A.M. Early Update

If you were around for the market action late yesterday (around 2-4 p.m.), then you know we spotted an initial change of character in NYSE TICK that was just a hint that something was about to change. then we started seeing 1 min 3C positive divegrences and price's downside ROC lightened up and we saw more lateral trade, by the EOD we had divergences that migrated from the 1 min to the 2 min charts, still not a screaming signal, but considering the short amount of time, it was a start and the idea of a reversal and prices coming up to us to be shorted , finally with the kind of signals we have been waiting for, starts to look more and more realistic.

If you caught last night's Daily Wrap then you know that it was not only 3C, but Leading Indicators and in the nearest term, positive divergences in the $USDX and EUR/JPY and negative in the Yen which suggested the USD/JPY move higher which would take Index Futures like ES and thus the market, higher, those divergences posted in last night's Daily Wrap materialized as seen in this morning's post, What's Really Moving the Market.

However, if you looked at the post carefully, there were already divergences in the Yen (positive) suggesting a pullback in USD/JPY and as such Index futures that are tracking the carry trade and as such, the broader market. There were also negative divergenceS in USD/JPY and ES, both being the same signal as the Yen divergence suggesting a pullback from this morning's early exuberance which is EXACTLY WHAT I'D EXPECT.

 The short term 1 min USD/JPY is up, but with a negative divegrence suggesting a pullback.

However looking at the USD/JPY 5 min chart, we have the start of a reversal PROCESS, not event and a positive divegrence so a pullback would fill out the reversal process and strengthen the positive divegrence giving us the move we first speculated on yesterday afternoon and then saw it start to materialize in 3C signals and then in price itself this morning.


The market rarely moves like this...

Note the SPY "V" or 90 degree reversal with the red "X", it almost always has some reversal "process" (the larger yellow rounding bottom which is still not that big). So the short term intraday negative divergences would simply bring prices back in to the reversal process, which is needed to form a base large enough to hold a move up of a day or two days or whatever it will be so that we may sell short in to that move.

The reversal event of this morning (if that were to be it for the reversal process), wouldn't hold a move higher for more than a few hours.

Of course most of you have been around here long enough to know that's one of our staple concepts.

In any case, I did find the VIX futures interesting... They didn't move at all yesterday like I'd expect. I know Monday they were "monkey hammered" to send the market higher, but yesterday there was no monkey hammering to send the market higher and it appeared there was no fear, I think Wall St. is smarter than we may give them credit for and they are or rather we are expecting the same things as we are following their actions, so if you know the market is on the edge of a cliff and this is the last few moments (whether that be days or...?) wouldn't you want to buy all the protection and VIX you could at the cheapest prices possible just like any long position?

It's as if VIX is pinned right where it's at, but as it is there, the divergences (positive) are piling up, I showed you the VXX/UVXY positives last night from yesterday's action and the cumulative divergence which is a "flying" leading positive as I have been looking for for about 3 months now in VXX.

This is what the 5 min actual VIX futures look like, so in this dip and pin of VIX futures, it's not just VXX showing accumulation...

That's a very nice 5 min positive in the dip area of VIX futures, I don't think there's anything wrong with them, I don''t think they are broke, I think smart money knows what's coming and are doing their best to accumulate an asset that would benefit immensely and provide protection.

Further evidence is where smart money accumulates relative to VWAP, that would be at VWAP or below.

Here's VIX Futures' weekly and monthly VWAP...

 Weekly VWAP accumulated at or below VWAP

Monthly accumulated at or below WVAP with any move above VWAP being slapped down to the accumulation zone.

I think the May monthly VXX calls will be ok, but any new call positions I were to establish moving forward, I'd start moving them out to June monthly expirations for the most part.