US Manufacturing Biggest Miss Ever, 1 Bn in Gold Futures Dumped, Index Futures Looking Worse, VIX Better

There are a rush of events since the open, New Home Sales saw a -20% miss, the lowest print since this time 2013. US Manufacturing data did not continue the overnight Markit trend as US PMI (Manufacturing) saw its biggest miss EVER! Among components tumbling were Employment which is at 10-month lows while Input Costs soared, the Stagflation meme back in full force despite this morning's initial claims data.

And once again, someone dumped $1 bn in gold futures shortly after the open (which is becoming almost a daily occurrence)...

 Just after the open someone dumped $1 bn in gold futures, Wall St. is quiet about what they do, if this is seen it is meant to be seen.

As far as the PM's and Miners pullback, my first instinct as it has been is that a pullback is necessary for GDX to breakout of its large stage 1 base...

GDX daily chart with an Inverse H&S bottom, volume confirmation is even more important in a H&S bottom than a top, in 2010 a lot of traders were burnt shorting a H&S price pattern that had no volume confirmation.

At A we have the head of the pattern, at B a head fake move which is where we went long NUGT for our +40/+50% trade before exiting expecting a pullback. "C" is where the breakout occurred, but it was suspect from the start with distribution and the most important area of volume confirmation was not there. My assumption has been it was a shakeout as GDX was just starting to attract retail longs , most of whom entered on the breakout which has now failed. I still suspect a pullback to gain a head of steam before GDX can breakout to stage 2 mark-up. Also since QE has been phased out, the market is going back to the old pattern of miners leading gold, unlike during QE where they lagged horribly.

With inflation still a hot item, I still believe the highest probability is a pullback, gather shares/accumulate at lower prices and make a strong breakout, but the length of time this pullback has taken has forced me to consider whether the market has reconsidered the Gold/Miners run as the F_E_D will likely act and act quickly to stem inflation once they stop pretending its noise. The only way we'll know for sure is whether there's accumulation on a pullback so that is the larger trade, although if we can find an entry in DUST, I wouldn't mind a swing position there.

 This is the Russell 2000 Index Futures, now leading negative out to a 15 min chart, note distribution at each of the highs successively stronger. You can also see the final accumulation phase from last Friday, which we saw and posted...Market Update / NEXT WEEK,

"As I have thought all week, I think the IWM has to bounce before anything else on the downside happens. The IWM is down -6.28% for the month and almost a straight line decline, a bounce here would not be anything out of the norm."

 The NASDQ futures are not looking great either, yesterday seems to have been a significant distribution event in the move.

And NQ 15 min probably needs no commentary.

This is the IWM trend since calling for a bounce Friday with the last bit of short term accumulation, the distribution trend in to the bounce is pretty clear.

 As far as opening indications, nothing too strong, the IWM looks rather dull here, but not any strong signals on the open, the other averages are similar.

There has to be higher prices to sell in to...

 This 10 min chart is still the main focus, but as we can see by the 15 min chart which shows the larger underlying trend, distribution has been the theme.

 We are also getting that "normal" bounce" look that is present in a downtrend of lower highs/lower lows.

The highs on the chart are the top of the right shoulder.

And the daily VIX's bullish Rising 3 Methods has held, this capture is a bit old now since the poist takes a bit to put together, but the way it looks here, it looks like it is almost ready to blast higher.

I'm going to spend more time today going through watchlists as I have said since posting some of the stocks we are looking to short in to, "We need a bounce in them and when the IWM starts to fail, that's when we want to enter".

With the look of Index futures and VIX, I think it's time to get a temperature on the trend among watchlist stocks, they'll usually give a pretty clear indication if you go through enough of them as to where we are in this process. The daily updates may be a bit quieter today as I go through several hundred stocks on the watchlists, but if I see anything that is worth noting, I'll have it out to you ASAP.