Daily Wrap

This afternoon was different than any post-pin iop-ex Friday I can recall in some time, usually the market is moving up, especially in to a long weekend, but not so today, it followed the 3C indications. There was a clear rotation in to bonds.

All of the carry pairs since the start of the year have and continue to make lower highs and lower lows, we know that last week the USD/JPY uptrend broke, but now we have clear evidence of a downtrend, so far it's short term, but that's just a function of how much time has passed. I don't think it is coincidental that they topped right in to the end of 2013 and have been trending down since.

The Yen, by price only, seemed fairly flat, but 3C is showing something else altogether and it is as has been suspected as we have watched at least a 30 min positive divergence in the Yen all year (2014) which pressures the carry crosses down, which sends the Index futures lower as we saw overnight as they were up until 5 a.m. and then fell to open and trade within yesterday's range as we suspected the lack of movement yesterday was about the January op-ex monthly pin.

I have a few assets I want to show, but the only one that really matters in my view is the Yen, everything else is flowing from that.

I already posted the HYG and PCLN charts, both are or would be at a gain (puts opened yesterday and HYG was suppose to open today, but didn't fill).

Other positions like another of our long term favorites, URRE has a position gain of +14%, PCLN puts from yesterday nearly +14% on the day, MCP (another long favorite) looks like it is doing what we expected when it hit a lot of stops this morning and the new trading position just opened is still in the green by +2.5% while the core position is up nearly +14%. The recently opened IWM puts (this week) are moving in to the green .

Here are the charts that I think are important other than the already posted HYG.

 MCP's recent smaller base within a much larger one "W", 2 is the breakout and a is a pullback, a1 is the base or reversal process for the pullback and HF is this morning apparent head fake move and I'll show you why beyond the volume RIGHT UNDER the trendline as stops were hit, yes, if you place an order (limit/stop) they can see it and they'll go after it if it's worthwhile; I keep all of my stops mental and always on a closing basis unless I have good reason to act sooner.


Here's this morning's break/stop-run/head fake move sending volume up as stops are predictably placed right under support. The "U" shape price action is what I'd like to see with positive divergences confirming the head fake, at this pace, I'll be ready to add to MCP or put it out as a new trading position (long).

This is the accumulation I want to see in to a head fake move, that's half the reason for a valid head fake move.

 And it is migrating to longer timeframes.

As for the IWM puts or just the market...

 Again we are getting large leading negative moves, this is a 1 min chart of today only.

This is a 2 min chart, so underlying trade is showing distribution on at least a short timeframe, but the size of the divegrence makes it more serious, but it doesn't stop there.

The 5 min chart is hitting a much more vertical new leading negative low

And the 10 min chart is nearly where it was when prices bottomed on Monday, except price is still flat and significantly higher considering, that means the damage is that much worse right now.
 It's little wonder we saw yields tighten up as treasuries gained today.

 SPY 2 min with significant damage done this afternoon intraday.

The 5 min, again another leading negative move at a new low with significant afternoon only damage in addition to other recent damage, today looked a lot worse.

SPY 15 min which never confirmed, just tried to move in line is done and back to moving lower.

 The same can be said for the 30 min chart.

These are just examples, but this is a market wide trend in averages, Index futures, VIX, but positive (and this is so close to a screaming divergence) as well as Industry groups like Tech and individual stocks (take PCLN).

This is what really matters, we identified the Yen as THE asset to watch weeks ago and have been right on as carry crosses make lower lows and lower highs, a downtrend and the Yen is the leading indicator for those pairs.

While the Yen 30 min chart looks flat, remember what I say about quiet markets, "They are like the kids in the room next door being a little too quiet, you know they are up to something". In this case, we don't have to guess, the 30 min chart which has led the Yen all year from the start of the year lows, is now ready to make a new leg higher as 3C is CLEARLY positively divegrence and in some size, much bigger than what led to Monday's market sell-off.

There are a lot of positions I was considering today, there's just a few things I want to see that are almost there, like VIX futures screaming, they are yelling now, but you know what they look like when they are going to move, I'd say we are more than halfway there over the last two days and from the halfway point, the other half is exponentially faster to build.

I like our positioning overall, it's just a matter of adding to or adding new positions.

As you know, I try to keep track of our core position performance vs the SPX, you can say the beta of our positions, this isn't like a trading portfolio, it's just about every core position that we have opened and remains open, meaning it is susceptible to underperformance due to over-diversification, but in a sign of good stock picking and excellent entries, the performance of the shorts (Core positions) is between 7 and 9 times the market's, so if the SPX is down 1% for the week, the core portfolio of dozens of stocks (over 20) is performing at a gain of +7-+9% on a -1% move in the SPX, that's Beta of 7-9 while the volatile PCLN's beta os about 1.5.

That's pretty exciting.

The market will be closed Monday in observance of Martin Luther King day, we'll be open Tuesday.

Lets see if 3C picks up where it left off over a 3-day weekend, if so...

It should be a very exciting week. Hopefully Wall St. doesn't take ANOTHER extended holiday.

Speaking of which, enjoy yours.