EOD Wrap

Interesting day, as stated earlier I think a large part of the afternoon dump was the reversion of ES back to USD/JPY as we've seen happen about 4 times this week already, and it never takes very long.

I still think we have a bounce coming, although the deterioration is now reaching a level in which trades are realistic as before the signals were always missing something and luckily as we'd just be chewed up in a choppy a sideways market for a couple of months. However, now I believe is the time to use price strength (bounces) to enter decent looking shorts or broad exposure inverse ETFs like SQQQ, SDOW, SRTY, SPXU, etc.


The main reason I think we get a bounce that is driven by USD/JPY which remained pretty flat all day under $102, is the 5 min Yen chart and it suggests bounce and that's about it as all of the Yen timeframes above 5 min are positive unlike last week BEFORE we moved above USD/JPY $102. I'm surprised how quickly those FX charts turned, almost instantly after $102 was crossed, but maybe it shouldn't be surprising considering the amount of damage in the averages since stage 3 of the February cycle started.

 Yen 5 min negative divergence, but only 5 min, not beyond. If the Yen falls and the $USD remains relatively flat or moves up, the USD/JPY bounces and takes Index futures and the market with it, our bounce.

 The 1 min USD/JPY lost a little on 3C intraday, but the 5 min chart gained.

This 5 min USD/JPY further suggests a bounce, again, limited because of the Yen positive divergences beyond the 5 min charts, ideal to sell short in to.


Some other indications that suggest a bounce...

 This is HYG (blue ) as a leading indicator vs the SPX green intraday, it is leading very short term suggesting a bounce.

 The same can be said of sentiment, but remember what the bigger picture here looks like...

Longer term sentiment from the Feb 3rd Cycle.

Here's TLT vs the SPX (green) w/ SPX prices inverted to see the correlation, TLT has run way above it. I'm not sure the market understands TLT's new dynamics, it use to just be a "Flight to Safety Trade", but with the F_E_D ending QE, it may be taking on a new relationship.

 I stuck with the TBT (short TLT 2x) position mostly because of charts like this, even though we saw this coming on the 12th (15 min TLT negative).

This is TBT's confirming 15 min positive.

Also TBT's 3 min positive near term as far as timing and...

A 5 min leading positive, thus we'll see what TBT brings and evaluate the position as we get a move which I think is very high probability.

 Yields are a favorite leading indicator as they pull equity prices (SPX) to them like a magnet to revert to the mean as we saw today, but again, don't forget the bigger picture.

Yields are significantly lower than the SPX correlation, the SPX has a lot of catching down to do.

 We also have an EOD SPY inrtraday positive divegrence forming at the close and stronger ones in the IWM.

IWM 5 min positive, but note how quickly the IWM turned negative once the USD/JPY moved above $102 on the 12th, this kind of negative activity turning quickly and strongly is seen market wide.

We do need to be careful shorting into price strength or bounces because the market is so weak here...

Note how weak the character of this 30 min ES chart is suddenly.

And as far as the candlestick picture, not pretty either.

This daily SPX chart shows a classic shooting star reversal formation with confirmation today.

To put it another way, the only thing right now that supports a bounce is a single 5 min Yen chart, one that I think is important, but everything else we have is pretty darn ugly.

It looks like we are finally going to be able to move out of this...

A choppy meat grinder and in to some real positions. You may have noticed I haven't put out a lot of trade ideas lately and that has been because the signals were not there, it only happened after that we saw this choppy lateral range that we would not want to be involved with anyway, but now the signals are there and they are in line with the probabilities, not counter trend like the Feb 3rd longs or April 11-15th longs, but in line with probabilities to the downside.