Yesterday we had a brief piece on end of month window dressing by Financials, the same as we saw the last day of April when the F_E_D's 1-day reverse repo facility saw the second highest usage ever, those assets are returned to the FG_E_D at the next day as the month is over and it's only a 1-day operation, yesterday on quarter's end window dressing I believe it was 94 financial institutions participated to take the F_E_D's 1-day reverse repo facility to a record usage of $339 billion dollars, sure enough, today as the end of the quarter is passed, that 1-day reverse repo fell to $151 billion, meaning $189 billion dollars in collateral was borrowed from the F_E_D for a single day, the same single day which happens to be the last day of the quarter so the banks can dress their windows and look like they are in better shape then they are, the most ridiculous thing is that their regulator who monitors their health is the same entity that lent them the assets to "fool" the regulator, the F_E_D!!!
The financial system is not in such good shape being they just borrowed a record amount from the F_E_D for a single day to dress their windows. UNREAL!
Now you know why I like FAZ, Short Financials.
As far as the market and some leading indicators,
High Yield Corporate Credit is an institutional risk asset much like perhaps an AAPL or PCLN would be for retail traders,
it should rise in a risk on mode, often it rises under manipulation of the SPY arbitrage with VXX and TLT being the other two assets involved.
Last night/yesterday afternoon I said I saw some weakness in it, it was not willing to move with the market near the close, but rather moved down.
Today there's a VERY clear dislocation/divergence vs the SPX in green as HY Credit is sold ( which is something that was seen in the underlying trade / 3C charts).
The VIX, while down here, is not anywhere near where it should be vs the SPX and the normal correlation, VIX should be in single digits today, but as you can see it keeps making a series of higher lows and on the day is outperforming its correlation vs SPX (to the right of the vertical white trendline).
TLT/20+ year treasuries should also be making a new low here and instead it is outperforming its correlation as well, it is a flight to safety trade.
This is the intraday TICK which went from a trend which was in line with market prices to breaking the trend which has sent the averages off their best levels of the day.
There was quite an extreme move in ES/SPX futures as it hit its high of the day, quickly moving to the low of the day (3C).
R2K futures look just plain bad all around vs the normal intraday confirmation we'd expect to see and look worse since this capture.
The DIa intraday, nothing close to confirmation suggests all of the price strength has been sold in to.
The IWM also no confirmation, suggesting the same.
The Q's , the same
SPY 1 min never moved even in the direction of confirmation
The 2 min chart didn't either, it should move with price if there's price/ underlying trend confirmation.
And like ES futures, the 3 min chart deteriorated rapidly.
The 3 min chart on a longer scale shows distribution and accumulation, each point being a reversal point to the downside or upside, but this is by far the deepest negative divegrence on the chart.
Perhaps some kind of blow-off?
I know it's hard to pull the trigger on a short or a put on a strong day, but this is where you have the best price entry and the lowest risk as you can set a stop just above rather than wait for price to come down and have a stop much further away.
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