LEADING INDICATORS...

Right up front, before I forget, Gold/GLD is looking strong for a move to the upside, apparently whatever we were seeing last week is directly tied to the $USD and the expectation for a $USD shakeout as CITI essentially put it this a.m. when saying they closed all $USD longs.


As for Leading Indicators, many have been right on track, whether HYG which is one of the most popular market manipulation assets right to our professional market sentiment which had been confirming upside trends until last week.

The very basic concept of the 4 stages of a cycle with this cycle starting on 8/1 (base through 8/8) has gone through base, mark-up. rally and the expectation was for lateral/reversal process or stage 3 top, everything is in keeping with those expectations.

I think we probably have a few more days of chop, both gaps up and down like scribble, the larger trend though should be seen as a clear turn to the side from up, HYG is leading so lets start there.

 This was one of the best indicators that we were going to see a broader base as HYG led the SPX for about 4 days to the upside, algos follow the HYG signal as a sign of institutional risk on or risk off and buy/sell accordingly, the more complicated version is the SPY arbitrage where VXX and TLT are used as well, but I don't think they can pull off the manipulation of safe haven assets right now as they are seeing flow as we saw last week as  they outperform their correlations, TLT continues to do so today.

 Near term HYG vs SPX leading negative, tells us the same thing about market probabilities as the leading positive HYG did, recall also last week the internal 3C signals for HYG just fell apart warning us this lateral / down move in HYG was right around the corner.

HYG has now been leading sideways for 5 days, a little longer than the 4 days it lead to the upside at the base, but top reversals are generally a bit broader than bottom reversals so that's not surprising.

HYG intraday vs the SPX, credit continues to underperform and this is the manipulated credit, however the manipulators don't want to be caught long HYG when the music stops making HYG a great leading indicator that has called many tops and bottoms for us.

 This is HYG's 30 min chart from negative and leading the SPX out of its ascending wedge (daily chart) and down, to the positive divegrence leading the SPX on the upside at the early August market base, obviously the negative divegrence right now is not a positive sign for HYG or the market, but this isn't new, we saw many other charts of HYG negative last week and before it started sideways.

 5 min trend at HYG's flat, reversal process area, essentially the market is following HYG with a several day lag.

 ES, this is the second day in a row and the only two days since 8/11 in which the SPX Index futures' VWAP has headed sideways rather than up and some of the only times it has touched the lower standard deviation.

TF/Russell 2000 futures' VWAP also headed sideways the second day in a row and seeing a lot more of the lower standard deviation which I don't think was touched once except the first time the Ukrainians said they destroyed a Russian Convoy a little over a week ago.

 Today's NYSE TICK starts off with the gap up and a +1250 reading which is immediately lost as it treads water sideways, since there have been several forays below -1000 as the lower standard deviation of daily VWAP has been penetrated.

 Our pro sentiment indicator which was up just about every day just before the next day , acting as a leading indicator, however last week both of the versions we use turned to the downside as professional sentiment has soured and they appear to be moving out as would be expected in to stage 3.

Pro sentiment intraday, not biting on the early move up, instead showing what 3C shows and selling into the move.

We've seen VIX futures/short term futures outperform their correlation with the market several days last week,  the other "Safe Haven" or "Flight to Safety " rather than flight to protection asset is TLT, 20+ year treasuries which we saw flatten out in the 5-30 year curve to 2009 flats. There's a clear outperformance in TLT (SPSPX prices in green are inverted, normally TLT would follow along with inverted SPX prices).

Everything is pointing at the same thing, the same forecast from Friday a week ago as well as last Friday, 3C, the charts, the stages, even the informal map of IWM target expectations/pivots which is nearly perfect, but was drawn over 2 trading weeks ago and the XLF trigger, that's not considering the indicators we usually use. Right now it's just a mater of tactical timing as the strategic level has been reached and which assets. This is one of the main reasons I chose to add most of the FAZ position back, but leave some room for timing, it's much more important at this stage for me to replace that short coverage that has been out of the line-up since August 1st.

I think one of the last timing signatures here will simply be watchlist set-ups.