SPY 4 Hour

I'm kind of use to seeing these charts and worse, but a member mentioned he saw this and was shocked at how bad this chart is, I say, "This is the tip of the iceberg", but since I am maybe out of touch from having seen this so often and don't realize how much it might mean to you or give you a better understanding of what kind of trouble this market is in (far beyond the media's -20% correction), here's the SPY 4 Hour chart.

That is a leading negative divergence, it is making a new leading negative low, most of the damage here was done in less than a month, I suspect it has a lot to do with the need to wrap up "Carry Positions".

Daily Wrap: Not The Summer Doldrums

Last night's "Daily Wrap" somewhat rhetorically asked if we were in the "Summer Doldrums" a period of very dull trade during the summer, but I haven't seen it in years. The Doldrums literally feel like you're on a sailing ship at sea in the hot, humid summer sun with ZERO wind, just sitting there...waiting for something to happen.

However as I said last night, "... the market looks like it's in true summer doldrums, but I'm not sure I believe that is what we are seeing.... I suspect it's something a bit more serious."

One of the concepts that is true in so many scenarios is that of, "Changes in character lead to changes in trend".

If we start with the overall market...

 This SPX weekly chart shows the SPX has moved about 0.26% over the last 4 weeks.

Closer to home this daily chart shows 6 of the last 8 days closed down, this is certainly a macro change of character.

Intraday we also saw a change in character. Ever since last week we have been able to accurately predict morning or first half of the day weakness followed by an afternoon recovery and have been able to predict it the afternoon before based on 3C signals. This is exactly what we have seen for a week, morning weakness, the intraday lows put in and an afternoon recovery. Today's 3C charts were the first time we've seen anything different in just about a week now, maybe 6 days as can be seen in this market update.

Furthermore we saw a clear change in market trend with every major average closing near the lows of the day (no more afternoon recovery), the Russell 2000 closed at the lows of the day.

The late day (intraday) 3C readings showed some strength developing in the SPY and Financials while the NASDAQ and Tech sector seemed to be using any bit of strength to sell in to which is the EXACT market trend we have been seeing EVERY afternoon for a week now.

So not only do we have larger changes in character, but smaller intraday ones as well; one other that should be noted is the short term VXX as I have been showing the last several nights 3C strength in real VIX futures.

 The VXX (blue) vs the SPX which I inverted so we can see the performance of VXX vs it's normal correlation today, seems to be right on and not showing anything of particular strength, at least not in price action,

 We saw CLEAR VXX / UVXY short term strength picking up in the chart above and this post from earlier today. This post was around 11:15 and had overwhelming confirmation.

The longer term 4 hour chart has been strong, that hasn't been in doubt as there has been a stealth move to buy protection, this has been evident in VIX Futures as I have shown recent;y.

60 min positive divergence in VIX futures, last night however I suggested we'd see more near term action and the 3cVXX chart nor did the shorter term VIX futures disappoint.

 5 min VIX futures showing strength in the short term as well and...

The 15 min looking a lot like the VXX / UVXY charts seen today.

 The spot VIX...

as pointed out numerous times has a buy signal and the Bollinger Bands are pinching for a highly directional move which should be to the upside, although we may get a head fake move under the bands with a BB VIX buy signal.

Was today's change in character enough to get us our bounce? As we have gotten closer to the big picture and as I said last night, I think we are in it now, things get more volatile and unpredictable, that's why I don't blame anyone for sitting out any bounce and just use the price strength to short in to.

However there are a few signs that we are close, perhaps as close as we get to a bounce, although NASDAQ and TECH 3C charts are in poor shape, this may sound counter-intuitive as they have performed well in price, but that's exactly what smart money sells or shorts in to, the same thing we saw the last week in all of the averages, selling the afternoon recovery which created early weakness the next day.

Credit...

 The 15 min 3C chart of HYG is one of the few signals that suggests a bounce, but as you can see some damage has been done the last couple of days, it's still enough though.

 Oddly Junk Credit rallied in to the close as if it were expecting some market upside soon and...

High Yield Credit looked good in to the close.

Based on these charts, I'd say we are about as close as we can reasonably expect, of course some more 3C confirmation would be welcome.

 Yields are dislocated from the SPX and act as a magnet so there's some upside pressure here.

Commodities went from under-performers to out-performers, today they did especially well vs the SPX.

Some of this is the weakness in the $USD (green), but not all.

Speaking of yields and Treasuries, you saw what I said last night about 30 year futures and the expected TLT pullback and what I expected to see (10 year and other treasuries look no where near as good)...

 The 30 year 30 min shows 3C accumulation on the dip as was expected last week before the dip even started.

TLT shows the same positive divergences I expected, this is why I said a dip in TLT may very well turn in to a buy/add-to opportunity, so far so good.

As far as what's going to push the market and CONTEXT clearly thinks we get a bounce...

CONTEXT for ES at nearly  50 points positive in the model and this isn't CONTEXT in need of rebalancing, it's been like this for days now.

as for an engine, it's hard to imagine a carry cross doing the work, especially the $USD/JPY, maybe the AUD/JPY, but as you'll see, the JPY has some 3C strength that would make any carry cross driver difficult.

 AUD 15 min has a positive divergence.

 $USD 15 min has a negative divergence, perhaps this is what I'm waiting on in USO (Dollar weakness creates commodity strength and Egypt isn't helping). It seems very unlikely that the USD/JPY cross will move the market up.

The AUD/JPY seems possible, but this 15 min chary of the Yen will have to give some ground.

