Sunday Night Index Futures

I hope everyone had a fantastic weekend / Holiday weekend! I'm so proud to tell friends and family how lucky I am to have such a great group of members; how so many of you are not only great friends, but like extended family. 

There aren't many people who can identify, understand and when necessary, empathize with what we do no matter how caring and well intentioned they may be. It takes a certain kind of person to do what we do (and an even more rare quality of person doing what we do) and I think if you don't live and work as we do, it's simply incomprehensible... So this Thanksgiving when we sat around the dinner table, after recognizing how blessed I am to have such a fantastic partner in Andrea who not only empathizes, but has taken up trading as well, my next thought was how lucky I am to be able to do what I love, to do it in a way that hopefully helps others and to do it with people who couldn't be more deserving. It's truly remarkable and defies even basic statistics (or what I usually call the 80/20 rule) to have so many truly fantastic people to work with every day over the years. So... THANK YOU!

 Myself and Andrea...

Andrea's new job as pilot for Sky 10;  she recently left flying Trauma EMS as many of you know and loves the new job- I love the helicopter rides. This is a rally and fund-raiser for volunteer firefighters which we brought the helicopter to for the kids to have their pictures taken in. Believe me, the pre-flight check was extensive as they had turned every dial and flicked every switch!

As for the market.

I was just poking around looking at Index futures as they begin to trade tonight and while we have a long night ahead of us, after Friday's last post, CHANGES IN CHARACTER LEAD TO CHANGES IN TRENDS... when considering recent SKEW volatility, of course VIX's (custom indicator) buy signal and pinching Bollinger Bands and maybe most significantly Friday (not the SPX finally breaking below the 5-day moving average) and last week on the whole, was the HYG distribution leading to the near crash in High Yield Credit, I found the near term charts flying the same red flag as the macro probabilities...

For instance...

 As you probably know, I won't take any directional; trade unless at least the 5 min Index futures 3C chart confirms. Above is ES/SPX E-min futures with not only a negative divegrence, but a very clear negative in to Friday after the market was propped up for Black Friday.

While most citizens aren't going to understand PMI's, ISM, Initial Claims, Non-Farm Payrolls, etc...they will understand the radio on the way home from work saying something like, "The Dow closed red today" or the "Dow Closed down 200 points today".


This is the 5 min NQ/NASDAQ 100 Futures 3C chart, it too shows the same negative 3C divegrence as ES above and quite specifically in to the end of the week, just as it seemed that HYG's support of the market was also over on distribution through the week and a sharp decline on Friday.

 HYG's (light blue) perfect support of the SPX (green) after accumulation on the 19th and then distribution in to the move higher in HYG as HYG up and VXX down is all that's needed tp activate the SPY Arbitrage lever and HYG alone is often used to lever the market.

HYG/3C confirmation of the down trend to the left (green) with a 3C positive divegrence which I commented on as "bothersome",  just like in early October, "There's only one reason to accumulate HYG-to support a rally."

However it seems the lever pullers weren't willing to stick around long in HYG and started taking profits as soon as it moved above the 19th's lows were it was bought until distribution overwhelmed HYG and they were out with the correction and near HY credit crash Friday.

Credit leads, stocks follow...

 This is the last major pivot when HYG diverged (price) vs the SPX, at the August cycle/rally's September stage 3 top head fake high which led to the 1200 point Dow loss in to the October lows. Now compare that divergence (above) to now...

The white arrow is the accumulation and leading of HYG to support the market as we saw clearly in early August, then the September head fake high and divergence vs SPX (green). The size of the current divegrence is enormous and that's just on a shorter scale/context.

 Back to the 5 min Index future charts...

 TF/Russell 2000 Futures 5 min 3C chart shows the same after an initial pump, it clearly dumped in to Friday as it would seem Black Friday sentiment wouldn't be swayed at 1 p.m. on Black Friday, EVERYONE IS ALREADY SHOPPING.

Impressively, as the shorter term charts migrate to longer timeframes as the divegrence grows in strength, the 5 min chart's negatives include the 7 min charts as well.  These shorter charts tend to be "timing divergences" when we already have macro themes in place on the long term charts as we do...

 7 min ES/3C trend, again negative/Distribution in to the "Save Black Friday Sentiment" week of trade we saw last week...

 NQ/NASDAQ 7 min showing the same trend...And I thought Friday would be a quiet day...IT'S ALWAYS THE QUIET DAYS THAT HAVE THE MOST UNDERLYING ACTION...

This is one of the reasons I say, "Price is deceptive".

TF / Russell 2000 futures 7 min chart also with a sharp negative 3C divegrence and the Russell following the 3C warning.

This is interesting not only because of all of the things in place mentioned Friday (as well as numerous other times), but specifically the "Full House" effect of the intermediate timeframes...

