Market Wrap

Despite the overnight ramp in the EUR/USD which is supposedly because the Finance Minister of Cyprus remains "Hopeful" that a deal can be reached with the Russians (no other details-just "Hopeful"), you know there are economic problems when Fed-Ex looks like this...

This is bad economic news, not because of the Dow Theory confirmation of the Industrials vs. the Transports because we aren't an industrial dynamo anymore, we're more services oriented and Fed-Ex is representative of shipping for the services sector, they aren't moving coal, steel, grains, cars and such, they're moving goods and a lot of things related to the services industry. If you wanted to update Dow Theory you might compare Fed-Ex to the Russell 3000.

 I'm not going to make a case on this one chart, but this is part of putting the pieces together to see the bigger picture, FDX did not make a new high with the Transports around 3/15. This might be one part of your analysis and if you found a trend of similar or confirming indications, you can start to build your case and see if it holds water.

As for the market overnight and the movement in the market today was all about the overnight session and the gap open, the rest of the day wasn't all that impressive.

While some say the Euro rallied on the "Hope" statement from the Cypriot Fin-Min., others think this is indicative of Euro repatriation flows, essentially EU banks selling overseas assets and converting the money and bringing it home to shore up their capital base which is the Achilles Heal of the EU. The problem I see is that most of the investments would come from the US and during the overnight session not many US markets are open to sell those assets. I think this could have just as easily have been ECB intervention to try to get back to EUR/USD $1.30 or it could have been algos just driving up the ask, whatever the reason, it drove Futures with it.

Again Swiss 2-year Yields fell again, further in to the negative (it's costing the buyers money to hold the asset), this should tell you something about the nature of the sentiment in the market. Credit markets in the EU which I showed you last week were diverging negatively away from stocks and it turns out credit was right as the Cyprus affair happened over the weekend. EU credit is lower now than when the Cyprus affair started so they are still very fearful, whereas European stocks for the most part just whistled past the graveyard (except Spain).

I'll skip over Bernie for the moment and head to Japan where the Nikkei reported that the BOJ Governor is going to call for "Bold Easing", which is such non-news. I mentioned the Yen yesterday and showed you some market correlation and as it were the Yen was losing it's downside momentum that Japan wants to keep up so they regurgitate this story that everyone already knows and it does the trick, they jawboned the Yen lower.

Here the Yen moves lower on the news as it was in danger of more lateral movement.

Interestingly, the F_O_M_C statement which to me was a progression of the drawing down of expectations that started as QE3 was announced in September, continued today; perhaps that's why the F_O_M_C release was so bland as far as the market was concerned, this wasn't anything like a normal, initial knee-jerk move.

The 2 p.m. release just didn't do much, nor did the press conference, after hours as you can see (2 blue hash marks next to price) is not thrilled with ORCL earnings.

Context may not be that surprising to you..

 ES vs the CONTEXT model.

However as I suspected earlier in the week, Credit and a few other risk assets used in the Risk Asset layout, were used to try to ramp the SPX up to that new closing high, I was shocked to see it again (now confirmed that was what was going on) and even more shocked that it didn't work for the 4 measly points-lets just get it over with already and move on.

Check out the SPY Arbitrage model and especially later in the day after Bernie failed to ramp the market, the model is ABOVE the SPY and I can show you why, but I can't help but about how weak this market must actually be if the F_O_M_C, Bernie and these coordinated ramps couldn't pull 4 points for the SPX. The safe haven buying is clear and the willingness to sell (FDX / ORCL are reminders) is clear as well, there just apparently isn't enough willingness to take risk on for 4 minuscule points.

I first noticed it in the very liquid High Yield Corp. Credit (HYG)

 First HYG seemed to step in to move to highs of the day on exactly what? Well whatever, it didn't get the SPX any higher.

 Junk Credit was in there as well, just as the SPX was starting to come down, credit comes to the rescue, but doesn't make the 4 points.

