Wrap coming

I'm going to post the Wrap a little later as I have a board meeting tonight at 7 pm I have to prepare for. I'll also update UNG and PM's.

If you have any requests, email them to me and if I see something interesting, I'll cover them.

INCREDIBLE! Last Night's Futures Post in Currencies Called FX moves Perfect and Today's Market.

Last night's Futures post as it relates to the currencies which are so important to the market movement right now, not only called the EXACT moves in the currencies, but also the exact moves in the market in last night's commentary below each chart. I show you the changes today, which are much more market negative (perhaps the pullback?)

Since Currencies remain so important, here's a look at one of the risk pairs that seems to have held the market in place.

Something odd did happen today sending the $USD lower almost instantly, it was definitely not normal trade, not sure what it was though, but that is market supportive.

What is interesting is last night's futures post correctly predicted the move in the Euro, $USD and that they would be market supportive. From last night's futures post.... the relevant charts and commentary...

$USDX (US Dollar Index) 5 min

" 5 min leading negative, clearly the short term looks like a correction in the larger trend of a move up from the pullback of the last 2-3 weeks or so."

USDX 1 min
"also supports a short term move to the downside or correction, this is short term market supportive as well as commodities and most risk assets incl. precious metals and oil."


Now today's $USDX 3C charts...

 $USDX 1 min is in a leading negative divergence

 $USDX 1 min in a leading positive divergence, this suggests a move higher which is short term market NEGATIVE

$USDX 5 min- First note how much $USDX fell from last night at the highs of the chart, just as 3C predicted last night. Today there's a positive divergence moving in to leading position, this is short term market negative.

Now last night's Euro short term analysis...

" 5 min the Euro very short term looks like it wants to bounce, but I wouldn't be surprised if it started to head down before a market bounce was over, the Euro/market correlation has been weak lately, the $AUD has had much better short term correlation."

 " 1 min looks like it will move a bit higher overnight as of now."

Now today's Euro charts...

 The 1 min is in a deep leading negative divergence, this suggests a move to the downside, this is a short term market negative.

EUR 5 min, Just as predicted last night, " 5 min the Euro very short term looks like it wants to bounce," it did exactly that from  about $1.3025 to $1.3208, a pretty significant move of nearly 200 pips and short term market supportive.

Now we have a decent size 5 min negative divergence. Put the pairs together and you get the EUR/USD...

It bounced overnight which is market supportive, this is why we didn't get a pullback today. I believe I correctly theorized Friday and over the weekend that currencies were going to be front and center in market action.

This 1 min EUR/USD is negative as the pairs would suggest, if these hold up as they did today in to tomorrow, we should have exactly the opposite from today, a market correction!

Other currencies that are influencing the market...

Here's what I said last night in my futures post about the short term action in the $AUD which moves with the market.

$AUD 5 min... "5 min is showing increasing momentum to reverse the last swing down to a move to the upside, again short term market supportive as well."

Overnight the $AUD moved from a low of $1.024 to $1.0345 currently, this is an equity and index futures supportive move.
         
The $AUD today...

$AUD and then a leading negative divergence suggesting a move lower which is market negative.

Last night's Futures post commentary about the Yen

Yen...

Yen 15 min from last night...

" 15 min This is confirming and on a timeframe that suggests a decent base and/or move up in the market would be well supported by the Yen as well as the other currencies above."

The Yen didn't move much since last night or today,

 the current 15 min chart...


There's not much change from last night on the 15 min chart, it's still long term positive which is market negative, but near term leading negative which would be supportive of the market bounce.

Watch EUR/USD Start to Correct to the Downside Right At the Close

Market & Futures Update

This has definitely been one of the stranger markets I've seen, still, if the trade doesn't look VERY high probability, I'd rather miss it than get caught in what will be increasing volatility and increasing unpredictability. Smart Money herd too, remember when Dan Loeb's First Point Fund had AAPL as a top 5 holding and the next release it was missing? Well the Hedgies and others tried to sell their AAPL holdings without knocking price down, I got too fancy for my pants and covered my short as we were down, but I expected a little bounce that I could short in to at better levels. Well at some point smart money's herding instinct sees one break away from the pack out of fear and takes the "He who sells first, sells best" approach and knocks price down by putting too large a chunk out all at once, then everyone is down and everyone starts dumping, before you know it AAPL has lost -40% and 286 points in 6 months, that's the herd all trying to fit through the same door at the same time and it will happen with the market too.

Thus, if I'm going to trade against the probabilities, there's got too be a VERY STRONG case for it.

