Wednesday's Wrap

It looks to me that the Closing Market Update was right on.

If we look at the averages, what I see is a market near the top end of the chop range with significant intermediate and long term damage done.

 DIA (Dow hits new highs, but there's distribution in to the move

DIA 2 min shows it even worse

DIA 5 min makes it very clear what was going on as the Dow, the last to break cleanly above a range, does so today in to distribution.

 SPY distribution intraday as well

SPY 2 min shows the same

SPY 4 min chows the same

And the intermediate 15 min is breaking down badly here right at the top of the chop range.

 As mentioned, short term IEWM looks like it has some short term upside.

But at 15 mins there's very significant intermediate damage, I doubt any upside move can last for long.

IWM 30 min shows the same

QQQ 1 min shows a positive like there's some more upside room as mentioned before the close...

But mot a lot of room as the 4 min is already negative.

So much for momentum stocks today as the Most Shorted R3K Index plummets.

R3K MSI

Speaking of momentum, Transports see the largest decline in a month, but don't count them out yet, although I think you can very soon

IYT 5 min...

So much for Dow theory confirmation today, but after that middle of the night, horrible ramp in Yen crosses, are you really surprised that Transports strength from here is skin deep? The R2K and NDX also ended the day down, yet they are the only two that look like they have a short term, likely intraday lift left in them, but that's about it!

We were looking for a bounce in oil, largely on its own divergences, but it seems the $USDX will be helpful.

 30  min $USDX futures start to see downside as expected yesterday on a negative 30 min divergence, this should help oil, gold, GDX and likely equities, although they look like they are at the top of the chop.

USO finally starts to lift off a bottom with a 5 min leading positive and some healthy longer term charts like 30-60 min.

We had a nice double digit gain in GDX and GLD after just a few hours in the position, but decided to give them a little more room even though they are short duration positions.

 GDX should have some more upside in it before it continues a constructive pullback lower leading to an eventual long duration long position, NUGT was up almost 4% on the core long position as well as the trading position.

GLD 15 min also looks like it has more room on the upside before making the same macro moves as GDXm both should offer beautiful long term core positions as soon as their pullback continues and ends shortly after that.

Our partial long position in MCP "Should" be filled out tomorrow just before earnings at the close, we were looking for a head fake move in MCP to fill out the [position and it started that move today.

 MCP head fake move 1-day after we said we'd be looking for it? Most likely.

This 15 min positive on the shakeout is exactly what we're looking for, we just need the intraday to go positive and I'll be filling out MCP as it looks like an earnings leak is probable

And Treasuries?

 10 year 30 min is positive after 4-days of pulling back after the F_O_M_C

And TLT looks ready to bounce, our TBT short should do well

The short term TLT also looks like it is tactically ready to move.

As for the currencies, the AUD/JPY lost a lot of ground and the USD/JPY did as well, these were the carry trades ignited in the middle of the night Tues-Wed...

 ES is falling behind the EU/JPY once again, this manipulation really doesn't have more than 24 hours in it?

Now you see how they move the market when they need to, we saw an extreme example Tues-Wed. night on a no news, low volume Yen stomping.

HYG is the other asset for short term manipulation, it has been used for quite a while, but...

 HYG 5 min looks like it has some more upside like the Q's , IWM and transports, all down today...

However the 60 min chart shows the macro manipulation trend in HYG is coming to a close as it goes 60 min negative after being in line for well over a month.

 Intraday HYG saw distribution so I don't think that 5 min positive will hold out too much longer.

And protection? Just looking at the VIX you'd think there was no fear, but...

30 min VIX futures show a solid bid for protection, someone is nervous, but skillfully accumulating nice and quiet, when something goes bump in the night there will be almost no warning for those looking at price only.


Sentiment was down in to the close, not a great signal for continued gains.

High Yield Credit also closed badly in to the SPX's price action today, credit as a whole, one of the best leading indicators wants nothing to do with market upside, the credit markets see something equity markets don't see, even though they have largely been struggling (the DOW had to break above the clear range as the only average yet to do so).

Commodities also were divergent and negatively dislocated again today, even with gold and oil gains today.

I think it's very likely that the averages try to move a little bit higher, especially the IWM and NDX, but I don't think they are able to maintain long, WHICH MAY SET UP SOME NICE TRADING SHORTS TOMORROW.

I believe the Yen sees another downside move overnight, what the Euro does will depend largely on the ECB and whether they cut or not, the rumor has been no cut, but a cut would end the EUR/JPY trend, no cut would give it a little more room with HYG as well and the short term divergences in IWM/QQQ as well as the $USDX.

However I wouldn't chase any of these moves, in fact I'd be looking for the opportunity to fade them.

We should know something about the ECB in a few hours, I'm guessing the Eur/JPY moves up and the $USDX moves down, a bullish environment, but there's so much damage, it looks like it will be best used as a tactical short entry, perhaps an add to trading positions in FAZ, SRTY, SPXU, SQQQ and a few others.

I'd say don't let price scare you, I'll put the charts up when the time is right, but FAZ for instance is on the border of a nice upside move, but I think we'll get a little pullback tomorrow first, it may only last intraday.