Daily Wrap

My first thoughts to myself for both today and Friday are, "What the heck is this about?" and not in a good way for the market. Whenever there's doubt I always try to go with the highest probabilities and there are tons of places to look that all confirm each other, as far as the short term trade, it would be nice to understand what's going on, but I'm more interested in just being on the right side of what's going on.

You saw the credit situation and the market's desperate need to rig up $.60 of SPY arb to hold $/44 in gains. Not to mention today was the lowest ES (non-holiday) volume day of the year, it seems just last week we were talking about the exact opposite.

The oddities don't stop there...

Take the Dow-30 for instance, remember how many times today I said, "This seems like a market caught in 'indescion' and that's generally not good, especially after a day like Friday?"

Sometimes we look at the ATR or Average True Range to get an idea of changing character, for instance...

The ATR of a rallying asset should see by pure mathematical function alone a higher ATR as it advances, here we see the Dow-30's 10-day ATR go from over 200 to under 100 in about 6 months, that's not a healthy sign.


However today's was even more stunning...

 We have the range of the open and close on a candlestick to the left, to the right we have the day's range, high  minus the low gives us the range the asset travelled during the day.

Today's Dow -30 saw the smallest range it has seen since August 17th, 2012 (yellow arrow above).

This is my indicator that shows the day's range, today the Dow had a range of 43.11 points, the lowest since Agist of 2012.

None of the JPY crosses seemed to work very good today, perhaps that's why HYG and the SPY Arbitrage got extra support in to the close,

EUR/JPY vs ES (purple) during regular hours, the AUD/JPY and USD/JPY didn't fare any better and talk about smashing the VIX in to the close...!!!

VIX in white vs the SPY, SERIOUSLY? That little EOD 1 min candle and the VIX smashed like that in to the last minute of the day?

Just for some context...

VIX range intraday

The Absolute Breadth Index I showed you about a week ago remains extremely low which is consistent with the topping of a market, the McClellan Oscillator has a negative divergence stretching from September to present.

You know how I'm fond of breadth indications BECAUSE THERE'S NO INTERPRETATION, THEY ARE HARD FACT...

From 10/22 to present the SPX has gained +3.06% while the Percentage of NYSE Stocks Trading Above their 40-Day Moving Average ....

 (Indicator in green vs SPX in red) Has seen the % fall from 82% to 47% and this while the SPX moved up 3%

The same indicator, except momentum stocks as it uses the Percentage 2 Standard Deviations Above the 40-Day Moving Average during the same period has fallen from 42% to 6% Thursday and just below 11% today.

The same indicator using 1 Standard Deviation instead went from 66% to 29% in the same period and 21% last Thursday.

While the Percentage of Stocks falling Below Their Moving Averages rises, over the same period Stocks 1 SD Below their 40-day increased by 400%, Stocks 2 SDs increased 400% and Stocks 2 SDs below their 200 day doubled.

There are some wicked changes in character going on and not too many people are aware of the breadth readings, but that's the actual number of stocks falling apart in to the advance, remember what I said about Index Weighting.

So far I don't see anything strange in futures and there was no Dominant Price/Volume Relationship, but based on the strange occurrences through the month or so as well as the week and the day like needing the SPY Arbitrage to keep the DOW within a tiny range on an extremely low volume day (futures) see above, I'm sure we'll be seeing some things "out of the norm" and unexpected.