There is another possibility that may emerge quickly today, that is those who have been buying protection in low strike puts may have been squeezed this week, we saw it in SKEW dropping and if we see very fast moves in 3C today, we may just have confirmation. This bounce has not acted like the others except the last two, it has been on abysmal volume and supported by assets that are now falling apart, HY credit being one of the main ones.
Nevertheless, overnight futures looked like this marching higher (which is also unlike an op-ex Friday as they have tended to open close to Thursday's close)...
This morning, just after yesterday's GDX warning of a pullback (which is what I have wanted to see), gold and silver were dumped on fairly heavy volume.
This coming before the Empire Manufacturing miss, the biggest miss in 4 months falling from 25.6 to 14.69, the most since June of 2012. New Employees, New Orders and Inventories all fell sharply, the one thing that did rise was the 6 month outlook which can be expected with inventories having fell so hard.
The dump was also before PPI which came in below consensus almost entirely due to a .6% drop in Energy, the biggest drop in a little over a year. Food inflation was up .4% after having been down -.2% the last two prints, Core excluding food and energy came in at the highest since March.
While the 10/15 min positive divergences have more room traditionally speaking to lift the market, volume has been horrible and after seeing what SKEW did the last week and a half or so, I suspect those who have been piling in to low strike puts were just squeezed out, if so, we should see some very strong signals today which have been mediocre all week.
We'll know soon enough.
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