Market Update

You'll have to excuse me this morning, there are quite a few short trading positions I needed to check on as well as some possible trades and some other current trades, MCP still looks good by the way (long).

I think it was yesterday I had pointed out what seems to be that new dynamic I've been looking for (recall, "Whoever figures out the new dynamics of the market first, wins"?), when the 60 min Index future charts are negative, the market doesn't handle shocks well, on the Index futures charts I showed we have had 3 this year, today is the fourth although smaller than the previous one so far.

Additionally, as long as the Yen stays strong at 30+ mins, the market also doesn't handle shocks well. China's HSBC PMI dropping in to contraction didn't help either. We've had both divergences at least as of yesterday.

What happened last night is what I would call a fundamental event, something the market hasn't discounted, in this case the mere suggestion that Japan "should, uh...maybe start thinking about how they'll taper QE-Zilla" from the IMF. So we get a knee jerk reaction, but the knee jerk reactions haven't been to the downside very often, that's another change in character over the last several months, but especially 2014.

 Every one of these 60 min negative divergences in Index Futures this year has been followed by a sharp downside move, it use to be 5 min charts that were the timing factor, but I think these are stronger breaks.

The Yen 30 min chart has stayed in a leading positive divergence all of 2014 and since it has been, it's been heading higher causing the carry traders a lot of money at 100:1 leverage.

 I was hoping USD/JPY 104.91 didn't see an upside break, it didn't, the 2014 downtrend in the carry pairs remains in effect.

This is why the trading portfolio has been leaning heavily short (SPXU 3x short SPY) as the first rounding area was big enough, but add the second and make a large "W", even better.

We'll see if the market has a new dynamic on gaps, I hope it does as the breakaway and exhaustion gaps were very useful, over the last 4 years HFTs have been ruthless in filling them and we have a decent one today, but these are the new rules we need to learn and learn fast.