 DIA 1 min positive from yesterday and a leading negative intraday in to the afternoon.

 DIA 5 min leading positive with a relative negative divergence now

 IWM 1 min is actually pretty strong with a leading positive and only a small relative negative that likely caused some sideways consolidation today

 IWM 5 min looks the best, from the worst to the best, leading positive

 QQQ 2 min leading negative intraday

 QQQ 5 min relative positive (big) and leading positive to leading negative

 SPY 1 min Positive to in line to a pretty decent negative

 SPY 5 min positive, in line and a leading negative

 ES 1 min leading negative intraday

 ES 5 min positive and in line, a pullback with a leading positive at a new high would be worth the chance

 NQ 1 min leading negative

 NQ 5 min leading positive

 TF 1 min leading negative

TF 5 min in line, it's odd that in futures the R2K looks the worst, but in equities it looks the best.

All in all the market doesn't look bad here, but it's not high probability/low risk

Tick Also

This is more of just a reminder of how to use the NYSE intraday TICK data for your tool box.

Define the trend with trendlines, often it is a channel up or down, not very often is it a triangle like this, and then look for the break either above or below the trend, that's usually early warning or confirmation for a change in trend for the market, especially on an intraday basis.

As this situation seems to be coming under control, we'll be taking a look at one of my favorite long term longs, UNG which I believe will buck the trend of the market longer term and has significant gains ahead of it as it still is yet to break out of a large base and many of us already have close to a 50% profit in UNG, so there's a lot more potential on the upside and UNG is nearing a add-to position or a new initial position if you are interested.

If you are new to UNG and want to see some of our longer term analysis, let me know- we have been following UNG for over a year now and long before anyone noticed it. UNG is a great example of how a changes in character leads to a change in trend.

Quick Market Update

Lots of good signs for a market pullback although we've been pretty much stalled (these still seem to be along the lines of a short term pullback so a stronger base can be built for a stronger short term move up).

We have All of the Index futures negative intraday and growing worse, the market averages which were there, but not as sharp as the Futures are growing much sharper in their negatives, the EUR and $AUD have deeper intraday negatives and the Yen and $USD have stronger intraday positives.

Momentum looks good as it is fading for the market averages, the SPY below $156.80 should trigger a round of selling by intraday traders.

TLT, VXX and HYG & ES / $USDX VWAP

As mentioned and shown in a previous post, the SPY arbitrage (as well as CONTEXT for ES) do not appear to be showing any upside manipulation in the market, there very well may be downside manipulation or this may be natural trade (although I suspect Wall St. would like to see the market pullback as much as I would).

 SPY ARbitrage is negative as it was earlier so it seems pretty clear whatever drove the $USD down and the $EUR up or the EUR/USD up, was responsible for moving risk assets as well. I'm still not sure what moved the pairs, but something did and it was supportive of market risk as seen in the market moving higher intraday.

The SPY Arb model is even lower now just minutes after capturing this one.

The 3 Levers -These are the 3 assets that are actually used in Capital Context's SPY Arbitrage model, they consist of Flight to safety or safe have flows via TLT, Volatility and as such either Fear or Greed through the VIX futures VXX and institutional risk appetite via the risk asset of  choice, High Yield Credit via HYG.

So even before the SPY Arbitrage model can pick up the underlying flow of funds, here are the 3C charts confirming my thoughts.

TLT -20+ year Treasuries

 The intraday 1 min chart is leading negative, there is a gap (yellow) that likely will be filled, to do that the market would likely have to pullback in to the area of yesterday's lows to continue its base, this would be all around good for us in taking on high probability, but short term trades. In other words, whether manipulation of TLT or not (I suspect it is), it "appears" there's a short term move away from safety and toward risk and 3C is showing the probability of a further pullback-if the market can stay in a range and accumulate while this happens, it will be very bullish for a short term move up.

 TLT 3 min chart shows the accumulation, rotation in to safe haven assets (Treasuries) right before the market move, today we see more short term distribution suggesting more downside and a short term market move higher.

 VXX shows the accumulation mentioned last week after we saw real demand as VXX WOULD NOT move lower despite a higher SPX as protection in options was being bid heavily. The next trading day was yesterday so smart money was prepared as we saw as of Thursday. Short term we have a negative divergence moving VXX lower and suggesting more short term lows which suggests the market make a move higher short term.

 XIV is the inverse, but it confirms the same as the VXX 1 min chart above.

 VXX 5 min accumulation before Monday's plunge in the market and a head fake move (yellow) before the downside reversal, this chart is in line.

