I did expect to see a move below the SPX's (-0.56%) 100-day moving average and that came to pass, however the head fake move confirmation was weak at best, it's not the typical confirmation that I'd use to enter a position, but it also didn't fall apart.
Other major averages are at significant technical support levels, the DOW (-0.46%) tagged its 200 day on intraday lows and seems to have bounced off of it toward the close. The NDX (-0.44%) tagged its 50-day and closed above, the R2k (-0.53%) has been holding under its 200-day for the past week in what looks a lot like a bear flag, even these price patterns are head faked though with an initial break below the flag being most common before a shot above the flag, eventually returning to a new lows.
Intraday 3C action was a lot like yesterday, except it didn't end on a negative divergence for the day, but rather a positive divergence, as weak as it was.
I suspect part of 3C's the poor ability to hold a divergence intraday has a lot to do with the hedge fund herd (yes they herd as to not standout as an under-performer relative to the herd even if that means underperforming the market) finally breaking up and taking more of a fear-driven "Every man for himself" attitude. Rather than them all doing the same thing, I think while some are working on an oversold bounce, others are selling any strength they can find just as we saw during the last 2 bounce attempts, the first time ever really in the last 5 years.
This is the chaos and unpredictability/volatility I mentioned as we get closer to going over the cliff, this is also why I want the bulk of my positions aligned with the highest 3C probability which is clearly to the downside and any other trades that run counter to that probability (on say an oversold bounce) to be speculative position size.
10 year yields closed at 2.42%, 14 month closing lows, or in other words, the "Flight to safety" trade is on. 30 year Y's closed just above recent lows at 3.24%, however this also means that while the SPX is over 3% lower, 30 year yields are holding a bit higher which looks to be a slight risk on(short term) posture. 5 year Y's closed at 1.60%, which typically leads the market lower near term. However this is an area that has been held as support since June.
The USD/JPY was in charge most of the day, near the close testing $102 and for now...holding..
Very short term the Yen looks to be headed lower which would benefit the USD/JPY and by extension, likely the market.
THE LATE DAY BOUNCE SAVED THE S&P FUTURES AND CLOSED THEM ABOVE $1900.
Oil was up today as recently posted, USO looks set for a bounce, although it's not my favorite trade at this point.
After a volatile day in which I long ago decided just to stick with the long term chart probabilities and let the MCP long have space, it closed up over 15% on heavy volume with a nice move on volume in to the close. Remember there are some 60+ million shares short, near 12 days to cover.
As for breadth, very little has changed all week, the % of NYSE stocks > their 40-day stands at 23.11% today vs 22.48% yesterday and most breadth indicators have very little change for the week as the range/base persists.
Of the 9 S&P sectors, only 2 closed green today, with Utilities being the leader, the exact opposite of yesterday. Of the 239 Morningstar Industry/Sub-industry groups I track, only 45 were green today, the market remains deeply oversold on a breadth basis.
As for Dominant Price/Volume Relationships. it was Close Down/Volume Down which is the thematic relationship during a bear market, also the one relationship that has the least influence on the next day, it's basically telling us that there's no extreme conditions although breadth would disagree on the week, however nearly unchanged on the day.
HYG is still in leading position and supportive of a market bounce, even though underlying trade is falling apart fast. HY Credit also had a slight improvement today as a leading indicator (to the upside).
Professional sentiment increased a bit today as a leading indicator suggesting a bounce is still in the cards just as HY credit (nearby). 5 min (3C) VIX futures showed a little short term distribution today, also indicative of a near term bounce.
A number of our "Short" watchlist stocks were up today such as NFLX or the one we entered a partial position in today, FSLR, SCTY, and several others. There were about half the list that looks ready for a pop to the upside which is what I'm looking for in many of them for short entries.
For now this is a very sloppy consolidation, but one that has not moved to the downside like the 7/31-8/1 move and it has taken out numerous head fake areas. For the time being, I have to stick with the higher probability charts in the 10-15 and even 60 min range, that doesn't mean I have to trade an expected bounce, but if I see a good set-up long or short I'm going to take it. I suspect we still have a bounce coming, breadth can't get much more oversold than it is.
Normally tomorrow is an op-ex Friday (even the weeklies) that tends to be pinned until 2 p.m. or so at Max-Pain. The pin is often close to Thursday's close. If we do get a pin then I wouldn't expect any bounce until next week, however there's an outside chance based on some of the EOD divergences and the breaks of important support that we do get the start of a move that in my view is overdue by about 2-days.
I'll hold the XLF call position, try to salvage the IWM call and maybe re-enter it if the signals are there, but they have to stand on their own two feet, not on any opinion of my own.
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