So we use 3C a lot, it's my signature, award winning indicator, but this is just one tool in the tool box. "3C" is a constant reminder to "Compare, compare, compare", that's literally what it stands for.
If you know your correlations, then you can put together a case with great confirmation or you may find things are in the air and it's not time to come off the sideline.
I wanted to briefly show you several ways you can use different assets and indicators to make that case,
but always beware of bias, your analysis is of no use except to make you feel better emotionally for a short period of time, if it is biased.
In addition to the assets alone, you can apply any number of indicators to them from something as simple as a Rate of Change to 3C, to a MACD of indicator.
SPY's intraday divergence makes it clear that we have a leading positive divegrence, it looks like we even have a bigger "W" base, although there was very little accumulation in to the second part of it formed today.
VXX which trades opposite the market also gives us a clear signal, if you know your correlations you'll check HYG and TLT for the SPY Arbitrage scheme as well, which is even more confirmation.
A closer intraday view of VXX, of course we can check UVXY and / or VIX futures to confirm,
but as we saw last night in spot VIX futures, the closing candlesticks of the last two days made a reversal highly likely, just that chart alone.
The Dominant Price / Volume relationship yesterday of Price Down, Volume up was in itself a strong indication of a short term oversold condition.
VXX compared to the SPX (price of the SPX is inverted) shows the VXX underperforming, another signal.
HYG as mentioned before has no reason to move higher except in an arbitrage scheme and with VXX moving lower this alone is used by many Wall St. firms as a model.
The movement in High Yield Credit is another signal.
How about professional sentiment? It's not telling us we have a major reversal, but it is saying we have a reversal.
The TICK Index is another simple breadth indicator that can be used.
I created a custom TICK indicator using the SPX's linear regression vs the TICK's LR to come up with this histogram that gives a clear picture of intraday market breadth which is much more positive than price, but price is positive as we know, but few other recognize in the fact that it is lateral or rangebound, especially when we have 3C signals confirming the range is being used for institutional activity.
We know what Gold's correlation has been vs the SPX so the 3C negative divergences on short term gold and silver charts give us another form of confirmation that is completely different than anything above.
Understanding the Carry Trade makes this Yen chart useful in understanding what we should see in the carry and the market.
And there's the USD/JPY carry, it's not likely that it's going to save itself here, but it is bouncing already.
As I say EVERY Friday, "It doesn't matter what price does in to the last two hours, but the 3C signals will almost always pick up where they left off on the next trading day, (Monday).
Lots of ways to skin a cat so to speak and there are dozens of ways to look at each one of these charts above with different indicators or just a keen eye toward changes in character.
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