 Longer term 15 min VXX is leading positive, this is in sync with our slightly longer expectations of a sharp market move lower after a short term move higher.

 XIV 15 min is the inverse of VXX and it confirms the VXX 15 min chart PERFECTLY.

 HYG1 min went negative as the market was topping last week, it also made a head fake moce (yellow) remember we see these moves quite often just before a reversal so seeing one can often be a good timing clue.  The move up in HYG intraday is not supported by 3C as SPY Arb suggests, this suggests short term HYG come down and by correlation, the market as well to base more.

 HYG 2 min shows the same distribution at the top-same time as the market. It also shows a leading negative divergence now, suggesting HYG comes down short term which has a strong correlation with the market.

HYG 5 min is the longer term and just as we see accumulation in the longer term (5 min) market averages, HYG confirms, suggesting we do see a bounce or short term move higher.

 This is ES 1 min at the top of the VWAP band, this is exactly where middle men filling orders like market makers on the NASDAQ and specialists on the NYSE strive to sell or sell short, the green areas are where they want to buy, so again even VWAP suggests the market pullback.

 As does the 1 min ES intraday chart, leading negative. Remember all of the currency moves and divergences at 5 a.m. this morning, ES has a positive intraday divergence right there, which is also at the bottom of VWAP, the buying area.

 $USDX 1 min VWAP at the sell area, the white is the buy area, the green arrow is 5 a.m. when $USDX was at the buy of lower VWAP channel, we saw this in today's first futures post.

And 1 min $USDX accumulation at 5 a.m. and a leading negative divergence since.

I would not chase prices here, you may want to consider taking profits or having a trailing stop on short term long trades that some of you took yesterday, otherwise I'd be patient and wait for the market to not only pullback, but to accumulate and that is our signal to start taking on some short term trading positions.

If that does not happen, I'd still be patient and if the market continues higher, we'd just wait for decent prices, heavy distribution (which is not present on the 5 min charts now) and then start setting up the bigger picture short entries in to market strength.

Quick Market Update

The Index futures intraday (all 3) are turning even more sharply negative intraday, the market averages are negative, although some not quite as negative as the Index Futures, still enough and the $USDX actually looks like it may be putting in the divergence needed to send it higher and the market lower, the Euro already has a sharp negative.

So look for the pullback to begin anytime now in earnest.

Futures Update

All of the intraday 1 min Index Futures have negative divergences as well.

 ES 1 min negative

 NQ 1 min negative

TF 1 min negative.

The 5 min charts are positive as I'd expect them to be, but it seems smart money wants the market to pullback just as much as I do.

 SPY ARbitrage is negative so it doesn't seem the market is being tickled up by anyone, I believe it is directly related to currencies and it seems something abrupt happened, some fundamental news that was instantly discounted.

Last time I looked at CONTEXT it was just a fraction of a point from turning negative, now it's about 3 points negative, which means it's more or less in line with ES, just signaling the same pullback I've been expecting.

I'll loo around a bit more.

Intraday Market Strength Via the $USD

As I suspected Friday (and long before) and wrote about extensively this weekend. currencies have a lot more power right now than you might think.

Something happened with the $USD, that is what appears to be moving the market, I don't know what, but it seems VERY sudden.

or it could be something in the Euro as it spiked up and the USDX moves opposite the Euro as the Euro makes up 50% of the $US dollar Index. The $AUD and Yen moved as well, but I don't think they sparked it, it seems they are drafting through correlation.

So, not sure what moved them, but it supported the market.

SPY arbitrage is negative so it seems smart money does want the market to pullback so they can accumulate.


There are intraday negatives in the SPY, QQQ and DIA so I expect they will back off soon and continue on the pullback course.

Market Update Charts...

First, if you saw or review the charts in the "Pre-Market Futures-Last Night Told the Story" Update, then none of the trading action thus far or the charts I'm going to show you will come as a surprise.

In fact, if you saw any number of posts yesterday on the type of base I expected before a move up and the pre-requisites or standards for a tradable base (vs one I'd rather just sit out), than no price action thus far is surprising.

First, assuming you saw last night's Futures Update  as well as "The Daily Wrap"  and the "Few More Things " post that came after the Wrap, again none of these charts will surprise you, in fact you should be expecting a move toward further consolidation. In fact, after a quick search, I referred to a "W" , "U-shaped" or "Rectangle-base " at least a dozen times yesterday and specifically said that "I would NOT buy anything that I thought would not have a sufficient enough base to produce a reliable move,  I do NOT want to buy a DEAD-DAT bounce as they are highly unpredictable and unstable" and that I thought it would take at least a day and a half to 2 days of accumulation at minimum to produce a sufficient base to even consider. 

