Daily Wrap... Bounce or Selling at VWAP?

That is the question...

After this morning's initial smack down of biotech and momo related stocks with XBI (Biotech sector) down -4.04% as a sector and select momos like FB-4.67%, PCLN -3.22%, TSLA -3.85%, NFLX down a whopping 6.67% I thought we'd see a trend change from down to lateral and some accumulation in that range, that did happen, although the accumulation part is pretty much being generous as few charts made it past 2 mins in their positive divergences. Because of the way the action unfolded, my habitual taking of gain in option related position at the first sign of a loss of momentum was put on hold as we need to be able to evolve with the market.

On Friday March 14th when I said I thought we'd see a mini cycle up last week, but unlike every other cycle that has been set up and has been some sort of head fake trap, this would be about accumulating VIX futures or protection to add to the substantial position already in place and would serve as an excellent marker as we transition from the Feb rally stage 3 top to stage 4 decline and more, all of that has happened. We still aren't exactly where I want to be for NEW VXX / UVXY positions, but I do have an open UVXY long that I'm fine with.

So the things we expected to see we have seen. As far as today's action, I assumed we needed to knock the VIX futures down a bit more to finish that accumulation cycle as it looks right on charts like 5 mins...

However isn't quite where I want it to be or where I know it should be on shorter timeframes

As you know, the divergences were enough to move several positions, chief among them are beaten down commodity assets, I moved out of DZZ in the trading portfolio and replaced it with UGLD 3x leveraged long gold, I also opened a JJc / Copper position for a bounce as well and commodities seem to be reflecting that in general including solver which we'll look at closer tomorrow, GDX was not where it needed to be to allocate assets there yet even if probabilities were leaning in its favor...

Commodities vs the SPX...

Because of china's cash calls commodities have been under assault, especially copper and iron ore, but even gold even though we've been expecting that for a bit based on signals before the cash calls started coming in after the Chaori default in China. The flat range in commods alone is notable as we know what happens there so I like JJC, I like the UGLD position added today and it seems ther are a few other hints of a bounce, however they are not in leveraged ETFs as we usually see them first, whether it be FAZ/FAS, SPXU/UPRO, TQQQ/SQQQ, URTY/SRTY, etc... the places we normally see them first.

This got me thinking today as you know I felt like at least a short term move of maybe a day or so was in the making, thus the weekly SPY calls, but I checked on something that I was afraid (short term for the SPY call) might be happening.

I looked at ES' VWAP and the divergences seen earlier today moved ES right up to VWAP, this is exactly where middle men would be filling sell and sell short institutional orders so were we seeing steering divergences to get back to VWAP or a small, short term bounce building?

What I know for sure is we ended the day with intraday charts going negative in 1 min timeframes so I wouldn't be surprised to see weakness early tomorrow, the question is do we make a mini "W" and bounce off that in which case I'll add to SPY weekly calls, but that's about it, everything else will be selling short in to any price strength.

There are also a few indications that the market may try to make the bump up that we first expected today on 3C signals, for example...

 High Yield Corp Credit intraday is still in a place that would tell algos to go risk on until the SPX reverts to the short term mean, even though HYG has been and continues to be under heavy distribution since last week's mini cycle essentially ended.

As for the February cycle, HYG is already leading the SPX lower as a leading indicator so keep that in mind as well with the current distribution there.

The VXX (SPX prices are inverted to see the correlation) were a bit weaker in to the close, I don't think it was a ramp so much as the need for VXX to finish accumulating and we'll know that when we see it like the 5 min chart.

Yields are leading the SPY up, but not by much, however this is another very short term indication that what we saw today was correctly interpreted.

 TLT and 30 year Treasuries are the only ones to move since the F_O_M_C, however short term this flight to safety is seeing some distribution so a small move up would fit. The 5 and 10 year T's are still down since the F_O_M_C, the market is still not happy with the policy statement and presser, that wasn't a knee jerk reaction, that was true disappointment in the market. There is a chance as well that the SPY Arb might be activated if TLT and VXX move down and HYG at least holds or moves up, that would be another market manipulation lever.

 The $US Dollar Index reacted in a hawkish manner to the minutes, as I said last week, there appeared to be signs of a leak, this positive in the $USDX appears to be another, but short term it is seeing some distribution here and in the futures so that "could" or normally would support equities in an attempt to move higher which I still think is all about the VIX futures moving lower to finish accumulation.

 As for the USD/JPY carry, the algos seem to be half on, perhaps not all the way there, but the $USDX's longer term signals are looking stronger than normal so the market may very well be stuck on the F_O_M_C and the qualitative vantage.

As for sentiment, it seemed they were buying lows and selling higher prices today, not much there.

I looked at a number of individual assets to get a better feel, I mentioned the leveraged ETFs, in just about everything I looked at, there's nothing sneaking up on us, it is as it appeared in the averages today just about everywhere, the slap down in momos shouldn't be surprising, they've had horrible negatives on long and intermediate 3C charts.

In fact I'm thinking, "What took so long?" The answer of course is trillions of dollars pumped in to the market via POMO and then those assets being leveraged up via carry trades, it takes a while to distribute all of that and it would take much longer to repair the damage so I have no doubt those divergences are accurate and will fire, we just have a lot more money in the market than would normally be the case because of POMO and of course the carry trades leveraging it all up.

As for XLF, it looked better in to the close, but I'm fine with the April Put from Friday which could have been closed today at a double digit gain, I may if things look right tomorrow. XLK put in the same signs as the general market, however AAPL didn't look good on 3C charts, if I had owned it I would have sold it today.

You know what the short term and after situation is with FXP which I'm very happy about so we'll keep that on the radar. IBM is putting in some interesting signals, I have alerts set there as well as a few other places I mentioned today. 

I said last week I thought PCLN needed to break below the 14th's support, it did that clearly today and easily hitting stops so that's one we'll watch for maybe a quick call position if it puts in the reversal process it needs, it did show some positives. 

BIDU looks like it wants to bounce too, as a trend/core short I'm not worried at all, but it would make a nice add to as the position is already at a nice gain or it would make for a nice new entry on a bounce, but I'm not trading around it.

I was really surprised that the 3x leveraged ETFs weren't showing stronger early signals than they were, that's the one concern I have that this may have been more about selling at VWAP as you know distribution started as we hit VWAP in to the close, for example (even though it didn't break the 2 min charts)...

SPY intraday much like sentiment, when it hit VWAP, distribution which I thought was going to make a wider "W" bottom and still may, we'll find out as we approach the area which I think will happen early tomorrow, but the point of the post is, this may have been distribution at VWAP and for no other reason as we are already at the Feb. rally's stage 3 and the mini cycle's stage 3 area, you know what comes next and what we have expected to follow the Feb rally since before it started.

If I see anything in futures I'll let you know, oh, keep an eye on MCP, it's looking interesting, if you're not in it already I'll look around for an entry tomorrow.