Quick Market Update

Looking around for any possible leak of embargoed news, as we have found them before, although rare (news networks already have the F_O_M_C policy statement, this is how they have instantaneous reaction as they've read it long before us, although it is embargoed, however I would suspect it wouldn't be that hard to get some newbie at the station to get the gist of the statement out for a handsome fee, in fact the BLS built a new media center to rectify exactly that problem, in building the media center they had admitted embargoed information was reaching trading firms before the official release) What I see looks like a couple of things: on a 3C basis of the averages, it looks like the natural decay of the Monday/Tuesday morning accumulation for the move up based on a deep oversold breadth environment last Friday (the same scenario as last Tuesday with a 1-day oversold event in breadth that rallied Wednesday, although I have said from the start I expect this to be bigger than last week's based on HYG's divergence and of course the probability of a head fake move taken with the possibility or likelihood of an F_O_M_C knee jerk reaction-all concepts that are typically seen except of course the HYG divergence-which is a divergence, not a concept) first lets look at that.

 Intraday the SPY looks worse as it should as the natural decay/distribution from a day long positive divegrence only has so much gas in the tank. From a breadth perspective, very little of the oversold condition was worked off as of last night's data.

 SPY 5 min seeing about the expected rate of decay or negative divegrence migrating to the 5 min timeframe. So far this looks like the analysis from Friday for early this week "IF" it were in a bubble devoid of outside influence like the F_O_M_C.

The Q's with their positive divegrence Monday and early Tuesday morning and a natural looking negative divegrence in to the bounce. if we can call it that.

And the IWM 5 min chart with a relative negative divegrence (the weakest form), meaning the IWM lagging yesterday wouldn't give much reason to sell/short in to higher prices so it's seeing that today.

SO far, nothing that looks like a leak of the F_O_M_C.

On a different concept, the head fake one which I have drawn , talked about and posted numerous times over the last 2 weeks with last night's daily wrap showing this chart to get an idea of what one would look like, as they tend to be excellent timing indications just as longs jump in, shorts cover, they tend to reverse to the downside creating a boatload of momentum, which is behind the concept, "From failed moves come strong reversals"

 This was posted yesterday and last night, the "Igloo with a Chimney", the igloo representing a real reversal process or top and the chimney representing a false breakout that fails and gives the downside reversal momentum as shorts are forced to cover on the move and longs jump in to be caught in an eventual bull trap, thus increasing downside momentum which I suspect is one of the reasons (other than creating demand and supply) we see them so often just before a reversal  (80%).

 HYG's divegrence has deterioration, but not as much as I'd expect by this time.

In fact...

 HYG (red) supported the SPY/market intraday as it was moving lower along with the MSI.

Here's te intraday move lower from a TICK perspective with a -1200 reading so some serious selling there intraday, likely F_O_M_C nervousness as I see VIX futures were bid at the same time.

 The TICK trend continues to deteriorate...

And MSI holding up better than the SPY today, also giving support pre-F_O_M_C.

From this perspective, it looks like a head fake move as drawn above is probable as the initial F_O_M_C knee jerk is dependent on the market reaction, not the actual news so some HFTs hitting the ask can create an upside knee jerk if that's what they want until the F_O_M_C language sets in, thus the fade of the knee jerk reaction.

However, while HYG is manipulated short term for stuff like this, general HY credit is not and it is not looking good.

 HY Credit vs. the SPX

And while this is a new indicator for the site, VIX Inversion and SPX/RUT Ratio, it has been pretty spot on...

The July top has a negative SPX/RUT ratio (red) signal at the yellow area to the far left sending the market lower in to our 8/1-8/8 base where the indicator fails to confirm a new low and is divegrence as well as 3C positive at the base sending the market up in to the August cycle. Since however as we have been in stage 3 , there's another clear negative divegrence in the indicator.

Taking this altogether, this is something I suspected last week in the posts toward the end of the day Friday and early this week.

I suspect the F_O_M_C knee jerk reaction will be to the upside, it will be a failed move and also allow us nice entries in multiple shorts, some of which are in the area and listed yesterday.

Of course no one knows what the F_O_M_C will do or what Yellen will say at 2:30 (MAKE SURE YOU WAIT FOR YELLEN), but based on what I see thus far and being this was already a probability I suspected before this week's move higher even started, I'd put probabilities there.

The way I want to use that is to short in to those higher prices in the assets laid out and I will put out the posts as they confirm a false move or head fake.

That's my best guess at this time.