Market Update

Two things are apparent this morning, 1) as stated last week, especially for the "Week Ahead" post, the market is very weak and any head fake move to the upside is not going to happen on the market's own energy, it will need short term manipulation levers like HYG (High Yield Corp. Credit) and as we saw this morning, that of USD/JPY being ramped. 

The second is that Credit markets are smarter than equity markets, thus the whole, "Credit leads, stocks follow".

HYG which only had a small end of day positive divegrence Friday gapped down this morning so it was not an effective ramping lever. One of the things I was thinking other than, "Well maybe it's just that time in the process as HYG has been in the reversal process for 2 weeks (lateral trade) and the Friday's positive divegrence was very small, only a short period in the afternoon and only intraday charts. The other thing I thought about over a seemingly quiet weekend other than Manufacturing numbers worldwide in important markets going down the tubes, was, "What does credit know that we don't?"

Well as of now, the market is weak, the SPX cash market lost $2000 just after the European close even with the help of USD/JPY and of course the other thing is the gap down in HYG. 

Whether or not this is the cause is debatable, I can see how it might be, but either way, the market is weak at this area.

Apparently Putin told the EU's Barroso that "If I want to, I can take Kiev in two weeks," during Ukraine talks recently which Barrosso passed along to colleagues which instigated a NATO rapid deployment force of 3500-4000 soldiers that can deploy in 48 hours obviously to counter any Russian threats which has not irritated Russia that the conversation was not only leaked, but the NATO response of course.

The market also fell right around the time of the European close, a trend we have seen more often than not recently.

Some of these faster 3C charts are already changing, but not much for the better.

The MSI (Most Shorted Index) collapsed this morning after an initial attempt at an opening squeeze, these haven't been holding, unlike months ago in which they'd hold for days and even weeks.

The 1 min IWM is in line, even now at lower levels.

The 2 min chart shows the pre-European close negative divegrence and looks pretty much the same.

 The 5 min chart is where I said last week, any upside is capped at because of the leading negative divergences, this one is obvious where distribution set in stronger and it looks worse now than at this capture.


 QQQ 1 min, also weakening and negative pre-European close,  this chart looks worse, leading negative.

 The 2 min is about the same, same relationship with the Q's

 The 3 min is also about the same.

The 5 min shows were distribution picked up even more, this chart looks worse currently, leading negative almost straight down.

The SPY 1 min looks a bit worse, but there's a chance of a relative positive divegrence developing here which would slow downside momentum, perhaps a consolidation, if it strengthened, maybe an intraday bounce.

 There's no strength at 2 min, it's leading negative and confirming SPY downside.

 As is the SPY 3 min

The SPY 5 min is probably the last hope right now for a relative positive divegrence to stem the downside at this time.

Note how bad TICK was just prior to the European close at -1400 and a downtrend.

My custom SPY/TICK indicator also showing an ugly trend in intraday breadth.

HYG has a small intraday positive, whether it can do anything to support the market is anyone's guess, we'l have to see if it holds or falls apart.

However, just as HYG has led the market, 3C has led HYG, the clear leading negative divegrence during the reversal process meant it was only a matter of a few days before HYG reversed to the downside, this  has been the market's main support through August.

More to follow.

Interestingly USD/JPY is of no help, unlike the overnight session so I suspect this is about escalation.