know that we are doing so based on a knee-jerk reaction and not just what price "appears" to tell us.

For instance, take VIX futures (a reach for protection).

Looking at the VIX alone you'd say it is depressed, complacency is high, this would normally mean you should look for a VIX move higher and market move lower, but in recent years and months, this has been taken to simply mean the market will keep heading higher.

UNDERLYING TRADE TELLS US SOMETHING VERY DIFFERENT THAT PRICE DOES NOT.

 These are the actual VIX futures, not a derivative or proxy like spot VIX or short term VIX futures like VXX (nearby forward months combined) or even the intermediate (several months a little further out combined). These are the actual futures that are used as protection from market downside.

You would not think there's real demand for the VIX futures by looking at the Spot VIX or even the daily prices of the VIX futures, but the underlying trade is telling a different story. 

Remember how flat VIX futures and even VXX or spot VIX have been when their inverse correlation suggests they should be at or making new lower lows, IT IS THAT FLAT TRADING RANGE IN VIX (and derivatives or proxies) THAT HAVE SUGGESTED ACCUMULATION UN UNDERLYING TRADE.

I mentioned this in the last two night's market wrap posts, charts like 15 min were going positive, this is the 15 min above so there's some serious underlying accumulation of VIX Futures that price alone doesn't show you.

 The 30 min chart of VIX Futures is now leading positive meaning there is LARGE underlying accumulation and very recently.

 Even the 60 min futures are showing a leading positive divegrence which in this long of a timeframe, means the underlying activity (ACCUMULATION) is quite strong, however you'd never see that demand in price alone as it seems they are trying to keep prices steady to accumulate.

 A 4 Hour VIX Futures positive divegrence is one I haven't or can't remember seeing, this is VERY STRONG accumulation activity and very recent.

However if we look at a 1 or 5 min intraday chart...

It looks a lot like price and you might never know that someone is accumulating VIX in huge amounts, someone or a bunch of someones (more likely) are getting ready for a market plunge.

These are the kinds of charts I've been looking at this morning and trying to figure out when they reacted to something specific today and why.

For instance, the better than expected GDP print would make sense to see VIX Futures accumulation as it is not QE friendly, THE F_E_D HAS A HARD TIME JUSTIFYING POMO WHEN GDP IS BEATING LIKE THAT.

However, it's what's behind the headlines like the inventories that Goldman saw and is reacting to as they lower Q4 GDP Guidance by 25%!!!

In any case, this VIX Futures strong accumulation fits very nicely with the 3C charts dealing with the most recent Cycle, deep leading negative divergences and maybe beyond (Leading Indicators and Credit VERY specifically too).

The other not so obvious issue is the VIX futures may be an outstanding short term long (VXX or UVXY long) very soon, the longer strategic charts are there, it's just the short intraday timing charts which also tells us something about the market and expected moves both intraday and intermediate and even long term trends.