"There was only 1 Dominant Price Volume Relationship today which was the Russell 2000 at Close Up/Volume Up, the most bullish of the 4 relationships, but also the one with the highest probability of creating a 1-day overbought condition typically sending the average closing lower the next day."
The Russell closed down yesterday and again yesterday in the Daily Wrap the R2K was the only average with a dominant P/V relationship, this time different of which I said,
"There was only 1 Dominant Price/Volume relationship today, the same as yesterday, the Russell 2000, but this time it was Close Down/Volume Down which doesn't really have a next-day implication for short term overbought/oversold, I just kind of consider it, "Carry on doing what you were doing" which is ironic as the IWM was the only average not showing a positive divegrence intraday in to the close." Also ironic for it being the biggest laggard today -.58%, vs SPX @ -0.17%, Dow @ -.25% and the NDX @ -.17%.
In fact, interestingly as the US cash market (regular hours) closed, ES/SPX futures regained yesterday's close (after 4 p.m.).
In any case, a cycle is a cycle and there's very little that will keep Wall Street from running and completing that cycle. You may recall the chart of the SPX's reversal process earlier today with a virtually straight trendline up with the only dip being last Friday's Ukraine "Destroys Russian Armor column" which turned out to have no evidence. The point simple being, a head fake move is high probability and Wall St. runs them as part of the cycle started on August 1st, there's very little that will cause them to abandon it as they know where it's going and what the reasons are for it well in advance, these are not coincidental or random moves, they are set up and controlled by Wall St. for a specific reason. The most specific reason through 2014 has been to distribute in to higher prices.
I won't get in to all of the reasons this run looks to be the last, but breadth is a hint.
As we suspected Tuesday, Gold and GDX/NUGT would see a pullback yesterday after Gold miners very strong day (NUGT up +6.19%- one of our long trades), yesterday I suspected that the pullback would be over today and we continued higher, GLD + 0.56%, our preferred PM play, GDX + 1.38% and our actual PM play, NUGT up +4.17%.
Also USO which has been posted numerous times this week as a bounce to the upside gained +0.86%. A correction in USO as well as Gold, GDX and NUGT looks probable, but the trend in all of them look to be much higher in the week/s to come.
Copper had a horrible day, down -1.47% and as Dr. Copper goes, it's seriously divergent with the SPX.
Transports ( a current open Short which I'm looking to add to) were down -.27%, I consider IYT a strong short and would consider entering it on almost any bounce from here and I do think it sees 1 more bounce.
The divergence between the SPX and 30 year yields continues with a fresh low today in the 30 year yield at 3.07% (10 year at 2.33%). As mentioned rhetorically, someone is wrong and I'm not betting against the bond market.
There was no Short squeeze attempt today, although if the SPX regains 2000 after a test of 1991 today, there may be which could power our head fake move.
I don't think there's a whole lot of thinking to be done at this point short term for the market, we either get confirmation of our projection, Broader Market Picture & Message of the Watchlists , or we don't although I doubt we don't unless there's some big fundamental news in geo-politics, specifically Ukraine/Russia. This sets up the end of the reversal process as shown earlier today as the first hints were visible Friday (some may have needed ROC to see it which is no big deal), today the process is very clear with HYG leading the market by almost a week just as it led the market while it was still forming a base for 4 days and then though 2/3rd of the rally.
As for Dominant Price/Volume Relationships which have been amusingly interesting , the only average NOT to have one today was the Russell 2000 (complete 180), the other major averages all had the same relationship with 14 of the Dow 30, 41 of the NASDAQ 100 and 183 of the SPX, it was Close Down/Volume Down. Other than being the thematic relationship of a bear market, it really doesn't have a 1-day overbought/oversold correlation like the other relationships do, I often call it "Carry on" as it's no sudden message that is likely to produce a short term change in direction, but it also won't hamper one and in the absence of anything to move the market such as the R2K not having an end of day positive divergence like the other averages, I call it "Carry on".
Of the 9 S&P sectors, 3 closed marginally green, one closed at respectable +.73%, that was the Defensive Utilities which were the worst performing sector yesterday.
Of the 239 Morningstar Industry/Sub-Industry groups, only 73 of 230 were green and of the 73, only 24 closed up more than a 1/4 of a percent.
As for breadth indicators, and you know why I think this is important, almost none have moved for the last 8 days, they moved at the start of the rally, but for 8 days, the same amount of time HYG has been moving laterally in a reversal process, there has been no gain. The only movement in breadth today were the Advance/Decline lines, all down including the Russell 2000, 3000 and NASDAQ Composite which is already by far the worst and has been for about 4 months.
As for geopolitical risk events, NATO released this to stir the pot today, From the Washington Post:
NATO: These new satellite images show Russian troops in and around Ukraine
As far as next week's risk event as German, Dutch , Italian and French sovereign yields hit fresh lows, the ECB could engage in QE next week, although Reuters said today that the probability is low unless inflation really slides, however the ECB did hire the world's largest money-manager, Black Rock (BLK) to advise them on buying ABS to compliment their LTRO.
What is interesting are sovereign yields so ,ow as if traders have been front-running an expected ECB QE, however I'm not so sure unless they are simply that dumb as Draghi has said on several occasions, they'd be targeting ABS, "Asset Backed Securities", such as packaged mortgages, auto credit, consumer credit card debt, etc. VERY different from buying up bonds, like the F_E_D did with US treasuries, so unless they are just that ... "dumb", I'd have to assume there's some risk off tone or flight to safety. In any case, there are those who say the ECB moves this meting and those who say Draghi will never do anything but talk.
A lot will depend on the inflationary outlook and the probability of deflation, but if traders were trying to front run ECB QE by buying sovereign bonds, they're about to be crushed when they find out that's not what they are buying as their charter expressly forbids the ECB from financing any nations' debt.
An ECB ABS purchasing program would presumably be taken as an endorsement of consumer credit assets and encourage more lending.
It's difficult to gauge Draghi's comments as they seem to be Greenspeak, we'll just have to wait and see as the meeting is set for September 4th.
That will about do it for now as we have seen pretty much all we can to make forward looking forecasts, we'll have to see if there's follow through on them, but I think a test of SPX 1991 (earlier today) that recaptures 2000 (after the cash close today),could be the buy the dip move the market needs to get the head fake move over the top and there are a lot of great looking assets out there to enter trades in (you saw a half dozen or so today).
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