 Such as a 15 min chart (TF) with the Black Friday save or small positive divegrence to keep prices from sliding further and the distribution in to the highs and then Friday's behavior during the cash market.

This includes the 30 min charts as well (TF 30) which shows the initial HYG divergence I saw on the 19th and commented on, that it was arousing some suspicion. However look at that leading negative divegrence to the far right of the chart in to Friday.

These are only part of why this is impressive, it's the macro trends already in place and the shorter term timing divergences jumping in as well when the levers such as HYG or USD/JPY's correlation to the market/Index futures has also failed. All of the market ramp levers are breaking/broken.

USD/JPY (candlesticks) vs. Es/SPX Futures (purple line)... Remember we saw this break up starting well over a week ago as this has been a macro trend not only for the JPY carry pairs, but the $USD and Yen independently.

The normal near tick for tick correlation is busted as ES sees a Black Friday SENTIMENT save and falls sharply out of correlation with USD/JPY (the JPY pairs)...

Add the Macro Index future charts...

 ES 4 hour at the July highs leading to the August lows. The divergence at the August cycle/rally's head fake move in to September (yellow) and the decline to October lows and a worse divegrence now (look at where price and 3C are now relative to the past 2 negative divergences).

 4 hour TF / Russell 2000 and the same pivots.

And NASDAQ /NQ 4 hour looking virtually exactly the same.

However, the real macro trend is the weekly charts such as ES below...

 The green arrow is in line, there's no divegrence large enough to disturb the trend or call a divergence until we move in to 2014 and there it gets very sharp. For a divergence to show up on a chart this long, it has to be enormous.

The main point is the Index futures are showing what I call a "Full house" across multiple timeframes (multiple timeframe and multiple asset analysis, confirmation).

This is what really grabs my attention.

I'll take a look at futures before I turn in, if there's something very interesting, I'll post it. Otherwise, get some rest after all of that turkey and I'll see you in about 12 hours.

CHANGES IN CHARACTER LEAD TO CHANGES IN TRENDS

I'll try to keep this short so you can enjoy your holiday weekend. Black Friday felt a lot darker in the market than usual, in fact most of the averages gave up a good portion of the gains on the week and on the day, not pretty...

 On the day, a pretty solid drift down, in fact to prevent people driving to the stores from hearing the Dow closed red today, there was a late day effort to secure the fractional gain, close to dead flat without the ramp it would have been red...Dow-30 in white JUST closes green.

There was NO positive divegrence in the Dow...

The white trendline is the difference between red and green , actually my charts are showing the Dow at 0.00% on the day, but it almost didn't get that.


And could this have been the work of credit? You saw the 3C charts deteriorating badly today...You've also seen the HYG support, accumulation turn distribution this week leading to today.

 HYG (blue) longer term vs SPX (green), the last negative divegrence between the two was at the September head fake highs leading to the October lows to the left, look  at the size of the divergence between the two now. You'd barely know HYG was ramped to support the market the last week looking at this chart, but it was.

 Here's the ramp in HYG on the 19th, it supporting the SPX and then today, it didn't just come out of nowhere. This is the detailed 3C distribution trend...

 After accumulation on the 19th, distribution just got worse and worse in HYG until today's break lower, perhaps stocks are already following credit's lead, but I sure wouldn't want to be long going in to Monday morning.

Here's a closer view of HYG vs SPX over the last week and a half, note the near perfect support...Well that ENDED today.

Not only in the HYG lever, but USD/JPY as well!

 Es (purple) overnight losing ground until the European open, then regaining in lockstep with USD/JPY, right in to the US cash open and then...

BREAK and hard! This is addition to a larger break between the two already in place and USD/JPY looking as if it too is ready to roll over.

As for other credit in the HY space... no better...

 Again on a larger timeframe the last time HY Credit and the SPX diverged was the September highs leading to the October lows (red arrow) and look at the size of this divergence!

As for near term, the past several weeks have seen HY credit pick up the pace of sell-off, I wonder why?

As for leading indicators, remember the VIX accumulation in VIX futures Wednesday on the 1 min chart, joining the longer term charts?

 VIX (blue) intraday vs ES, note VIX bid moving up WITH stocks early until stocks fall in the late morning?

 Here's where we had our VIX buy signal, note the uptrend in VIX until last week's levers needed to be pulled, and today VIX rockets back up on a half day!

In fact looking at our buy signal and Bollinger Band pinch, today almost looks like the start of that highly directional move the pinching bands are pointing to.

 Again yields lead stocks (red) vs SPX (green), this longer term chart shows a MASSIVE divergence after a very healthy set of treasury auctions this week.

And near term, what do we know about changes in character? Look at the change in the drop in 5 year yields remembering they lead price toward them!

 Even the longer term 30 year yield closed at an incredibly low 2.91% and has diverged massively with the SPX which tends to follow it even intraday.

