There's always some rotation among relative strength, although this is not the healthy bull market sector rotation we are talking about. For instance, the Q's intraday 3C signals are holding up better today than yesterday, of course AAPL which is the most heavily weighted NASDAQ 100 component broke 100 so it's going to pass along some of that intraday strength to the NASDAQ 100. *I'm not talking about price percentage performance, but underlying trade.
Transports are also looking weaker today despite another drop in crude, of course outward appearances have gapped Transports up, but you'll see what I mean.
Finally as shown last night, there's a big difference in the performance of general High Yield Credit and HYG (High Yield Corporate Credit) which is very liquid and is used by the algos to determine whether smart money is in risk on or off mode and buys stocks accordingly, making manipulating HYG one of the easiest market manipulation levers even if HY Credit is going the opposite direction as shown yesterday in the Daily Wrap. We've been watching HYG as it led the market the entire time the base was being formed for a week (8-1 through 8/8) and continued, but recent deterioration seems to be showing smart money not wanting to take the chance of being caught in HYG when the music stops. Of course tomorrow's release of the last F_O_M_C meeting's minutes will likely hang the market up in the area until those come out.
SPY 1 min since Friday afternoon's positive divegrence which is why this week's forecast was for a few more days of bounce before a reversal process starts. Today the SPY is seeing the sharpest negative divegrence. Like the NASDAQ has a high percentage of tech representation, the SPX has about 22% representation in Financials which are also interesting. You saw my earlier target for XLF, but that doesn't mean things aren't deteriorating below the surface, that's 3C's edge, the ability to contradict price and when those contradictions are sharp, that's when we have a strong edge.
XLF'x trend since breaking out of the week ling base. Just like the two previous bounces (which were much less effective, but also had much smaller/weaker bases), this move has seen the same immediate distribution which we hadn't seen often until after July 1st, typically the market would run up for a few days before distribution would start, not the case the last 3 bounces (since July 1 when a number of indicators turned sharply to the downside).
The SPY daily chart is near some of our upper targets posted last week before the bounce started. Today's gap up and small body are bearish candlestick indications, however the ones that are especially reliable will have increasing volume over the previous day, the higher the better so I'm guessing we are in the area, but until I see heavy volume I don't have a lot of interest in today's candle as a breaking point for the bounce.
Transports intraday are also among the weakest of the major assets/averages I track.
This is a longer 15 min chart which has remained leading negative, meaning the base divergence was never strong enough to reach this timeframe.
This also means that shorter term charts like the 1-10 min charts, no matter how strong their base divergences were, have an exceptionally high probability of failing, like "Rock, paper , scissors", the 15 min chart trumps all timeframes faster than it and becomes the chart of highest probability resolution at least for intermediate term trade (longer than swing).
IYT is a current open short partial position entered just after the ascending (bearish) wdge saw a channel buster at #1, we entered just after that and as such with excellent positioning, the IYT short which was left in place, is still at a slight gain and offering us the ability to fill out the rest of the position at excellent levels rather than short it as most technical traders do on confirmation of the break of the wedge at #2 where risk is very high. #3 is the base area, and #4 was one of the potential targets for Transports, the wedge resistance area or just inside it.
I'd be very interested in a small bodied candle like today or any other bearish reversal candle with higher volume which makes these signals much more reliable.
HYG has been deteriorating , but it was also one of the early signals we'd see a bounce as it led the SPX ever since 8/1 when the base just started forming and continued to lead through the end of the base and in to the bounce. I've posted several times the last several days showing underlying HYG trade starting to deteriorate badly, however as a short term manipulation lever it will really only effect the market when price starts to slip. So far today's lateral price trend is a good start toward that end.
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