PRE-F_O_M_C UPDATE

You'll have to excuse the charts, my drawing tools are reloading.

There's a distinct feel of some nervousness that's easily apparent in Index futures, we'll start there, but this is by no means the biggest development so far today.

 ES (SPX E-Mini Futures) and 1 min 3C intraday show some weakness, most likely a little nervousness before the F_O_M_C announcement.

What is interesting though (I wish I could notate the charts, but the software crashed and is reloading) , the 5 min ES shows there to be significant damage already, there was a time when our very short swing trades were based on 5 min divergences alone not so long ago.

 The 15 min is where the market is in line since the bounce we saw coming last week in which we made major preparations for last Friday as we closed out puts and opened a few hedging calls as this was a transitional pivot, this is where we got the best pricing and least risk, that's why we are in holding pattern for this move to move to the transitional stage which is timing, it's not about the move itself as it is not very strong as far as underlying trade.

Whenever you need to bring in levers like the SPY Arbitrage or HYG or even carry trades, the market doesn't have enough strength to do it on its own.

Just like the 10 min HYG chart we are looking for a break in (as it is the driver of the market this week), this 15 min ES chart should also see a break and turn quite negative on 3C, that's where I'll add a lot more than just 1 IWM put which is doing well today so far considering.

 Beyond the 15 min, the 60 min is where the real flow and large transactions are, clearly distributive even on the new contract, this is the probability that tells us the shorter term charts/timeframes below that bounced will almost certainly fail, they are paper, this is scissors.

VIX Futures, not spot, not even short term VXX VIX futures, but real VIX futures...

 Note to the right where 3C diverges positively from the futures, this has been what we have expected since Friday the 7th of March in the late afternoon, we expected this move lower in VIX futures to begin last week, it started this week; which is (in my view) only a ploy to be able to accumulate protection at better prices... this is the exact same thought you'll see at the Friday March 7th EOD post.

The point is, we are seeing what we expected to see, therefore this will almost certainly be the timing trigger we expected it to be. They are accumulating protection short term as the longer term position (very large) is already in place, we see this quite often right before a move from a stage 1 base to a stage 2 breakout to mark up.

 The NYSE intraday TICK has been FLAT and dead all day, look at the 4 p.m. area just to the right of the middle and all the way to the right, that's today. The readings are in the (approx) ZERO to -750, this is very flat as the TICK is all NYSE advancers per bar minus decliners so the action today has been on the negative side, but not horribly so, more like a holding pattern before the F_E_D with some trepidation.

However, this is where we are seeing some big changes today. 

In my last Market Update today I said,

"my problem with this is the HYG 10 min chart, if it were breaking down, then I'd feel better about being near a pivot, but that can happen fast."...  and fast was the right word, look at what has happened today in HYG which is the asset that has moved the market this week and held it up thus far...

 The intraday 1 min HYG / 3C chart is seeing a major distribution/negative divegrence since about  11 a.m. this morning, that's the stronger form, "Leading Negative".

I know a 1 min chart isn't a huge deal, but these divergences always start on the earliest charts and migrate to longer timeframes the stronger they are and we already had distribution from 1-3 min yesterday adding a weaker relative 5 min negative today which is continued migration or strengthening of the negative divegrence in HYG, thus the market's strength or legs are being slowly or I should say increasingly knocked out from under them as HYG fails, the market fails unless they find another lever, but I don't think that is what this episode was about (moving the market to a head fake), I think it was about accumulating VIX on the cheap and since the market trades opposite the VIX, of course it will rise, but I don't think (unlike the past), the market was the target, protection in VIX was/is.

 Look at the migration to the 2 min HYG chart leading negative, concentrate on today the 19th, that's an immense change in character even though we already had distribution here yesterday.

Now the 3 min chart is nearly insane in how negative it is today, as I said earlier, "It can happen fast" and it is.

It seems someone "might" know something about the F_O_M_C , a leak.

Meanwhile the other asset that is key for us this week, the reason for the season so to speak, VXX is seeing an increased 5 min leading positive as we expected, again try to focus in on the 19th and the fact this is a 5 min chart.

There's also a large rounding process that seems to be in place as VXX was accumulated on the first day down which is unusual, almost as if they were in a hurry.

I RARELY enter a position before a wild card event like earnings or the F_E_D, however we've seen leaks in both, If I find more evidence that this is accelerating, I may do just that or look for a knee jerk reaction to the policy announcement as there is almost always one and they are almost always wrong, to use in order to get a better entry.

THE POINT IS, THINGS ARE MOVING A LOT FASTER IN UNDERLYING TRADE THAN THE PRICE ACTION LETS ON, OF COURSE MY OTHER SAYING YOU HEAR OFTEN IS,

"PRICE IS ABOVE ALL, DECEPTIVE".