"Sell in May and go away"... it appears they may just have taken this very literally as volume on the NYSE today was the lowest of 2014 by a decent margin.
Friday we were expecting early weakness Monday morning, which we got for a brief time in the form of a gap down, then we were looking for a break above the SPX's bear flag which we also got, but not quite the Crazy Ivan I had thought we might get...
From Friday's
EOD Market Update
"The 3C charts still suggest very strongly that we see a head fake breakout of the flag to the upside and while we haven't seen the head fake below as of yet, there are still good signals to suggest that probability as well, I assume it would be very early next week, however this is a smaller probability than the upside move."
The volume on Friday was right for a bear flag, although we didn't get the lower break below the flag, we did get the break above it, however volume is completely wrong, it should explode on a break out, especially on a breakout of a bear flag that's is suppose to break down, but it followed the 3C signals from Friday.
If you want to know how they moved the market today, here are a few charts to consider...
VIX futures were monkey-hammered early on in the day (vs SPY in green), however the rest of the day there wasn't as much manipulation in VIX, they seem to have also used old faithful, High Yield Corp. Credit, more specifically HYG...
There's actually been quite a bit of VIX monkey hammering of late.
This is HYG vs the SPY today, it looks like an algo locked right on to that correlation, but in the meantime outside of HYG. credit was not following the market and we wouldn't expect it to considering the type of move we were expecting ( a hollow move that's best used for shorting in to)...
This is High Yield Credit vs the SPX today, as they say, "Credit leads, stocks follow"...which is right in line with our expectations for this move above the bear flag.
Although we didn't get the "Put" set up I would have liked to see from today's earlier post,
TLT / TBT (trade) Update , we did get the downside reversal in TLT and move to the upside in TBT (current long trading position).
Here you see TLT getting hammered vs the SPX today.
Sentiment was sour intraday as well
As I've shown before, it's pretty ugly longer term as well.
As for Yields, they popped a bit and they tend to pull the averages toward them until they revert to the mean.
This is the slightly longer view, also in line with out near term expectations of shorting in to price strength and...
The longer term is a mess and these are only 5 year yields, the 30 year treasuries got hammered today vs 5 year (Yields move opposite Treasuries).
This is a 5 min chart of the 30 year vs the 5 year, note the 30 year Treasury futures selling off hard today vs the 5 year, near perfect timing for our TLT/TBT positions.
As for Currencies...
This is what USD/JPY looked like this morning from the
A.M. Update
And this is the USD/JPY after the 4 p.m. market close, you can see what else they used to try to move the market as it bounced off its 200-day moving average (below)
This is the USD/JPY 5 min so it was set to bounce.
Take a look at the ES correlation vs the USD/JPY...
Once again this 5 min chart shows ES running above the USD/JPY correlation even though the USD/JPY did bounce, but like last week as we saw at least 4 times, I fully expect ES to revert back to the carry pair.
This is the same, just a 15 min chart.
As far as single currency divergences...
Yen 1 min went negative early today allowing the USD/JPY to gain intraday as it bounced off its 200-day moving average, but by 4 pm there was a positive divegrence starting to build
The $USD didn't do a whole lot today, but by the EOD there was a 1 min negative starting to build.
Yen 5 min is about in line
$USD 5 min is slightly negative.
Yen 15 min is about in line with a slight positive
$USD is a bit sloppy...
Here at the 30 min I believe this is where the Yen weakness was coming from, this chart migrated out from last week around the 5 min mark.
Something is going to have to give in the $USD, it looks like there are positives to hold it up or in place and negatives to keep it from moving up too much as it got knocked down as you can see.
this weakness in the 60 min Yen seems curious until...
You see the weakness in the 60 min $USD, this suggests the $USD/JPY will fail below its 200-day and likely take the whole market with it.
Here's the USD/JPY 200-day moving average...
You can see the bounce off of it this morning but I suspect it doesn't hold too much longer.
I said near the EOD, I'm not quite ready to get in to shorts, I'd like to see HYG and a few other leading indicators go negative.
As far as the Index futures go...
ES vs Daily VWAP, the red is where I believe there's heavier selling, green some accumulation for a move higher and red again with selling at the upper standard deviation.
This was the positive divegrence from the a.m. NQ that I mentioned and posted...
And here's how we ended the day at 4 pm, a negative divegrence.
The Dominant Price/Volume Relationship is pretty easy, Close Up/ Volume down which is the most bearish of the 4 possible combinations, typically the next day closes lower.
The EOD averages were already going negative on 5 min charts which is where they had their strength on Friday and why we expected upside above the flag, this post shows most of the charts we are concerned with...EOD Market Update
I can't really see how this move can last much beyond tomorrow so I'm going to get plenty of sleep tonight and be ready for tomorrow's action.
Don't forget NUGT as well, it's really coming together well, patience pays.
I really did expect a bit more of the market, but there's deterioration already, a lot faster than I anticipated.
I'll have another update if anything significant changes in futures, but with the way the 5 min and 10 min averages (3C) charts are positioned, I think we have a bit of reversal process to get us set up with some nice opportunities.
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