And a closer look, talk about a change in character, SAFETY is BID.

This was an ugly market as you can see by TICK which has nothing to do with volume, it has to do with advancing and declining stocks...

Not only did it have a huge change in character and went negative on the day, but until the DOW's last minute save from red, it had not crossed above +500 for almost the entire day! That's a lot of stocks going no where but down.

After a record some 29 days, which last time it happened was followed by the Crash of 1929, the S&P CLOSED BELOW ITS 5-DAY MOVING AVERAGE FOR THE FIRST TIME OIN OVER A MONTH!

IT'S NOT MUCH, BUT IT IS A CLOSE BELOW THE 5-DAY MOVING AVERAGE, "CHANGES IN CHARACTER LEAD TO CHANGES IN TRENDS..."

Speaking of which, our SPX/RUT Ratio looked like this today...

Hmmm. it was warning of a move lower as of Wednesday and is far, far below the SPX's correlation above.

As for the might Transports, well they gave nearly EVERYTHING back today...

Transports on the gap up and sell off today, a couple more hours and?

Be aware of today's post, BEFORE THIS HAPPENED IN TRANSPORTS...

Be Careful with Airlines

Lots of recent trends have changed this week...

Today's

Important Intraday Update

First Two Alerts of the Day-Copper and Oil

Early Indications, HY Corp. Credit Smashed

Wednesday's

HYG Starting to Fail, VIX 2 Cents From Green

AAPL Update

Quick USO Update

Leading Indicators / SPY Arb...

Tuesday's

Russell 2000 Map- IMPORTANT POST

VERY BAD Market NEWS...Richmond F_E_D, CONTEXT, SPY Arbitrage and TLT-30 year Treasuries...

Quick Index Futures Update-VIX Futures are SCREAMING (now higher than when posted)

Monday's

HYG CONTINUED DISTRIBUTION

Lots of good reading above that may take on a different light after the charts above today.

As for the Dominant Price/Volume Relationship...

The Dow, NASDAQ and SPX all were Close Up/Volume Down (remember these are the component stocks of each average, not the average itself) for each, 15 Dow, 70 NDX100 and 266 SPX-500. This is the most bearish of the 4 possible relationships.

The Russell 2000 was Close Down/Volume Down or what I call, "Carry on" as the trend tends to continue for the index, this was dominant at 1048.

The S&P Sectors saw a slightly overbought 6 of 9 close green, not good paired with the Dominant P//V relationship. Consumer Staples led at +1.277% and Energy lagged at -6.42%, Glad we stayed away from oil as we saw it as a crap shoot, not trading.

Of the 238 Morningstar groups and sub-industries,  115 of 238 closed green, an odd divergence with the S&P sectors.

A Couple Breadth Indicators...

Other than the larger divegrence in the NASDAQ Composite's Advance/Decline line, there was an extra near term one at the small white trendline.

NASDAQ COMP in red and the A/D line in green.

AlL NYSE stocks trading Above their 200-day moving average vs the SPX (red)...

Not only is there a larger divergence (yellow arrows), but the range mentioned, now near 3 weeks is looking like it's about to rollover as mentioned Wednesday.

There are quite a few problems above, remember my prediction in early October before the rally, not that we'd just see a face ripping rally, but it would lead to an even larger decline as the rally was  JUST A MEANS TO AN END, NOT AN END IN ITSELF.

HAVE A GREAT WEEKEND!

Important Intraday Update

For a half day/holiday , something is going quite wrong in the market today. I'll try to get leading indicators out as well. Many charts I haven't notated, I don't think they need them and I'm pressed for time.

If anything, you'd normally expect a higher proportion of retail traders (vs normal market days) to be active today and we know their bullishness is off the charts so the below charts are difficult to explain away unless there is in fact something very wrong here.

 My Custom TICK Indicator vs SPY, note how low TICK is, this has NOTHING to do with volume and everything to do with the proportion or ratio of advancing stocks per bar minus declining stocks per bar. Compared to the recent trend, today stands out like a red thumb.

 As does the TICK Index , not a move above 500 all day!

 IWM intraday just lost it at new leading negative lows for multiple weeks

 IWM distribution in to Wednesday's close and in line today.

 IWM 5 min with a very fast/deep leading negative through the week.

 Considering the macro trend and last negatives at the last major highs, this is a real problem -2 hour chart.

 QQQ intraday today has lost it 3C and now price.

 Deep QQQ intraday distribution

More QQQ deep

 Considering where QQQ price is on this 4 hour chart and the size of the last 2 negative divgerences that took it to lower lows, this speaks for itself. This is the epitome of the expected market move to come next.... very similar to ALL Leading Indicators

 SPY intraday

distribution in to Wednesday close

deep leading negative 15 min SPY.

Again, all things considered, it's not that hard to believe in a move much stronger on the downside than the up...