I'll almost certainly use a long hedge position, the more I look around,
the more I feel this is a bounce that is useful in selling/shorting in to.
I have some evidence that it will build a bigger base in IWM and SPY 1 min intraday charts putting in small "steering" negative divergences suggesting what I mentioned in the last post, a "W" like base rather than today's "U" shape alone, but there also "seems" to be a time component here, it "feels" a little rushed as far as the pace of getting this bounce together.
The other data is showing pretty clearly that it's not a bounce I would be too concerned about selling or shorting in to.
The TICK data also looks as if it will break the downside of the channel supporting a pullback and likely larger "W" base.
Pro sentiment has flattened off today from selling off the last few days, but it's not leading.
HYG is still fairly well disconnected from the SPX correlation, however, it looks like it will be used to try to get a bounce moving in SPY Arbitrage where HYG has to move up, TLT and VXX move down.
HYG 3 min positive
HYG 5 min positive
As for the bigger picture and shorting price strength...
HYG 30 min strong distribution after being in line for some time.
As for TLT, it needs to move down, this is where it seems they may be moving a little quickly and may try to bounce the market BEFORE a "W" base can be put in place,
in that case I would think the reason would be to get it under way before the F_O_M_C minutes come out tomorrow.
TLT 2 min migration of the negative
However the 15 min chart shows TLT has put in a recent and solid base, it's not likely to do much more than pullback.
VXX is the other asset that needs to move down in the SPY Arbitrage scheme, it's already seeing a strong intraday negative divergence.
And the 3 min VXX...
The 5 min, like TLT has a recent and strong positive divegrence so once again, it doesn't appear at this point that it will see much more than a pullback, remember TLT and VXX usually move mirror opposite the market.
And VXX 10 min large positive divergence very recently.
5 year rates are in line with the SPX and not leading to the upside.
The same is true of 10-year rates, you can see where they diverged from the SPX and what happened.
As far as the carry trade, USD/JPY...
Initially as it was moving sideways it has a strong leading positive divegrence, that quickly fell apart so I'm not sure if that's part of an intraday pullback or perhaps there's something else going on in the pair.
As far as the components (FX...USD/Yen) that move the pair...
The Yen intraday looks like it wants to pullback which would be positive for the USD/JPY. The $USD has no 1 min intraday signal.
At 5 min the Yen is perfectly in line so it has not seen any strong distribution/selling on a 5 min chart at all.
The 5 min $USD looks like it wants to bounce which would be helpful for the USD/JPY, but...
At 15 min the negative divegrence is larger than the positive we have now, thus it would suggest a bounce and then return to more negative tone.
The 30 min $USD suggests the sme, but on a stronger scale, this would mean a USD/JPY bounce would not likely hold very long, thus not help the market very long before it heads lower and pressures the market lower.
thus I'd think a small call position for a bounce would work, but I'd be looking to sell longs in to it or sell short in to it, I would not call this any significant change in character, just the mechanics behind an oversold bounce.
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