 The radical moves in High Yield Credit (as it is less liquid) took way all of the gains for the year in two days and then popped back up (again it's low liquidity), but check this out...

 As HYG in blue failed to ramp the SPX, it looks like HY in brown got scared and sold off.

It even looks like VIX futures ended the day stronger than the correlation would otherwise suggest, perhaps reaching for protection or just an inaccuracy in the ETF?

Normally the VIX would be making a new low with the SPX making a slightly higher high.

And you saw plenty of posts on the VIX futures today, they seemed to have plenty of interest.

As for FX...

 The really tight correlation with the Euro slipped at the end of the day, more than it has the last 2-days, wonder why?

 The $USD was seeing strength since the gap down and especially in to the close, not helpful for the SPX.

The Yen probably doesn't hold a lot of meaning here, I wouldn't think this is significant other than the fact the Japanese are desperate to keep the Yen down until the new BOJ governors can try (they are only 3 of 9) to embark on their bold new QE to quell 20 years of deflation.

More on the Yen...

 The trend in the EUR/JPY has recently broken and the Japanese aren't happy about it, they want this chart rising and the Yen falling, but this could very much be indicative of the wrapping up of the carry trade, breadth seems to suggest that pretty strongly, whatever it is with the most dovish PM and new BOJ leadership ever you'd think this chart would be soaring vertically, but the BOJ needs to come out and tell the world again and again just how serious they are to keep if from falling and if the Carry is being closed as I suspect, they may have a hard time.

 This is the lateral movement they don't like, they want this chart moving up, not down.

You can see the BOJ's jawboning today, I think I'll chuckle or maybe even "LOL" if this chart falls and the Japanese come out again and tell us how super, super their QE is going to be, each time infuriating the Chinese.

A for Ben, the bottom line today is I didn't see anything that really stood out in the market, a few things here and there, but there was definitely a continuation of slow boiling the frog, he mentioned more than once the costs of additional easing vs. the benefits as well as "reviewing efficacy, costs and risks" as if he meant risk to the market as in a bubble... and you heard that hear before you did from the F_E_D as it has been obvious ever since they changed their Calendar based "yard stick" to a much more arbitrary and easy to manipulate, economic based. I guess they found it was going to be hard to manipulate dates on the calendar :)

The futures don't look very impressive, but I'm going to give them some time to get over earnings and see what happens later tonight, I'l just remind you of the signals in the VIX futures (yesterday's and today's).

Oh, by the way, tomorrow is a pretty heavy economic day, we have:

I'm sure I'll post again tonight before I turn in, I do think this market is a lot weaker than people realize, FED-Ex's sell-off, DE's, and of course ORCL are what happens when the market is let lose to discount, at the same time every little ramp trick can't get the SPX up a fraction of a percent to new highs, while the safe haven flight is everywhere around us.

ORCL Looks Worse Than You Might Think

I haven't seen all the particulars, but it seems ORCL's earnings were a disaster, missing on  multiple business levels that they had just guided on recently.

In any case, I have some charts, it's definitely a "Put it on the radar" asset because we don't want to chase something like this.

We actually traded ORCL around March of last year short and appear to have had several members do very well with different trades.

 I first suspected this was one of our trades when I saw the triangle trendlines drew in as I pulled up the chart as well as a channel that is harder to see within the triangle. It looks like 2007 was going to be a top of some form until QE1 rescued the entire market early 2009, but looking at the trend since 2002 or even further back, this triangle is significant. Tops often share some relation in size vs how long the trend existed.

Volume is horrible from 2012 forward.

 I'm using a longer term 2 day 3C chart here which shows some distribution far left around 1990 and ORCL lost ground, then had a confirmed trend up for 7 or 8 years before red flags started showing up at the 2000 Tech Bubble top, where it once again saw distribution (also leading). One of the most obvious red flags was the upside change in volatility/trend, although it feels great when you are long, it also makes a lot of people fall in love with the stock and when it starts to fall they hold because they made so much money in ORCL in the past, they just know it's coming back. ORCL lost somewhere around 85% in the tech crash. "Changes in character lead to changes in trends" and the parabolic move up shows exactly why I don't trust them because they tend to end just as extreme and bad as they went up.

