Daily Wrap

It's always the days when you feel like you are watching grass grow that are the most dangerous and you need to be paying the most attention, since I haven't said it in a while, "It's like the kids in the room next door being just a little too quiet, you know they're up to something" and that something is what I spent a good part of the day looking for.

Tomorrow is going to "theoretically" be a very volatile day, although the set ups in advance didn't seem to materialize, I'm guessing not many know what's going to happen. First it will be a low volume day as  the equity markets close at 1 p.m. and are closed Friday which means whatever high level traders were left on Wall St., they're on their way to the Hamptons right now for a nice 4-day weekend. Non-Farm Payrolls are pushed up to tomorrow as the market is closed Friday, that's at 8:30 as weekly Initial Claims also come in at 8:30. 

If the pretty much irrelevant, backward revising ADP employment report can cause as much volatility as it did this morning at 8:15, just imagine what one quarter of a market will do on Initial Claims and most importantly, NFP at 8:30 tomorrow morning.

This morning as ADP was released and came in with the biggest beat and best print since December and November of 2012, the $USD knee-jerked higher then spent the rest of the day treading water laterally, gold and silver both spiked lower, then gold and silver both moved higher (especially gold) in to early and mid morning and gold later started to roll over in to the afternoon along with Gold miners (GDX) who saw a nasty little end of day plunge.

GDX's late day plunge on heavy volume, still managed a 0.91% gain on the day, but trading lower in AH. You may recall we closed our long NUGT position last Friday, Closing the Rest of NUGT Long Position to preserve 40 and 50% gains as GLD and GDX are both set and need a pullback which I have every intention of buying as the charts there are still spectacular on a longer term base that is very close to a stage 2 breakout. I see that pullback heading at least for the 22-day moving average.

Gold was seeing stronger distribution signals today, they have been strong since the 30th but especially around 1 pm today.

GLD 5 min, signals last week were more than strong enough for a pullback, today's leading negative mostly from 1 p.m. makes me consider adding a GLD put if prices are still at a reasonable level tomorrow, I don't care much for the volume of most of the leveraged gold inverse ETFs.

Gold futures give us a good idea of the short term distribution/profit taking that precedes a pullback.

Also sharply leading negative, so these should pullback no problem, but the longer term chart patterns and accumulation in both gold miners and gold are spectacular, especially miners which I believe will lead gold as they use to before the F_E_D got involved in the market.

We are VERY early in the gold trend (miners too) as they are both still within their bases, I think this is going to be a huge winning position over the next year or so, but just as importantly this tells us something about inflation expectations as gold is bought on inflation expectations, well before actual inflation which is (as I have noted before), the one thing that will force the F_E_D's hand to hike rates as they were even warned this weekend by the Bank for International Settlements (the central banks' bank),  which said, that "leading" central banks shouldn't "hike rates too slowly or too late" which the market is going to hate as that's a market bubble buster every time.

Also on the ADP report this morning (which is usually widely ignored because it's so noisy), 5 year, 10 year and 30 year treasury futures fell sharply, even though this is directly attributed to the ADP as they fell at 8:15, there has been a trend the last several months of treasuries selling off the first two days of the new month (I suspect it has something to do with bank window dressing as we just saw a new record via the F_E_D's 1-day reverse repo to the tune of 1/3rd of a trillion dollars in borrowed collateral for 1-day, the last day of the quarter, WINDOW DRESSING).

Note the negative divegrence in 30 year treasury futures from around midnight to 4 a.m., then 8:15 ADP at the yellow arrow and accumulation in all 3 treasuries the rest of the day. As far as any leaks of NFP, traditionally the Chairperson, Yellen, of the F_E_D receives the data the night before, of course media outlets will have it on embargo early, but it makes me wonder what the knee jerk to a better than expected NFP print might look like?

As mentioned, the $USD shot up on the ADP data and then treaded water the rest of the day, USD/JPY gained on $USD gains, however the market TOTALLY ignored the usual market mover.

ES (purple) vs USD/JPY (candlesticks), you can see the 8:15 ADP spike in USD/JPY, but SPX futures (ES) are flat as a dead cat. I don't know what to think about that other than the distribution in to the flag of the last week and the head fake move of yesterday.

