Daily Wrap

I'm not going to make this as long as normal, because I don't see a clear short term relationship, but something started developing in to the close (futures might tell us more tonight, in which case I'll post again).

Don't you love the tidbits like "Gold has it's best day in 7 weeks" (I'm happy for that one as GLD/UGLD was a position opened yesterday) or...

"Market sees worst start to the month in over 2 years" (with a 3-day losing streak-only the NDX closed green today-it makes it the worst start of the month since September 2011). or...

"Heaviest S&P futures volume in a month"

I really I don't care (except for Gold as yesterday's analysis was right on and the position is up +6.64% in a day), however what we should point out is the last day for settlement (window dressing) last week I pointed out there was a lot of negative undertone (recall the T+3 settlement rule before month end).

The tone of the market has definitely shifted just from the headlines, from the worst start of the  month in 2+ years or the 4 or 5 days just a couple of days ago with the afternoon ramp replaced by the afternoon sell off and of course the ":Lightest non-holiday volume in 3 years" being replaced by "heaviest volume in a month".

These are all "Changes in character, for most they are just factoids or reasons to justify positions, but for those paying attention, they are changes in the market's charter and that leads to... "Changes in trends".

As far as some of my initial impressions, there were a lot of  closing candles in the averages that were near perfect stars or in the SPX's case, a perfect Doji, these are indecision candles and they have a strong probability of a 1-day reversal, the volume was there to give them more credibility, they weren't however true reversal candles like a "Hammer" or Hanging Man or Shooting Star, they are indecision candles and we see indecision after a trend, even 3-days down, the most probable outcome is a next day reversal.

One other thing missing from a strong reversal was a total lack of a Dominant Price/Volume Relationship in any of the averages, they were plain vanilla.

Here are some charts, I may add some more later...

 First VXX Short Term VIX Futures, 3 min (but you know almost every timeframe is very positive)

I was looking at this late in the day wondering if I should close the UVXY long (2x leveraged VXX) which is up +12% and even considered an XIV or UVXY short as a hedge, but keeping the negative divegrence today in perspective vs the huge leading positive and perfect reversal process, I decided to wait on better information. I suspected the closer to the close, the better the information.

 While a 1 min chart is weaker that a 3 min divergence, it is also the place where any new divergence will first be seen and what did I see? I saw VXX seeing accumulation in to the close so I looked around some more.

The 3 min SPY with a decent positive divergence (it's not that big at 1-day there's not that much fuel in the tank and only on a 3 min chart, but still...) and then I looked at closing information...

As the SPY bounced in to the close it too was seeing distribution, apparently the start of a new trend in the market.

The Q's showed quite strong intraday distribution in to the close, this was at odds with the character of the rest of the day.

The IWM with its 3 min positive...

However as mentioned, it doesn't go any further like yesterday, there's a big difference between 3 and 5 min charts, that's why 1-3 min are intraday, 5 min is where I usually count it as institutional.

However what was of interest was the close...

Again, the same thing, distribution in to the close? If they were bent on a bounce, Why?

Even Index futures...

 TF/R2K futures see the same in to the close

As do SPX/ES futures.

Remember, whatever divergence is in place, deconstructing or changing it or it moving in to a new phase such as distribution starts on the earliest chart, the 1 min and then migrates to longer ones, this all happened in to closing trade as well.

The TICK today which I believe saw an intentional leak yesterday of today's ISM as the reaction was overdone, registered a high of +1100, but a low of an amazing -1600, that's a lot of negativity.

I think this 1:30 low was like mini-capitulation and was bought (market makers and specialists would be forced to) and that may be what shows up as apparent accumulation at that area.

 As mentioned with the VIX BB squeeze, price tends to loiter, none of the past squeezes are as big as this one, but every one pulled back to the 20 day before taking off after the initial breakout, as I said, price loiters.

 Looking ay ES with VWAP, you see the initial "overreaction, but I think that's the 1:30-2:30 accumulation we saw yesterday on a leak of the ISM employment sub-index, people are willing to pay a lot for employment data ahead of the NFP.

Note how price acts as it breaks below or above VWAP, but remember what I said on the TICK chart about the extreme low which was held at VWAP's channel, I don't think this was specific accumulation as much as a mini capitulation event. That may be why there was selling in to the bounce after the low in to the close, shedding those shares market makers are forced by law to take at market.

 And ES in purple breaks away from the EUR/JPY only at the rally on the ISM data and at the close where I think they may have been trying to sell the shares picked up at 1:30.

 HYG intraday

HYG in context, it's weak.

Sentiment intraday had no interest in following the market in to the close.

I'm not staking my reputation on all of this, I don't need to do much other than let positions work and pay attention. I'll check futures, but what was murky earlier in the day seems to make more sense in to the close.