Daily Wrap... Futures, TF & NQ coming down

Another stunner of a day in the markets unless you were long IWM and were using leverage, Closing Friday's IWM Calls. SPX up 0.23%, NDX up +0.04% (REALLY?!?!?), Dow up 0.16% and the R2K, +0.83% as the big winner.

In S&P sectors, remember that XLF positive divergence yesterday, XLF was the winner today with a 1.02% gain, most other sectors closed somewhere around the mid. 0.20's, no big losers to speak of, Utilities which lead yesterday were down the most at -0.14% and XLE at 0.07%, not much of a move, just a flip flop from yesterday's winners to today's.

Commodities, except oil were up on this morning's strong miss in CPI as commodities gain in value in an inflationary environment and today's CPI print is already above the F_E_D's goal of 2.1%, the real trouble is CPI was only 1% 8 months ago, so the inflationary trend is strong, that will likely be the main topic at the F_O_M_C meeting which started today, ends tomorrow with the policy announcement and another Yellen presser. As ALWAYS, beware of the F_E_D knee jerk reaction. If the F_E_D is very clear about interest rates rising before mid-2015 as the market expects, we may see some real fireworks and no knee jerk, just panic (plus the F_E_D wants to introduce some volatility in to the market , meaning sending the VIX up, equities down). Typically the F_E_D knee jerk reaction is right after the announcement and can last a couple of hours to a couple of days, it's almost ALWAYS WRONG (the knee jerk move).

As of the close, the IWM put position opened today was at a modest 7% gain, although I didn't get in exactly where  wanted (as I put the trade ideas out for members first), but so far in AH trade, the Russell 2000 (IWM) and NQ (QQQ) futures are seeing some downside. Es's intraday divergence looks like it won't be far behind.

 R2K futures...

NASDAQ 100 futures, regular hours in red, in AH we are seeing some much more aggressive downside than we did during normal hours... interesting.

I also noticed VIX futures are putting in a positive divergence, this is the idea (long volatility in to the F_O_M_C I had mentioned earlier, but didn't have the charts to back it up, well they are developing right now.

This is just a start, but the earlier negative was right on at the highs, this positive is early, but it wasn't formed before and price is moving sideways rather than down. There are signs of a positive here too migrating to a 5 min chart surprisingly.

In fact, I hadn't checked on it near the close because nothing was going on earlier, but VXX (VIX short term futures) put together their own positive divegrence out to 5 mins in the last 2 hours of the day.

 VXX 1 min

2 min

3 min

5 min.

This may not seem significant, but with the snail's pace of the market today, to put together a positive out to a 5 min chart from nothing in 2 hours is pretty impressive, this will be high on the list tomorrow before the policy announcement, we may be seeing something interesting considering how big the short volatility trade is.

The R2K futures beyond intraday deteriorated as well, as did ES and NQ.

TF 5 min got worse today.

And as mentioned, although Es hasn't moved as much in AH, I'm pretty sure it will...

Es 5 min with even more deterioration than earlier today, a significant change since Friday, especially for R2K futures.

Remember we anticipated a pre-F_O_M_C bounce early this week, kit hasn't been stunning except for the 1 asset we chose to go long, IWM.

I pretty much made my case as far as the F_O_M_C goes in last night's Daily Wrap , but I can't emphasize enough how bad this morning's CPI print was for the equity bulls as the F_E_D has hit both of its mandates and any QE, even tapered as well as ZIRP policy is now HURTING the economy as we have inflation running hot and hourly wages running well below, in fact negative on the year.

I think the F_E_D has to sell the idea that the economy is recovering and I expect there will be some language that ZIRP (Zero Interest Rate Policy) the market expects to last until mid-2015, is data dependent and recent data shows the economy accelerating even though we know that's not true with a -2% Q1 GDP print and unemployment is a farce, of course it's going to go down when you don't count 90 million people who currently don't have a job in your unemployment figures (the smaller labor pool is what made the UE rate go down, not actual uptick in employment).


Oh, now ES intraday is heading south (4:50 p.m..)


As far as who was in charge today, the MSI (Most Shorted Index), I showed the early accumulation after a -1000 opening TICK (lots of stocks selling off on the open), that bit of accumulation sent prices near vertical which I recognized as a short squeeze, updated my most shorted list and confirmed.

This morning's short squeeze in the MSI (red), but not much after that. I find it a bit ironic that we could forecast this Friday, the signals , although weak, were there, we know Wall St. works pretty far in advance just by watching cycles and set ups like the mid-May bear flag head fake, so I guess it shouldn't be surprising, what you should be thinking about is why they set up this timing, remember to "Think like a crook".

I'm still suspicious of a gold/GDX pullback, but at least we know now why these assets have been accumulating, what do people buy when inflation is an issue? Gold. As mentioned earlier today, before QE, gold-miners would lead gold, with QE ending, I suspect some of those correlations that traders have disregarded (including volume analysis) over the past 5 years will come roaring back as "This time is NOT different".

I'll keep an eye on futures tonight, if I see anything interesting I'll be sure to post it, if you are watching, you won't get much from VIX futures as they don't trade 24 hours, but I would watch Treasury futures as well as gold and of course Index futures.