Market Update

There are a few other things I HAVE to look at before trying to assemble the composite picture, but the bottom line is no damage was done today to the bearish case, either long term or yesterday.

Here's what I'm generally looking at and my general concern in jumping in to positions too quickly (market correlated ones)...

I'll use the SPY as a more thorough example to save time and post the other charts intraday.

 SPY 1 min intraday leading negative, it seems price strength is being distributed in to just as you'd expect which is also part of the process (the first step) in closing a carry trade, but this could also be short selling as both are sales when they come across the tape.

SPY 2 min migration of the negative divegrence, also leading negative

3 min leading negative, once again compare the negative divergences to the accumulation at the white arrow, it's just like putting gas in your tank, if there's only a little, you're only going to go so far, there's no support and at some point what is there runs out.

I think the bounce today is a dead cat as was depicted in last night's Market Wrap analysis, the Dominant Price/Volume Relationships were across the board suggesting yesterday was a 1-day oversold condition and the most common occurrence after that is for a close higher the next day, but this is a 1-day observation only or until the next Dominant P/V relationship shows up.

 SPY 5 min leading negative yesterday in to the highs of the day when the NDX actually went green on the year, only to lose it badly.

At 5 mins, a stronger underlying timeframe and the first that shows institutional intraday activity, notice our small positive divegrence on the 3 min chart is nowhere to be found on the 5 min.

 The larger cycle off the 10/9 lows from accumulation and a head fake move that started the move from stage 1 base to stage 2 mark up, then initial distribution, or stage 3 top (in any normal market this first divergence red arrow- on a strong 30 minute chart would be more than enough to send the asset to lows below the 10/9 lows.

The Leading negative 30 min, as I showed you, has seen much of that move done in single day periods, in other words, massive distribution over the course of a day, a breather and another round of distribution. 3C essentially falls off a cliff here in a flat range where we see divergences most often that lasted over 5 trading weeks, talk about an extreme divergence/market.

IWM 1 min was in line earlier, it's still in line, but this is intraday activity only.

At stronger underlying flows like 2 min you can see distribution or institutional selling in to higher prices. I say institutional because retail generally sells after price has turned, institutions are the ones selling in to higher prices because of their size.

IWM 3 min leading negative

QQQ 1 min in leading negative position

QQQ 3 min leading negative especially as price starts to range.

QQQ 5 min, a very clear institutional move today as would be expected.

ES/SPX futures intraday negative

So there are quite a few negatives so why not just go hog wild shorting? Remember the move today is sponsored not by accumulation, it's not there in sufficient size, but in tricks and levers, smoke and mirrors, the SPY Arbitrage, the Carry Trade dead cat bounce, etc so those are the assets that dictate the market.

VIX futures are seeing a bid as earlier with a leading positive divegrence which is a very important indication for me.

The EUR/JPY carry is what the market is following as well as USD/JPY. The red large arrow is showing 3C distribution in the asset.

The others are showing changes in character from a healthy move in green to a more parabolic/unhealthy move in yellow and now flattening out in orange. As you'll recall, we almost always see an increased upside Rate of Change in price just before it makes a top.

 The USD/JPY made it to $1-4, there's a slight 3C negative, price is also parabolic.

 This is the Yen single currency future so it's getting knocked down so the carry pairs can bounce (and likely at the hands of the BOJ), but just like last time we are seeing accumulation or buying in to lower prices. Remember the last time we saw this in size, it was only a few days later that BAC came out and said they covered or closed their USD/JPY carry.

As I suspected earlier today, any drop in Yen pricing is going to be an attractive exit for carry traders.

5 min Yen also positive

And the 30 min remains positive, no problems here at all right now.

What does concern me is the Dollar Index futures. Now you can see yesterday that they weren't really active and the carry pairs still moved so because this is the actual Dollar Index and not a straight single currency it is more difficult to say what effect it will have.

5 min leading positive, but you can see as the USD/JPY fell yesterday the USDX didn't make that big of a move.

15 min very positive

and 30 min positive.

I'm not sure, like I said above because it is the $USDX, whether or not a positive divegrence and a subsequent move will have an effect on the carry pairs. don't have anything similar for the Euro so that's something.

This is probably what I'm most concerned about right now in NEW POSITION ENTRY TIMING...

More to come....