Wrap Up

On a personal note, thank you for your patience with tonight's post and all of the kind and thoughtful letters and to the members who are physicians who took so much of their time to talk with me tonight about my wife's condition (earlier today around 1 pm she checked in to the Emergency room and was diagnosed with Pneumonia and they have kept her overnight, we're not sure what the entire situation is or how long, but it comes 2 days before my mother has major back surgery, luckily they're at the same hospital). I appreciate all the kind thoughts, wishes and prayers and especially our member/physicians who gave so much of their time on the phone with me tonight, thank you so much!

From Friday after op-ex started to dissipate, my first post toward the EOD was Market Update: Clearing Op-Ex. The view presented in that update was as follows...

"this looks conducive to the move up to create chop while the stronger negative charts are kind of a lid creating the move down and thus "Chop". 

and....

"When I say chop, I really can't qualify it until we see the signals which we are starting to see, but I imagined something like this."

The first move I drew obviously is a guess based on the charts Friday, but all of the averages actually moved to that exact spot today, the highs of 10/31.

The second post toward the EOD was "Special Market Update"

"HYG, although underperforming intraday, has seen the same kind of short term accumulation as the SPY just posted. VXX overall is underperforming enough that the SPY Arb could be used, it was used today from 11 a.m. to 1 p.m. to help the market off intraday lows. "

In fact, from Friday's HYG short term positive divegrence forming late Friday, we had this today in HYG (HY Corp. Credit) which is an asset commonly used to manipulate the market short term on its own or through SPY Arbitrage with VXX and TLT.

 The proper way to view this 5 min HYG chart is to give the most weight to the large negative divegrence that started to send HYG lower, it is most probable that any divergences after this negative that are smaller will be temporary and the larger negative is likely to resume it's negative price trend.

In yellow is the data missing today from Worden platforms for about 2 hours, it is significant and should be restored tomorrow, but I doubt on this long of a chart it has much meaning.

Finally the short term positive that started forming Friday as can be seen and continued to form today, this would hint at market upside just because HYG is used for market manipulation, however keeping the size of the divergence in mind next to the larger one on this chart is important.

Even more important for trade beyond short term (day, few days) is the 30 and 60 min charts which have been in line or 3C price trend confirmation as seen at the green arrows. The red leading negative divegrence on a 60 min chart is very meaningful as HYG has seen a robust bout of distribution, again short term moves are like Rock, paper scissors. The 5 min chart would be like paper and the 60 min like scissors, the 60 min chart eventually wins out, even though short term/near term trade should respond to the 5 min positive above that started Friday as noted in Friday's post.

Carrying on with Friday's posts... The final post Friday was the "Wrap" talked about the QE sensitive assets (Gold , $USD, and Treasuries)...

"In short, QE sensitive assets are acting like the F_E_D burst the QE bubble, at least since  (or before) this week's F_O_M_C, take a look for yourself."

From my short term analysis of Gold/GLD / GDX and NUGT today as well as my TLT/TBT analysis, it is my view that these QE sensitive assets that have all been down since last Wednesday's F_O_M_C will bounce shortly. I also believe these will be short duration bounces as I warned last week about a probable GLD/GDX bounce on Thursday Oct. 31st...

"Not too much has changed in the assessment for both, but there is a decent chance for some misleading activity and a decent chance for some trades if you are pretty aggressive."

Today's analysis of GLD/GDX/NUGT showed the strong potential for a short term bounce within the correction that has started, it is that bounce that I believed may come and may be misleading if traders think the bounce won't end shortly and resume a move down, so we predicted this in advance and here we are on the verge of it, I do believe the highest probability will be for a short counter trend bounce and then GLD/GDX to resume their pullback which should eventually set up a strong, longer term long position in these assets.

VIX weakness was also noted Friday...

"VXX a bit weaker today than yesterday vs inverted SPX in green..."

That weakness carried through today and helped the market to some extent and apparently the market needed the help.

Today was the lowest Non-Holiday volume day in SPX Futures in over 2 years! Volume in stocks, other futures and options was also very low today.

I'm hesitant to use the intraday signals with almost 2 hours of data still missing today (it should be corrected shortly, but as of yet it still is not).

What I do have in intraday 3C signals for the averages leans toward the positive with most in line and a slight short term positive, however once again it must be taken in perspective and this is why I expected chop (actually a bit more volatile or wider than we have seen thus far), but ultimately that chop should give way to the dominant signal on the charts. For example...

 To the right you can see the start of the positive late Friday and continue in to today.

However, the same 5 min chart scaled out looks like this...

We have the initial accumulation and price moving up, then laterally with distribution and a smaller positive that has thus far created the chop that was predicted last week, HOWEVER THE DOMINANT SIGNAL ON THE CHART IS STILL A VERY LARGE NEGATIVE, WHICH IS WHY I BELIEVE CHOP WILL DOMINATE RATHER THAN A STRONG SHORT TERM UPTREND.

As the VIX was knocked down today, futures went positive in VIX Futures today.

I believe on such light volume VIX futures were likely manipulated today which helps the market, but even in to the decline a clear intraday positive is formed.

As far as Leading Indicators today, although there is some missing price data in the a.m., it looks like both High Yield and Junk Credit underperformed on the day. It's very clear sentiment indicators underperformed, here's one...

Intraday Sentiment vs the SPX sold off badly as the SPX tried to ramp EOD.

Yields were down today, although I expected that as of Friday. I expect a gain in Treasuries short term (thus the short TBT position) so I'm keeping an eye on the 10 and 30 year futures.

High Yield Credit also underperformed on the day, especially in to the EOD (end of day). Finally Commodities were another big under-performer on the day.

Transports were very strong on the day, (there are quite a few momentum stocks in the group).

There was a Dominant Price/Volume Relationship among all 4 major averages (5 including the R3K) and that was Price Up/Volume Down which is the MOST BEARISH OF THE 4 POSSIBLE COMBINATIONS.

The closest thing to a carry trade today was AUD/JPY and I would barely consider that a true carry, but for what it's worth, it has fallen off badly.

AUD/JPY falling off badly against ES.

However I think most damage was done today on the upside via VIX or VXX.

I think the market can make some more upside from here, but likely still remain pretty much in a choppy range, of course you have to wait for the leg down to define the choppy range, although we already have a pretty good start.

Overall though as I said Friday, I will not close core short positions nor will I close leveraged short trading positions (most of which are in the green ). It's not just the damage done on the charts whether from the 10/9 lows cycle or longer term, but Leading Indicators are trashed badly, especially credit.

I have no problem taking a long trade if it looks sturdy and solid, however I have not been interested in the market long in this area at all because of the damage that is so heavy, it's really like a very thin, shiny shell marked "New Highs" or "Bull Market", but everything underneath has been rotted away, structurally there's nothing there whether it be breadth, market/money flow, smart money assets, etc. 

The only thing there is F_E_D POMO and it seems that is even having a very difficult time as we saw last week with a $5bn dollar day and the markets closing red. As always, the market WILL front run the F_E_D.

I'll add additional details if the missing data from today sheds any new light.