At 2002 ORCL bottomed which was the start of the new bull market that gained momentum in 2003, there's accumulation there, although it doesn't look large, it's 5 intense months and shows signs over the next two years into 2004. Obviously the 2007 distribution / top is clear as is the 2009 bottom

Green arrows are trend confirmation, ORCL had a lot of that in the 1990's. The current negative divergence is leading negative and by far the worst.

 Here's a closer look from the 2007 top to present.

 MoneyStream is a totally different form of money flow indicator, but a good one and it confirms the same as 3C on a 2-day chart, 2007 top, 2009 bottom, leading negative distribution now.

Here's an hourly chart showing what we often see before a stock breaks hard, accumulation that serves to lift the stock and then distribution in to higher prices and demand.

When I was capturing the charts I wasn't sure if we traded this one, I looked and we did.

There are numerous posts on it, but march 20th of 2012 there was a post showing what we were looking for to happen,

"if they run a shakeout and this is just experience and gut, I have no evidence, then near the Trend Channel stop out (on a closing basis), there is a very juicy looking level of resistance, a break through that (at the yellow trendline) would almost certainly shakeout shorts. This is why I prefer wide stops on initial positions, it would be a shame to get booted from a good short on a shakeout move. Just be aware of the area and remember psychology, the market is about fear and greed, the more powerful a shakeout or head fake move, the more it moves emotions which for too many traders dictate decisions."

The chart and juicy shakeout level?

 This was the area we were watching for a set up...

This is the juicy level and entry on a head fake move that completed that same day, beautiful entry. The trade lasted until May.


ORCL has much bigger problems that I think most understand with that level of distribution, it's the worst divergence in multiple decades. 

Volatility Again

There's a lot I want to get to, but as I was just watching ORCL's after hours on the TOS platform which uses a slightly different version of 3C, it's not as specific to assets, but overall it's a very robust formula, it needs to be since there's only 1 version on T.O.S.

I switched over to VXX and was shocked to see almost an exact replica of what I've been pointing out all day long on the more specific version of 3C on the Worden software. Why this is interesting, because just like I posted yesterday with both the short term market averages and the Volatility ETFs/ETNs, 

"VXX 3 min shows a short term intraday negative divergence. The 10 min chart is very strong suggesting a move to the upside that will be faded as money continues to seemingly take the path of safety or risk off."

The charts of the short term averages and Volatility as well as treasuries were correct in the above statement (so far and are signaling the second half is on track as well) made in several posts yesterday. Therefore the charts continue to be of interest, although I don't know how it's possible to be 4 points away from the SPX nominal new high and not hit it, I mean if we all bought a share of an SPX component, we'd be there, we are talking about +0.0039% !!!

 VXX on the Think or Swim platform showing yesterday's negative divergence, part of the analysis that was looking for VXX lower and the market higher today and a staggeringly strong leading positive divergence today which is reflected in yesterday's comments that the short term move up would be faded due to the strength shown on the 10 min charts.

The catch is a new (even 1 -day movement or intraday reversal) divergence has to start on the shortest chart, the 1 min which above is doing what is expected and very strongly.

 The Worden version also shows yesterday's negative divergence sending volatility lower and stocks higher, I said this as well as "I wouldn't be a buyer, even believing stocks would be higher today-because of the risk) and the intraday leading positive divergence that leans toward the second part of yesterday's statement above, that the short term price move up would be faded. As Volatility moves the opposite of stock prices, this chart shows the initial evidence is in.

 XIV is the opposite of VXX and moves with the market, yesterday it had its positive divergence pointed out yesterday sending it and stocks higher, today it has an even strong leading negative divergence.

On the Worden platform, yesterday's positive is evident as well as the much larger leading negative today, I think we are right on track.

