" If there's any substantial corrective bounce, I'd expect it to come AFTER Wednesday with the signs of accumulation of sold small caps and mid caps during window dressing, potentially being bought back on an oversold/short squeeze basis, yet still a trade, not a shift in positioning."
If 3C charts showed us anything today, they showed at least that much, some accumulation, nothing big enough to warrant taking long risk or trading around (closing 3x inverse ETFs for 3x long until the move is over and re-entering the 3X short ETFs), even with the leverage, I don't see what we have on the charts right now to be worth the risk, the risk of being long and the risk of letting go of short positions that are working rather well.
Secondly from the same post,
" I'm thinking some more short term downside early in the week, perhaps a lower low than yesterday's before they build a base large enough to really bounce from...leading indicators look like the next move near term early next week will be down a bit as does HY credit."
And obviously today's action on the open was a bit extreme , but comparing where the 3C signals were on Friday, we ended up not only with the lower low, but somewhere around the expected downside and the expected timeframe of early week.
As for what actually happened today, it was almost a snoozer, but things were happening. This is not the kind of market AT ALL, that I want to take any new positions in, just let what's on the table work and wait for the right entry with good confirmation, obviously I suspect that will, if it does indeed come, be in to Wednesday as the new quarter starts, but I don't know for sure whether today's bounce back in which none of the major averages except transports made it in to the green was part of a divergence that can lead to a post Q3 attempt to close the averages at the best levels possible for the quarter or whether it's the divegrence that could lead to a post-window dressing bounce.
On the day, it seemed a lot more to me like the price action was more geared toward the best close for the averages for the month and quarter, not necessarily the divegrence that could produce a post-window dressing bounce in which thousands of stocks that have been sold because of VERY poor quarterly performance are picked back up after the reporting period is over on a deeply oversold condition and bounced. The main issue I see with that is according to the charts I'm seeing, the shorts that are left in the market are strong hands that aren't going to be squeezed.
Initially HY Credit was beaten down hard this morning, although it let up later in the day and while Investment grade credit saw a flight to safety bid, it underperformed stocks.
One asset that didn't underperform stocks were treasuries as they ignored the attempt to make it back to green off that ugly open with a TICK plot of more than negative -1800.
I mentioned this morning there was an attempt to ignite some momentum overnight in USD/JPY which failed...
For me, nothing has changed, if there's going to be any accumulation for a post Window Dressing Q4 start, the market needs to pullback and be accumulated more so than it was today which seems as if it was meant specifically for today, gas up as much as possible and try to make it to green which I suspect will be the same theme tomorrow. If so, then the Wednesday date for any potential move to even really start would be about right, but a lot can happen between now and then, especially considering we are already trending down, we are already in stage 4 for the August cycle, we are making lower highs and lower lows and HYG is leading as expected with another lower low.
As far as breadth today, you could draw a sideways scribble next to any of the breadth indicators and that's about accurate for the day, NOTHING MOVED , nothing improved and for that matter, nothing deteriorated much either.
Short term 1-day oversold events did occur with 8 of the 9 S&P sectors red, Utilities, the Flight to Safety Trade were green at a +.65% gain and Consumer Discretionary was the laggard at a -.52% loss, which really wasn't that bad considering the way the markets opened.This is almost the opposite of Friday's close in which all closed green which is a 1-0day overbought condition that usually closes red the next day. Today therefore is a 1-day oversold that "usually
' closes green the next day, the issue is we have been seeing 2 and even 3 of these days in a row before seeing any relief in the market, but they have been very useful.
The Morningstar groups had 174 of the 238 red today, that's almost the opposite of Friday's 220 of 238 green. While not quite as extreme, Friday's figures pointed to a red close today while today's are supportive of a green close tomorrow.
The Dominant Price/Volume Relationship Friday was EXTREME at Close Up / Volume Down, the most bearish of the 4 combinations and again suggesting a 1-day overbought condition that should close red today as we did. Today's Dominant theme was non-exxistient so the only thing that's 1-day oversold is the S&P sectors and to an extent the Morningstar groups, but not nearly as bad as they were last week, thus today felt "LUKE WARM" and one of the reasons I think today was more about closing the quarter as best as they can.
As you can see, when these indications are at extremes, they are very effective, the same in a large way can be said of 3C signals, because they didn't pullback and build today, instead chasing the best close possible for the quarter, they looked a bit like warm.
HYG did put in an interesting 3 min leading positive that stops there, again whether for the end of the quarter or a post Q3 bounce, I can't say and that's one of the best reasons to sit on my hands right now until things become clear in this regard and I know what kind of probabilities I'm looking at and what kind of risks.
Of course there is the new Indicators, VIX Inversion and the SPX/RUT Ratio that seem to suggest the general theme for the week or at least mid-week is on track...
Until that aspect of the market becomes more clear, I'm sticking with the Stage 4 trend, the distribution on a big picture basis, horrible market breadth and any other one of a hundred other indications showing this market looks a lot like the two pictures posted Friday , the first 3 actually in Week Ahead charts. & Daily Wrap.
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