Daily Wrap

There's not actually too much to add to what we've been looking at all day except a few interesting tidbits. As mentioned the market has been in rally mode when volume is below average and selling off above average the last several weeks like clockwork, so when the NYSE broke 13 minutes in to the day today taking out 150 symbols from AAPL to XIV you might imagine the volume and more so the volatility, this coming after a Reuters rumor on the ECB open, after the market had lost 20 ES points in overnight trade, that they'd be buying Corporate bonds, this was shot down by the Financial Times shortly after, but the futures made their move.

Interestingly, XIV, one of the symbols not working on NYSE today (inverse VIX) led the market higher, on below average volume of course. The Dow closed up 207 points despite bad earnings reactions in KO, MCD and IBM (collectively they shaved 65 points off the Dow and it still closed up over 200 points).

The NASDAQ had its best day of 2014 and best 3-day streak in almost 3 years, that's what you get with increased volatility and a positive divegrence that has been in effect since Oct. 2nd, this is why I tried to anchor expectations for this move last week BEFORE it started and I don't think we've seen anything yet.

As I said earlier, the sharp "V" bottom is like having 2/3rds a tank of gas and 1 flat tire, a stronger "W" base could and should take the market higher and today despite the broken NYSE, ECB false rumors, etc. the market rallied hard, but I suspect we do come back down a bit, maybe kick out some of the new retail short sellers who wanted in at SPX>200-day which happened today and then take the market higher, which would change sentiment after being booted out of a new short and then seeing the market rise above the level you entered, although that's speculation, it certainly would be effective in changing sentiment and that's what these moves are all about as well as profits as you know, this move has been under accumulation for most of this month,

This is why I chose the SQQQ (3x short NASDAQ 100) today for a trading position...
Unlike the R2K which has a sturdier base and has been almost exclusively driven by small/mid-cap short squeeze action...

Note our Most Shorted Index massively outperforming the SPX since the "V" reversal kicked in.

 The NASDAQ/QQQ 5 min above has that "V" base I think will need some additional support to get all they can out of the accumulation put in most of this month and the 5 min charts are signaling the same.

 SQQQ 2 min looks good, it also looks like a rounding base which is appropriate for the size move preceding it, a reversal process rather than event.

And the 5 min chart here just looks better than any of the other inverse ETFs (leveraged) with additional confirmation in QID and QLd (2x long and short QQQ ETFs).

All Carry risk was in the Off position today, JPY carry and credit wasn't excited wither, you saw the near term distribution in HYG already, which we'll have to keep an eye on as to whether it will lead the market on a pullback or whether it is DONE. So far, price wise, HYG continues to lead, but with those negative divergences building, just as they built positive before it moved up, it will be coming down.

Spot Vix was briefly cut in half today from last week's intraday highs, this is the accumulation we have been following and we are really only 3 days in to it and the SPX is already up over 120 points.

The lead in Trannies (Dow Theory) worked out as the rest of the market followed the implications, however today's 3+% move looks like a short term flameout with the same or worse intraday 3C negative divergences today.

Finally like yesterday, we have a strong, even stronger 1-day overbought event with the Dow, NDX and SPX all Close Up/Volume Up, the most bullish of the 4 relationships, but also the most likely to create a next day close lower. Taken with another day of 9 of 9 S&P sectors closing green with ENERGY of all , leading at +3.04% and Utilities lagging at +0.34% with a WHOPPING 227 of 238 Morningstar Groups closing green, we are definitely short term overbought, combined with today's 3C signals and I wouldn't be surprised to see that pullback.

Just remember, the move I described ion the upside last week before it started, is even stronger than this as I envisioned it, so keep those expectations anchored and if you need it, I'll post the highest probability 4 hour and daily charts, this market will make a new lower low after this is done, we have just been too bearish with the Fear and Greed Index pegged at ZERO, extreme fear for nearly a week...Too many people on the same side of the trade.