ORCL Misses

SPX is about 4 points from its nominal high

Here we go

Quick Market Update

Even as a knee-jerk reaction, it' pretty mellow, I was surprised even during the pressser, there were some interesting parts and we'll talk about them later. First, a quick look at the averages as well as volatility.

Bill Gross of Pimco, did tweet he thinks QE will end sooner than later, but this is a much more complicated discussion than I can post now.

 DIA still in leading negative position, intraday a negative divergence that has sent the market off the highs, how much it changes from here tells us a lot, but yesterday we were looking for price strength today based on the same very short term charts.

 The IWM is the only average that is nearly perfectly in line intraday.

 The Q's looked stronger earlier, they saw price strength from that and have since put in an intraday negative divergence.

 SPY with yesterday's positive divergence and a leading negative divergence today, also an intraday negative

 VXX-Volatility Futures has remained strong intraday-yesterday we expected downside in VXX today because of yesterday's negative divergence to the left, today's positive is more impressive right now.

The inverse of VIX, VXX and UVXY is XIV, which basically moves with the market, it confirms the VXX chart above as it has a leading negative divergence.

Still looking at several assets that are on the edge of tipping.

USO Follow Up

Earlier I mentioned the short term positive divergences in GLD and USO, this would be a short term trade, in case anyone took it, here's what the charts look like and the stops, I would NOT hold this overnight.

 There's a start to a negative intraday divergence since the move started.

Here's the trend channel and a 10-bar 10 min moving average as potential trailing stops.

Quick MArket/Futures Update

As John Hilsenrath wastes time with his question, here's a quick look at the futures.

 ES which has been in line since overnight is moving to a deeper negative divergence

 The same with NQ

TF is negative, but  less ugly.

 Volatility futures are seeing a new leg higher in a positive leading divergence.

The opposite of VXX , XIV is seeing a strong leading negative divergence here.

Pretty much there's good short term confirmation of the negative divergence in ES and NQ.

Quick Market Update

This may be our knee-jerk or just a quick move before Ben's presser, but there's very little confirmation, some here and there on 1 min, but nothing goes past 2 or 3 mins, except the IWM at 3 min is in line, but that's it and those are all intraday.

Futures aren't confirming intraday at all.

FX

As the single Currency futures suggested, the $USD is gaining a little, the Euro has lost a little, more interestingly as a carry currency the Yen is falling.

I think right now we may learn more from currencies than we are seeing in the market.

Don't Miss The Bernie Press Conference

This is where you will really learn what the market is happy about, what it is fearful of, watch the SPY tick for tick during Bernie's Q&A.

I have to Read The Statement Myself, but...

As I have been saying, it sounds like the F_E_D is REALLY trying to decide whether further purchases are worth the economic gains, this is because exiting policy is VERY difficult, VERY painful, the bigger their balance sheet, the more painful it becomes.

The F_E_D has HINTED that they are considering this if you read between the lines, this time they came right out and said it with words along the lines of "efficacy and cost of purchases", in other words, whether the cost of additional purchases on the exit policy are worth any potential economic games.

Since the F_E_D really hasn't been able to do anything for the economy as we recently saw a Q4 negative GDP print which was revised to +.1, which they know, I think the market takes this harder than most people would think. Give it some time, we have to go through the knee-jerk.

Futures and volatility

Yesterday afternoon and last night I showed you the short term negative signals in volatility and positives in the averages, suggesting a short term/early rise in the market, fall in volatility, there are some changes worth noting....

 ES just barely going negative, but the first time since overnight.

 NQ clearly going negative

 R2K futures clearly going negative.

 The VXX negative yesterday that suggested today's move down as it trades opposite the market is seeing a strong 1 min leading positive...

 Also strong 2 min leading positive

And 3 min.

This may be in preparation for an initial knee-jerk, it may be risk off in front of the 1:55 announcement, but we do have longer negatives too, as always "Beware the F_O_M_C knee-jerk reaction-it's almost ALWAYS wrong".