A.M. Update

Good Morning,

I've been keeping an eye on some markets related to Bill Gross , as you may have heard, has resigned from PIMCO and is joining Janus, however, after the BlueCrest story (the European hedge fund that laid off 4 of 18 US managers yesterday and liquidated their accounts, apparently responsible for yesterday's slide in the market) with a market that fragile that 4 US managers' funds, of a European Hedge Fund (of 18 managers in the US) can do what it did to the market yesterday, and with NYSE Margin Debt near record highs with a new set of data at 463 bn, just 3 bn off the all time record high from February and the investor's ability to service margin calls completely depleted with all time new lows in investor new worth, sinking to its second consecutive monthly low of 183 bn (meaning investors don't have the free cash to meet margin calls once the market comes down a few percent forcing sales of assets which of course is the slippery slope), the obvious concern is Bill Gross who co-founded PIMCO a year before I was born in 1971, might, just might cause some investors with PIMCO to move out, REDEMPTIONS causing PIMCO or Allianz to liquidate assets and they are MUCH larger than BlueCrest at $10.6 billion , PIMCO around 2 TRILLION and remember, BlueCredst just made a minor adjustment in their US managers, 4 of 18 as they are a European based fund.

In other words, risk from the Bill Gross PIMCO move is looming very large after we saw what a modest sell-off in 4 managers accounts can do and with NYSE margin debt at near all time levels and net investor worth at new all time lows.

In any case, other than what's happening to Allianz in Europe right now (sell) as well as European bonds and credit markets, so far I'm not seeing anything that should change an immediate change in VERY near term course.

HYG gapped down, but this was expected this week as it will lead the US equity market lower ad there are some moves lower in several HY credit funds. TLT for its part has pulled back a little and the divergence for that was laid over the last day or so, looking like a deeper pullback, maybe related to inside information that Gross was readying to depart, but I'm not seeing the panic button yet, although that can creep up fast with a market this fragile. i bet the NY F_E_D's trading desk, aka "The Plunge Protection Team" are sweating bullets this morning and high on caffeine watching every market they possibly can.

TLT 3 min

As for the major averages...

 SPY 3 min...it looks to me that someone picked up some shares on the cheap yesterday and intends to sell them a little higher, possibly market markers/specialists, HFTs or maybe even the NY F_E_D's trading desk.

 The same for the QQQ 1 min from yesterday

IWM's 3 min chart and...

The DIA from yesterday, 2 min chart.

These are small divergences in timeframe and in size, but they fit well with the last chart below.

 The Custom SPY/NYSE TICK has been appreciating since yesterday...

And Finally, the August cycle...

With stage 1 base, stage 2 mark-up. stage 3 distribution/top and our Head Fake move, we should now be in stage 4 as it makes a series of lower highs/lower lows, so you can use your imagination to see what the next lower high bounce might look like from here, but there's a change in price trend's character that is looking like stage 4, right after the head fake move at the topping process.

In other words, I wouldn't get too aggressive on any bounce from here, after the next lower high, you know what comes next, the next lower low and it could be a doozy.