Market Update

First I started looking at the lack of correlation or the lag in Index futures vs the USD/JPY which is what they lifted with overnight, I thought it may be an op-ex pin at first, but then after a bit more digging uncovered negatives in the USD/JPY and $USD as well as a positive building in the JPY, although there doesn't seem to be much good reason for such a divergence, there also doesn't seem to be much good reason for this market not to just head higher and higher if there's all the liquidity they want from the BOJ, unless of course it's largely irrelevant as its a slush fund for picking up all of the JGB's the Japanese Pension Fund is about to drop in to a market with no bidders and as mentioned earlier, some days with NO trades at all.

 USD/JPY (candlesticks) vs ES/SPX E-mini Futures. It's evident where the BOJ's decision was taken overnight by following the USD/JPY, ES in purple and other Index futures followed the carry correlation , but since the open, the rate of change in both USD/JPY and more so in ES vs USD/JPY has fallen off, momentum is fading fast.

 Looking at the 1 min 3C chart for USD/JPY, again as mentioned earlier, there were no positive divergences suggesting a leak of the BOJ decision, I don't think the market consensus expected any real changes and the vote was very close, 5 to 4 so it almost didn't make it. In any case, 3C is confirming the path of USD/JPY overnight , but has fallen off in to regular hours as momentum has fallen off as well.

Beyond 1 min charts, it's pretty difficult to get detailed signals in the FX pairs so I have to look at the individual currency futures like the $USDX (/DX) and the Yen (/6J) and come to some conclussion based on those.

Here the 1 min $USDX is underperforming, a falling $USD or rising JPY or both would s end the USD/JPY lower and we'd suspect Index futures along with it.

The 5 min $USD has been negative and remains so, this is one of the reasons the USO trade looks promising as a falling $USD would send dollar denominated commodities higher, most likely any way as the legacy arbitrage correlation to the dollar that was destroyed under QE as the dollar was artificially pushed lower by printing, looks to be returning (something we've suspected for months and have seen evidence of within the same period.

You may remember a period in which you could look at the carry trades about 2 years ago and a few years before that and know exactly where Index futures and the stock market would be. Likewise, before QE, you use to be able to look at the $USD and know just about exactly where the price of gold, silver, copper and oil would be until QE killed that long term correlation which I believe is returning.

The Yen 5 min chart (/6J) is in line earlier this morning as there seems to be no evidence at all that the BOJ decision was anticipated or leaked, but a BIG surprise. 3C simply has confirmed the move in the Yen lower overnight, but again in regular hours there's a positive divegrence brewing. Either or both of these moving on their divergences would send the carry pair (USD/JPY) lower and likely send index futures and the market lower as well.

7 min VIX futures continue to show heavy intraday activity/accumulation, again, like yesterday it seems someone with deep pockets is expecting downside volatility.

I know it's hard to imagine, but  remember how hard it was to imagine the market moving higher in what some members have reminded me I called a "Face ripping rally"? In fact I had at least 1 member mad at me hat the S&P had moved lower in to the positive divegrence by 100 points, now that the SPX is 200 points higher from that same spot, the divergences were right and we put out trade ideas long on the days of the lows so it's not like we were putting out trades 100 points higher, but I'm not going to keep what's going on from you because it might upset you. The market is what is moving, I'm just telling you what we're seeing and if that member had bought at that moment instead of being mad at me, he'd have at least a 100 point gain. As far as I know, just about everyone else in retail was expecting and setting up for lower prices, advance notice is not perfect, but it's sure better than being blind.

 The VIX 60in chart continues to make higher leading highs, the significance is that this timeframe usually takes a strong amount of accumulation or underlying money flow to make moves this big, this fast on a timeframe that usually takes days to make the same moves we are seeing in hours.

As mentioned earlier, TICK was initially up, I suspect this is the morning orders that come in on limit by traders who hold down a regular job and place limit orders overnight or before the head off to work. I mentioned TICK went flat and dirty after with no trend, it's clearly trending down now, although there's been a little move up since capturing the chart, this takes quite a bit of time, thus the "Quick Update".

 Without using any tainted data, all new data from today, the SPY 1 min is showing an intraday negative

It has migrated to the 2 min, again I'm only using today's data so there's nothing tainted from yesterday.

 We also see migration to the 3 min chart, thus far for an intraday move, the migration is pretty fast and consistent and all negative/distribution.

 And being the 5 min chart is the first timeframe we use intraday that can show the larger institutional activity, the migration to a 5 min chart and leading negative is important.

 IWM 1 min leading negative

 Migration to IWM 2 min chart

And the 3 min chart in a sharp intraday signal

And the important 5 min chart suggesting this is institutional activity intraday.

The QQQ was not tainted as it trades on the NASDAQ rather than the NYSE feed, so I can use longer data with no problems. The 1 min is CLEARLY leading negative

As is the 2 min after confirmation which ended right around the area of the Igloo/Chimney top area.

This is a closer view of the same chart above on an intraday basis.

 And the QQQ 3 min leading sharply negative, getting worse as the day continues.

The trend of the entire cycle on the 5 min chart from stage 1 accumulation to stage 2 mark up/rally and confirmation to a clear stage 3 distribution/rounding top and head fake.

I'm working on some other charts , but I want to get these out.

For me the 5 min charts are important, more so than the intraday 1-3 min charts as they can swing, but the 5 min trend, if it keeps up, is giving us valuable information.

Also the USD/JPY charts are valuable to more than intraday action and maybe most interesting is VIX Futures and the charts there. I'll continue adding as we continue to gather data to see how the market is taking this, remember the old "Sell the news" motto.