HYG Update

I'm just browsing around a bit, early trade isn't my favorite for analysis as there are a lot of games being played, but what I do see is the HYG Call position opened yesterday, I could pull about +15% out of that one right now, not bad for less than half a day, but I'm going to hold and this has some bearing on the market because of Credit''s leading nature and especially HYG's as an arbitrage asset.

 Pay attention to the timeframes because I have them a little mixed up for a reason. This is the 2 min timeframe with a clear leading positive divegrence.

Notice how divergences form, this is almost always the case, first a small relative positive divegrence and then a slightly stronger relative positive divegrence (the first two white arrows), as price comes down more and supply opens up, we see a much stronger move toward accumulation with a leading positive divegrence (leading divergences are almost always stronger than relative divergences unless we are looking at a leading divegrence like the last one on this post (timeframe and size).

 This 1 min chart is weaker than the 2 min above, but it does show the most current activity as it responds the fastest so there is a relative negative divegrence on top of yesterday's leading positive. Considering the 2 min chart above and the fact it is a weaker relative negative on top of a leading positive tells me this is most likely a corrective divergence. There are two forms of correction, one is through time like a lateral triangle or rectangle and the other is through price like a pullback. Usually when the divergence is only on the 1 min chart as this one is it's typically a lateral consolidation or through time rather than price, but if the 2 min chart joins the 1 min with a negative divegrence, then the probabilities rise dramatically toward a pullback via price.

 Either way, I'm not too concerned about it as we have a leading 3 min chart as well.

I'm willing to hold HYG for greater upside gains which speaks to the direction of the market as well, especially given the last chart.

This is a 10 min chart, much, much stronger underlying flow of funds. You can see a leading negative divergence to the far left sending price lower and a large relative positive divergence right now, this is what gives me confidence in holding the HYG calls instead of cashing out.

The leading negative divergence on this chart  is stronger than the positive divergence, however although this is really a relative positive divergence because it is relative between two points (the start and end of the arrow), it does have a leading positive quality about it as well.

If we have a leading positive on a 3 min chart and a large relative positive on a 10 min chart , the 10 min chart's signal is going to be the stronger one. One through 3 minute charts are mostly intraday, their trend matters most. At 5 minutes there's a major change and the chart is exponentially stronger, a 10 min chart is even stronger than that. Keep in mind what kind of divergences you have, what timeframes and where they fall on a chart.

Bottom line is, for now I'll hold HYG calls as I think they have more upside soon enough that it's not worth trying to trade around and that has a positive effect on the market.