Market Update-DISCOUNTING

Does anyone remember the Arab Spring or the tension flare-up between the US and Russia over Syria? Does anyone remember the market or even oil for that matter reacting? No, they didn't, the Bernanke put was in place. I'd say the last month or so is the first time I've seen the market discount and it is VERY jittery.

This is not normal intraday distribution although we do expect to see it in to the IWM bounce we have been expecting (carrying the other averages with it, Q's are outperforming because of AAPL, but I wouldn't count on that too long).

 IWM intraday distribution

We saw this forming up earlier in the Q's, but I think that's more specific to AAPL.

The IMF cut US GDP from 2% to 1.7% which is consensus, blaming Q1 which was suppose to come in at 3%, it almost did, except negative. 

However, this is not what is causing the market this fear that it hasn't seen or reacted to since 2009 as long as a QE program or Twist was in effect.

Putin recalled the Russian Duma from a planned vacation for a "situation in Eastern Ukraine".

The thinking is that Putin will send Kiev an ultimatum legitimizing the pro-Russian separatists as their own political entity and demanding negotiations or else face Russian forces in Eastern Ukraine under the guise of peacekeeper. 

I remember how the US, Europe and NATO systematically peeled away former Soviet satellite states like Ukraine, but Putin is facing, in my opinion,  an ineffective US president as far as foreign policy (my political views are not important and I don't like expressing them, but Putin has been like a champion chess player in Ukraine). Putin is doing exactly what we expected months ago, he's going to take back Eastern Ukraine and won't stop there. The market is obviously reacting to the news on the matter, which shows what kind of real strength is left in the market, virtually none, just as the US is in a real mess if "Weather" is blamed for a -2.9 negative GDP print, if the economy is that fragile that weather can do that to GDP, I'd be looking for a recession on the next GDP print.

 The distribution intraday is migrating to longer term charts as well.  The IWM 10 min positive divegrence is like a gas tank, it can take the market so far, but it eventually runs out. However, the market in this instance is acting a bit more like it is less and less interested in the trip, that should still appear on the 10 min charts, but it will take more than an hour to get there which is a function of the size of institutional positions.

 This is the IWM 5 min, it is showing a lot of weakness for a bounce only 2 days old. At 1  I closed the 3x short IWM, SRTY long at a nice 9% gain as I expected a bounce and entered URTY (3x long IWM) at #1. I closed that yesterday at #2 upon seeing how weak the market was at a 3.6% 1-day gain and re-opened the SRTY position at 2 which is already in the green today.

I think most of you know how difficult that decision was as SRTY is a core position representing a large chunk of assets,  so I'm not moving these on a whim, I take the moves very seriously.

 This is the Russell 2000 Futures, this is an ugly mess and really shouldn't look like this unless the market is discounting which it is and it's good to see it starting to return to normal.

The larger issue is the continued deterioration in the 5 min R2K futures that were leading positive just Monday.

Most trades I make have to be in line with the 5 min chart so I would not enter an IWM long like URTY with a chart like this, I would and have entered a SRTY (3x short IWM) on a chart like this.

 Es/SPX futures as well as NASDAQ futures 5 min charts look almost the same as this ES chart above, the point is there's serious deterioration here.

The first real TICK trend of the day on my custom TICK indicator.

I need to look at underlying trade in some assets like HYG which is seeing distribution, but I'd direct you to take a look at treasuries again today as well as VXX, there's a lot better performance there than you'd expect considering where the market is overall right now.

It "seems" the reach for protection is intensifying locally, we already know it's quite strong on a longer term basis.