Speaking of flat as a dead cat...

The major averages ended the day as follows: SPX +0.06%, Dow-30 +0.11%, NASDAQ 100 +0.12%, Russell 2000 -0.54% and Transports -0.36% with the Dow having its narrowest range day since December which has in the past led to corrections, which makes sense as the daily candlestick would have a tiny body and wicks, a typical candlestick reversal pattern. If the Dow breaks $17k, it's not going to be on any strong accumulation whatsoever as you saw in today's intraday updates, maybe it does and provides 3 days for the bulls to wallow in their "apparent " victory, it would also set up a nice bull trap,  because the only thing I've seen set up by Wall Street the last week or so has been the flag that saw a head fake move yesterday with significant negative divergences in to it.

Each time the Dow has neared the 17k level we have seen progressively deeper leading negative DIVERGENCES with this last one leading to a new low as price is the highest of the 3 attempts making this the largest divergence and it gives us a pretty clear sign of what's going on, DISTRIBUTION IN TO PRICE STRENGTH.

You probably saw the small intraday positive divergences that might make a run for Dow 17k, they don't hold a candle as far as the underlying trend to this chart. Here they are in case you missed them, not much to see, certainly nothing I'd trade...Dow 17K 4th of July? Just off the top of my head, perhaps that's what the game is, all the bulls expecting 17k to be taken out so they're all in? It leaves them holding the bag which is what the game is all about at the end.

Even the VIX today didn't move the market!

The VIX (red) is hammered early on the open, the SPX, FLAT. The Index futures didn't even move on the ADP data that moved everything else from the $USD to carry pairs like USD/JPY to treasuries and precious metals, Index futures barely budged.

YES, SOMETHING WAS VERY STRANGE ABOUT TODAY'S ACTIVITY.

HYG was flat today after selling off yesterday, it looks like it could be used to support the market for a half day tomorrow, yields were the same unless the positive divegrence in treasuries send them lower before the open. Credit markets were ugly in the early morning, but regained some of the lost ground the rest of the day, the certainly weren't leading.

 HYG vs the SPX, at 1 as normal it's ramping the market, at 2 it's leading the market and the SPX plays catch-up and at 3 it's leading the ,market, but this time to the downside, although it was flat today which might be used as a lever for tomorrow, I just can't imagine much is going to trump the NFP on such a short day, but you never know with volume as low as it will  be.

Professional sentiment remained sour today, it was selling off on yesterday's head fake move above the flag-like price pattern and continued selling off today as the SPX was flat across the day, just as we saw in TICK with +/- 500 readings most of the day.  Something certainly doesn't feel right, especially with a number of short trades setting up the way we had hoped.

As for MCP, it was down today on a Seeking Alpha article last night suggesting that if they don't raise cash, the stock is worth $1.60 a share which sent it down in premarket, however there were positive divergences on the day and the longer term ones remain in place, I'm beginning to wonder if a GS or someone else like that is an accumulator and also a facilitator of a capital raise? Clearly this is retail selling, a GS is not going to sell on a Seeking Alpha article, they have much better research.

 MCP's longer term 30 min positive divegrence with our last trade at A when $2.50 was broken, we had a +12% gain the next day in equity longs and a call position that was in the double digits closed the same day. At #2 I was looking for a stop run under $2.40 and potentially another call trade, but the short term charts didn't give a strong signal like at #1, however as I was watching today, I came close to looking at a call trade at #3, here's the intraday action below...

MCP intraday 3 min positive divergence, if this hit 5 min leading positive I would likely have entered a call position, but it still has time.

As far as the rest of the volatility for tomorrow, we have International Trade also at 8:30 (lots of data dumping at 8:30), we have PMI Service at 9:45 and ISM non manufacturing at 10 a.m. and we close at 1 p.m., lots of data in a condensed space on ultra-low volume, should be interesting, maybe set up some option trades.

Oh, of note, SKEW ticked up again today to the 140 level which is an extreme, which means OTM low strike puts are being bid up, someone is desperately seeking protection via a hedge against longs or just have heightened expectations for a Black Swan event, otherwise known as a market crash.

Index futures are still range bound and clogged up, nothing on the intraday charts even approaching a divergence, this is one strange day.

I'll check in if anything changes in futures.