EOD Market Update

As I said in the last post, this wasn't quite the knee-jerk reaction a F_E_D event normally inspires, but the general consensus seems to be that the minutes offered nothing new.

As far as late day action with Index futures going negative, I suspect it's because of this...

Yen intraday is regaining some underlying strength, a rising yen means a falling USD/JPY and after breaking down (USD/JPY), it seems it's doing what assets normally do when they break important support, loiter near it for a short time before making the next leg lower.

After the 2 pm release, the $USD also fell, not helping the situation for USD/JPY.

 1 min USD/JPY saw some deterioration near the close...

The 5 min chart shows the break of USD/JPY yesterday and loitering near support today, but the 3C signal for today is no where near the previous days as the pair was still holding support, thus this looks like classic loitering and should resolve to the downside for the pair.

This is a 60 min chart of the USD/JPY trend and how it has broken support , loitered in the area and broke the next level and loitered in the area as you can see today.

Really, this isn't much more than lower lows/lower highs when you call it as it is plainly.

As for the ES/SPX futures rejoining the USD/JPY correlation, as we've seen numerous times the past few weeks, ES, ran above the correlation that it had stuck to nearly perfectly all day, even at the 2 p.m. release and that little volatility spike. Our experience has been, ES reverts back to the USD/JPY and if the Yen signals forming now as well as USD/JPY tell us anything, that's lower.

More or less, today basically gave back what yesterday took away, more chop, however some things look the same and some things clearly are not the same.

 Two of the more noticeable things are two of my favorite leading indicators, Yields which dislocated with the SPX today, you can see how past divergences and dislocations have resolved and that's why I like it so much as a leading indicator, but  more significantly, the market ramping lever of choice, HYG...

Is showing definitive movement in underlying trade. Again you can see what the last divergences , both positive and negative did to HYG and the market that follows it. The signal of the last two days is quite strong, we haven't seen underlying movement like that in HYG for a long time.


Of course while HYG may not have been very helpful in ramping the market as is usual, VIX was and I almost can't get past the irony that the F_O_M_C minutes show a concern for investor complacency while the spot VIX closes at the lowest level since last August! Perhaps the F_E_D actually has it right?

VIX (green) vs SPY (red) intraday, note the last two hours, something had to be used, did you get a look at volume today?

However the take-away is still Yields dislocated from the SPX, the Yen is gaining strength again and there are signs of negative divergences already in USD/JPY which the Yen charts won't help. Then... there's credit...

Besides HYG, High Yield Credit (as seen earlier in the thinner DHY) dislocated again...

Monday dislocation, Tuesday moving close to in line, Wednesday dislocation...


There was a Dominant Price/Volume Relationship among all the major averages today, I'm sure you can guess, but it was Close Up / Volume Down which is the most bearish of the 4 possible combinations and it was quite dominant. This usually results in a close lower the next day.

I took a look at NUGT and GDX, improvement continues there, you can almost get a feel for timing by simply looking at the rounding reversal process. I'm very much looking forward to bringing NUGT (long) up to a full position.

As I said earlier, I'm interested in how the 5 min Index future charts move as yesterday's decline brought them close to in line with the negative divegrence that had been forecasting a decline in the market.

I have a board meeting at 7 pm, I'll check on futures when I get back.