Daily Wrap

I'm going to keep this brief because really tomorrow is what really matters, at 8:30 a.m., the NFP. Beware the knee jerk reaction, they aren't as reliable as the F_E_D knee jerk, but this is an emotionally charged issue and the market is all perception.

For once we have a Dominant Price / Volume Relationship and it's huge, more than half the components of each average, so a very dominant relationship. Even though we saw above average volume today on the 5th day of losses in the market, the Dominant P/V across all the averages was Price Down/Volume Down, for example it was 333 of the SP-500, 71 of the NASDAQ 100, 21 of the Dow 30, so a VERY dominant P/V.

Price Down/Volume Down is the hallmark relationship of a bear market, what it means in this situation is that the market is not at an oversold point, it can keep going lower. 

As we saw earlier our Sentiment Indicators closed negatively, HYG they've been trying to hold in a range for 4 days while at the same time trying to constrain VXX for 3 days now.

One moderately bullish Leading Indicator is Yields as the are like a magnet for equities...

 Yields vs the SPX.

However, the normal relationship of rising yields is due to risk on and selling in bonds, if you look below, bonds have been selling off in a very QE-OFF or TAPER on way

30 year Treasury futures, 10-year look the same, they are acting as if QE is going to be pulled, not their normal market relationship right now.

A few other odds and ends...

 Spot VIX is looking more and more like it may just make that directional breakout without a pullback to the 20 day moving average.

Still NYSE A/D line can't break above October and is actually looking like it has topped.

My award winning Trend Channel has the entire 10/9 cycle in the channel, the stop is just a hair below.

The Dow has already been stopped out by the Trend Channel.

I've found price tends to bounce in the channel after a stop out, but I have always seen it is better to exit on the stop out, sometimes you'll see higher prices in that volatility just after, but you almost need dumb luck to hit them and then there's typically a move down like a 1-day gap that can take out a month or two of longs in one morning.

The point being, when the Trend Channel is stopped out, I've found it's better to stop out and move along to something else or risk the market's wrath.

 RSI as many of you have noted is divergent, this is still one of the traditional indicators I like for divergences. The volatility stop that introduced the 10/9 cycle just ended it as well.

 This is VXX with the SPX (green ) inverted to show they pounded the VIX futures late in the day so ES could make it back up to VWAP at the close.

We actually saw this in 3C.

Finally I was wondering what Don Worden's much respected TSV had to say, I reduce noise and use a longer period of 55, note the positive divergence  before 10/9 lows and leading negative recently? It looks a lot like 3C in many ways.

I did find this interesting, CONTEXT for ES has ES undervalued by about 10 points, sometimes they reset it in the a.m. as they try to incorporate the new correlations, for instance we saw the long correlated EUR/JPY vs ES go completely inverse today, CONTEXT isn't built to accommodate that, they have to do it manually.

For now, not too much happening, but 8:30 all heck will break lose, hopefully we find not only some answers there, but some neat trade set ups. Get some rest, tomorrow is going to be interesting.