This is demonstrated most efficiently with 3 SPY charts.

 3C SPY charts

 This is a 5 min RELATIVE POSITIVE divergence, it is relative because we are looking at two points and the difference between 3C and price at those two relative points represented by the left side of the white arrow (*white is for positive divergences, red is for negative divergences and green is "in line" or "3C / price trend confirmation"*) and the right side of the white arrow.

You will notice that price is lower at the right side, but 3C is higher, this is a relative positive divergence between 2 relative points. A leading positive divergence is stronger and this is when 3C leads price, this typically develops after a relative divergence.

So we have the start of a positive divergence, in this case that can be less selling as price moves lower (and we are talking about the underlying trend or institutional money, not retail) or actual accumulation of lower prices which is typical of accumulation. In either case, whether smart money is looking to sell at higher prices and more than likely looking to sell short in to higher prices.

The short term 1 min chart does not represent the underlying trend of larger money flows, it represents intraday moves and in this case it is not confirming the gap up at the time of capture which leaves us with a negative divergence intraday and suggests lower prices. *Since capturing this chart (as the 1 min chart moves fast) prices have dropped a bit as expected and there's the start of some intraday accumulation.

The idea is that at very minimum, the gap up today in the smallest "W" base, would represent the middle high of the "W" and the next move would be a pullback to the last low of the "W" before moving higher to a breakout and that is in the case of a single small "W" base as I have drawn in above with arrows.

Now looking more specifically at intraday currency movements and the resulting Index Futures movements, we will see the same thing proposed last night and shown this morning in the pre-market post which suggested there would be an early pullback today as the more important 5 or 15 min charts have positive divergences like the SPY 5 min above and the 1 min intraday charts like the SPY 1 min above tell us the highest probabilities are for an intraday pullback which allows us to continue building a more reliable base.

Remember it takes time to capture and post these so the charts may have changed a little by now, but the concept is what is important.

Currency Charts (1 min intraday)...

(Please recall that the Euro and $AUD tend to move with the market so a pullback signal in either suggests a pullback in the market. The Yen and $USD tend to move inversely or the opposite of the market so strength in either currency or signals suggesting strength should produce a pullback or intraday price weakness in the market averages. Weakness or signals suggesting weakness in the $USD or Yen suggest strength (underlying accumulation or price moves) in risk assets like the averages as well as commodities like Gold, Silver and oil).

 $AUD 1 min intraday signals a leading negative divergence and a pullback in the $AUD.

 $Euro 1 min has the exact same signal as the $AUD, both suggesting early price weakness in the market averages.

 $USD positive intraday divergence suggests higher $USD prices

Yen 1 min intraday has the same signal, both suggesting risk assets see intraday weakness or a pullback, all 4 currency charts confirm each other and all suggest early price weakness in the market averages.

We already know that the 1 min SPY chart above agrees with all 4 of these charts as there was a 1 min negative intraday divergence suggesting SPY, early downside such as we saw already.

Market Index Futures... We should see negative divergences in all of the following on the intraday 1 min charts to confirm every chart seen above from SPY to Yen.

 ES 1 min intraday negative divergence

 NQ 1 min intraday negative divergence

 TF 1 min intraday negative divergence.

All 3 Market Index Futures, the SPX, NDX and R2K respectively all confirm EVERY CHATT ABOVE.

Other risk assets like Gold and Silver should at least confirm the $USD currency chart on an intraday basis.

 YG (Gold Futures) 1 min intraday negative confirms the $USD and risk assets generally as seen above.

SI/Silver Futures 1 min intraday leading negative divergence also confirm what gold and the $USD show as well as the risk assets (market averages above).

On an intraday basis, EVERY SINGLE CURRENCY, Market average, Index Futures and Gold/Silver ALL confirm each other.

As mentioned above in this notation right under the SPY 1 min chart  "*Since capturing this chart (as the 1 min chart moves fast) prices have dropped a bit as expected and there's the start of some intraday accumulation."  and here's the results of that...

The SPY 1 min intraday divergence I mentioned that was moving toward the positive and prices following.

As of now the 2, 3, and 5 min SPY charts are all positive suggesting more upside. ES, NQ and TF futures 1 min charts are still in leading negative position, but improving, their 5 min charts are still positive as they should be. So far this should lead to more upside, but I'd hope that this is an intraday shakeout and we return to a basing pattern.

All of the intraday currencies suggest we will pullback shortly as of now.