HYG is Starting to Fail

Yesterday's 1-2 min leading positive divergences in HYG were meant to send it higher as it is an arbitragable asset that is one of the most liquid ways to trade credit since the banks all but eliminated their exposure to HY credit, making it nearly impossible for institutional money to put together a diversified basket of HY Credit, thus the rise of HYG and the manipulation of it. You may recall in mid-October as we were still heading down, part of my case for a strong, "Monster , sentiment changing rally" was accumulation in HYG, I said, "There's only 1 reason they'd accumulate it". Since it has seen distribution except for yesterday when it was accumulated again , but in much smaller size on 1 and 2 min charts, HYG is not positive beyond that. HYG didn't fire yesterday, the VXX whack/Smackdown didn't work, however today in what looks like a textbook Igloo/Chimney topping process, it led the market higher (algo arbitrage), yet HY Credit fell, this is because HYG is specifically programmed in to algos.

In any case, HYG is now showing a negative divergence that should wipe yesterday's positives off the chart given a bit more time.

 HYG positive divegrence from yesterday, it finally fired today.

Here's HYG's intraday divergence as you can see, it's seeing distribution.

This is just common sense, if you accumulate shares in something, especially in the size needed to act as a lever, you need to be able to sell them as well, you need higher prices unless you are willing to flood the market with supply with no buyers as you already saw, HY Credit is not buying this move today, it's just simple logic.

 The SPX/RUT ratio confirmed yesterday intraday, but not on a bigger picture scale, it confirmed a lot of today until the last hour , but again, on a larger scale, there's no confirmation of the price move, thus it's not likely to hold as this indicator has been spot on.

There's no higher high in the SPX/RUT ratio, unlike the higher highs in to lower SPX lows that formed the base, a positive development, what we have now is the opposite.

There are additional leading indicators that I'll post after the close and internals should be more than a little interesting tonight.

I'm loaded up for bear at this point, I just have a gold/GLD position (call) I need to decide what to do with, other than that, I feel good about the positions and the near term future, whatever the knee jerk tomorrow.

More to come after the close.