A.M. Update

The overnight markets have obviously been effected to varying degrees and I suppose at varied locations for varied reasons.

I'm not sure that the $10+ billion in redemption outflows from PIMCO is having as dramatic an impact on HY credit as some as ascribing, I would think that $10 bn in the scheme of a trillion dollar company is not great, but will likely blow over before it becomes anything more than a tempest in a tea pot.

The Hong Kong demonstrations seem to be the main culprit for most of the world, the US included, while Europe has the extra strain of the much expected Catalonian independence referendum, now set for November 9th, the same day predicted while the Scottish referendum was under way as Artur Mas , President of the semi-autonomous region of Catalan in Spain has called for the vote which Spain, unlike the UK, considers illegal.

Of course the main stage this weekend is the effort to preserve Hong Kong democratic voting with a hundred thousand plus students protesting in Hong Kong, still ongoing... Obviously anyone who remembers Tiananmen Square knows why this is potentially a big deal should the PLA be called in or sent in, for now Beijing has said the local government can handle the situation.  It doesn't really matter what the news is, the reaction to the news over the last year and increasingly so has been a defining character change in the market and despite the 1 a.m. attempt to ignite momentum via USD/JPY in the futures market...

This market is proving "Things Aren't Different THIS TIME"...

I can see it on my portfolio value and the equity curve, otherwise it's easy to see if you just look.

 Since the August cycle started, it has been a classic 4 stage cycle complete with head fake, what's different this time is this market FOLLOWS THROUGH TO THE DOWNSIDE. Note the progression of lower highs and lower lows in the SPY/SPX and worse yet...

The Russell 2000 which leads the market.

And this after  massively oversold breadth readings Friday, mostly in Industry groups as well as the Dominant P/V relationship.


I wanted to see some regular hours signals before putting anything to print and as I suspected, as we do have Wednesday starting the new quarter, but until then, Window dressing rules the day and with at least 40 and 50% of the Russell and NASDAQ Composite stocks already in a bear market, there are a lot more stocks to sell and get off the holdings/portfolios for the end of the quarter for the new prospectus before the close on Tuesday, than there are to buy, which may change briefly Wednesday on an oversold bounce basis as a lot of these are probably starting to look like good deals.

That's something along the lines of what I've fond VERY EARLY this morning.

 The SPY with the SPX/RUT Ratio and VIX Inversion showing Thursday's underlying strength, weakness in to Friday's move and this morning thus far, some non-confirmation or implied strength on of course, a short term basis. The SPY/IWM charts above should make clear that not only is staging working, but the market is following through to the downside, something it couldn't do at SPX 2000 or Dow 14k.

 Our sentiment (Pro) Indicator shows the exact same with reversion to the mean this morning and...

HY Credit, although dumping as Friday's signals showed with a lack of a higher high, they also have short term regression to the mean with price, so we'll keep an eye on the 3C charts and it becomes trading opportunities, but again,unless a larger base can form, the trading opportunities remain selling and shorting in to strength , with the probabilities.

I'll have some more updated charts shortly and we'll see where the next entries are.

The take away that the market is screaming (we often talk about listening to the message of the market which comes in many different forms), is "This time is NOT different" and recognizing that is where the opportunities are, I can see it in my portfolio can you?