I could imagine a scenario in which the Yen sits right here and just builds a larger positive divergence, lets the AUD/JPY do the short term work and then we have a huge, nasty JPY positive that can easily pressure the market to the downside in a big way, although that's just speculation for now.

 I wanted to give you a quick look at a couple of Breadth Indicators without doing an entire post.

 The Breadth indicator is green, the comparison is the SPX in red.

% of ALL NYSE stocks trading above their 40-day moving average.

This should climb with a healthy market, a long time ago we could see that wasn't the case, from +85% of all stocks > than their 40-day to +78% to 50% now, only 50% are above their 40-day m.a. at these market highs!

Many people use a stock's price vs its 200-day m.a. to determine the primary trend, this is the % of all NYSE stocks trading above their 200 day moving average.

Again, slipping from 81% to 74% to 54% currently, if this isn't clear evidence that stocks have been sold to close out the FX carry trades, I don't know what is!

The McClellan Summation Index is CLEARLY negatively divergent and trending under its 10-day ma signal line.

Basically if we can get good signals for a bounce, I think a lot of us would play it, but shorting strength is the most important, this is why I don't wait to build out that Core short portfolio because this market has been so fragile, it could have broke virtually any time after March VERY easily and I don't have to run around like a mad man, positions are set and ready to go, adding to them is just a bonus.

Finally, the IYT Put that was closed today at a loss never got a P/L post, here it is...

I've had a few questions about what the URRE (current long position) charts look like as I'm expecting a move higher, I don't think I need to draw in the positive divergences....

 5 min

10 min

 15 min

30 min!

You see why I like it?

As for futures,

Silver and gold still look like they should be coming down, the weaker $USD may cause some trouble.

 Silver Futures 5 min

Gold futures 15 min

And normally I wouldn't post 1 min charts of Index futures for overnight, but since they are so similar and fairly large divergences...

 ES/SPX futures

NQ/NASDAQ 100 Futures

TF/Russell 2000 Futures

I have an 8:30 Doctor's appointment tomorrow, I should be back before the open, but just so you know.

Final Market Update

If I had to guess, I would say the same signals in the afternoon that have proven so reliable for a.m. trade & afternoon trade every day of the last week, while not as clean and clear as the signals from the last week, suggest some early strength in the SPY, the IWM likely; while some early weakness in the QQQ and Tech generally.

 IWM change in character for EOD / afternoon trade 1 min

IWM 2 min

IWM 5 min still isn't quite there.

SPY 2 min positive change

SPY 5 min positive

 FAS/Financial 1 min positive in to the afternoon

FAS 2 min the same

XLF/financial 5 min positive

QQQ 1 min negative

QQQ 3 min negative

QQQ 5 min negative

 TECH 2 min negative

tech 3 min neg.

Tech 5 min neg

Closing IYT August $113 Puts

I have to take the loss, I just don't see anything more coming from these before Friday

Market Update *****

Now we are seeing movement develop pretty quickly in the SPY which is the one of the 4 major averages I'd associate most closely with Financials.

The IWM is also seeing underlying strength and the DIA to some degree, the only one not so far is the QQQ.

The SPX and Russell 2000 futures are also seeing the same positive movement and even there the NASDAQ 100 futures ARE NOT moving

Financials are seeing underlying movement, XLF and FAS

This is sector that I'm really close to pulling the trigger on, but considering how speculative anything long is right now, common sense tells me I should demand more/ higher standards  just skip the trade than to jump in because I feel it will move.

I'll wait for that higher standard, but there is movement and I'm not talking about price, I'm talking about positive 3C signals which is the opposite of the market's character the last week-plus

Market Update

This market is now at a transitional moment and it's making me a bit nervous, the reason why is we don't have a lot of great intraday signals making it very clear that the probabilities are for an upside move, BUT AT THE SAME TIME, the change in character is significant, it's essentially the first change in over a week and changes in character precede changes in trends.

Here's a basic look...

 SPY 1 min shows what has been the trend for the last week and the change of character today, most people wouldn't pick up on this, but for me it's a glaring change and that's what is making me so nervous as we don't (yet) have signals that would go along with such a significant change.

The trend has been afternoon price strength off morning or early afternoon intraday lows  with the afternoon price strength seeing negative divergences setting up the whole cycle again for the next morning.

Today is the first day we have had almost nothing in terms of afternoon price strength, but more importantly we haven't seen the afternoon negative divergences that have been present 
EVERY DAY for over a week now.

 SPY 2 min with the 3C negatives yesterday afternoon and a relative positive today.

SPY 3 min leading negative with a relative positive in to today (relative divergences are the weakest form and often the first type we see that later develops in to a stronger /longer leading divergence).

SPY 5 min, but this 5 min divergence, even though it is relative, is fairly strong being it's on a 5 min chart.

QQQ

 Afternoon 3C weakness yesterday on the 3 min and another signal that is bothersome, a leading negative divergence, definitely not even close to the changes in character.

 DIA 2 min leading negative yesterday and some relative positives today.

DIA 5 min with the same.

The IWM is where strength in underlying trade seems to be developing first as the IWM should lead any risk-on price moves.

IWM 1 min

A closer look at today's IWM 1 min, keep this chart in mind when I show the Russell 2000 intraday futures.

IWM 2 min obviously has a different character in underlying trade than the other averages or at least the early divergences that would lead a change are showing broader 3C strength.

 However I would have a hard time even taking an IWM position as the 5 min is still leading negative, even though the intraday chart has improved.

This is the Russell 2000 futures on the 1 min chart, the only of the index futures positive. However as pointed out last night when I said "None of the index futures look inspired at all", there's nothing beyond the 1 min chart.

I see no other course here than patience.