Daily Wrap

This morning's A.M Update was a near mirror reversal of yesterday's in which positive divergences pre-market sent the market up as soon as the bell rang. Today negative divergences in everything but the $USD/JPY still saw the market flip on the open as usual, but only after having given back significant futures gain overnight and in to internal weakness today.

 ES giving back substantial overnight gains in to regular hours (green arrow)...

TF/Russell 2000 futures giving back very substantial gains from overngith in to the open...

However NQ/NASDAQ futures didn't accumulate much in the way of overnight gains so there wasn't much to give back. wonder why? Because AAPL doesn't trade overnight like Index futures.

That's right, AAPL, the heaviest weighted stock on the NASDAQ 100, we don't know exactly what unless we want to pay $10,000 a year for a NASDAQ subscription, but in the not so distant past, AAPL has accounted for over 20% of the NASDAQ 100's weight itself.

To put that in to context, that's about the same as the bottom 50 weighted NDX stocks so if you had the bottom 50 NDX stocks and AAPL and the bottom 50 averaged a -1% loss on the day and AAPL was up +2% on the day, the NASDAQ 51 (in this case) would close up +1% despite the fact that 50 of 51 stocks closed red.

As AAPL makes a second consecutive +1.41% gain today, look at the correlation between AAPL (blue) and the NDX (green) over the last 2-days.

And as I said yesterday, if any stock other than the IWM is putting in an Igloo with chimney head fake move, it's AAPL.

As for the Averages today...

Small Caps and the Russell 2000 were by far, the worst performers, R2K --.93% on the day with the biggest drop in small caps in 3 weeks, but the SPX almost closed red as it tested into the red for the week only to be rescued, perhaps by our mid to late day positive intraday 1 min divegrence I showed. 

Somehow the SPX and ES managed to close right at VWAP...

ES/SPX testing red for the week and closing at VWAP.

However, don't forget the sell signal in SPX in our DeMark inspired custom indicator...

 SPX buy and sell signals, the last sell signals were at the August rally's stage 3 top and specifically at the head fake move leading to stage 5 decline with a near perfect buy signal at the lows.

This might be dismissed if EVERY major average didn't have the exact same buy signal at the lows and sell signal now including transports and as of this week, the VIX which trades opposite the market so it has a sell and buy signal, the only two of the year.

VIX sell and buy signal confirming all of the major averages.

If you noticed above, the SPX has a Doji Star today, now 5 of the last 6 days. The RUR which closed down -.90% has a bearish Engulfing candle today, The Dow which was up a paltry +0.23% also has a star and transports closed lower, -0.20% despite the fact oil crashed.

WTI was down to $74.06 at its lows, the lowest since Sept 2010 and the fastest downward ROC since the Lehman collapse. Brent Crude was down as well, -3.47% while USO was down -2.92%.

Take a look at Transports vs Crude, what do you think? Have they been popping on lower oil or following the market cycle?

You can probably tell which is WTI crude and Brent, the SPX is white, Transports are green. There's no doubt the airline index has benefitted from lower crude.

In fact, seasonal gas is the lowest since 2010.

Note USO's break of the $29 area today and the large volume, I know some of you are interested and it may see a dead cat bounce, but for a sustainable rally it will need some work.

Treasury Yields are also getting interesting, I'm not so sure they led today as much as hit local lows for bonds to be accumulated... I suspect we are about to see a strong move in Treasuries/TLT which you might consider playing TBT (2x short TLT) SHORT, thus creating a 2x long TLT.

If 30 year yields were leading the market, then it's little wonder the market hit resistance early on in the a.m. as yields failed to make a higher high (red trendline), I already verified the spike in yields (white arrow) which would be a drop in 30 year bonds, was accumulated.

 long term 60 min 30 year Treasury bond futures have a huge leading positive divergence just as does TLT (20+ year bond fund).

The shorter term charts are now screaming as well like this TLT 3 min, it looks like they are just about ready to go,  A Flight to SAFETY trade which sends yields lower and stocks have been following yields on the long end.

As for TBT, the 2x inverse TLT, the 10 min chart (and others) saw a sharp distribution signal today. I really think Treasuries are close to a strong move up, that would suggest the market makes a strong move down, but you know that has been my opinion since early October before the rally even started.

As we saw today, TICK was not even close to confirming the morning rally, it was trending the opposite direction. I was VERY surprised we didn't have a Dominant Price Volume Relationship, I even reloaded me data feed twice to make sure. However that doesn't mean we didn't get information, the intraday breadth sold off as the market tried to rally before the SPX tested red for the week only to be saved at the close with a dash to VWAP, but during that dash and otherwise through the day...

 High Yield Corporate Credit (HYG- the market lifting lever) did what it did yesterday and got out of Dodge City, except today in a lot bigger of a hurry, NO HELP WHATSOEVER IN LIFTING SPX OUT OF THE RED.

HY Credit also sold off all day and in to the afternoon dash to VWAP and the green with an SPX close of +0.05%

And as has been the case, professional sentiment can't be much clearer than this, sold off in to the close, sold off all day, sold odd all week and then some.

There was some $USD weakness on the macro trend of EUR strength we've identified (bigger picture) which didn't do much to precious metals with GLD closing at +.15, SLV closing -.40% ,  but DOCTOR COPPER (they call it that because it is suppose to be a leading indicator for market direction) GOT SLAMMED....

 COPPER selling off hard...

Many traders still follow copper as a global leading indicator and stock market indicator.

While we have been seeing strong charts in treasuries, don't forget VXX and spot VIX, both outperforming the SPX the last 3 days, here's VXX vs the SPX (normal prices) refusing to make a lower low this morning on the SPX move higher as VIX protection remains bid.

Yesterday I pointed out the near panic in the charts to accumulate protection, if Treasuries are the flight to safety, VIX is the flight to Protection.

the 60 min VIX chart making new leading highs,  this is a spectacular divergence, the kind I sometimes say, "I NEVER ignore".

Well we didn't have a dominant P/V relationship, but internals were still there to be seen.

4 of 9 S&P sectors closed green, but very weak, that's a range from +.02% to the best performer at +0.63%, Consumer Discretionary. Energy was the laggard at -1.33%,

Of the Morningstar groups, a weaker showing than yesterday with only 88 of 238 closing green.

While most breadth indicators haven't moved at all in about 10-days, certain ones did move, take for instance the Russell 2000 Advance / Decline line which deteriorated today as you might expect as did the NYSE A/D line and R3K A/D.

Momentum stocks represented by the "Percentage of NYSE Stocks Trading 2 Standard Deviations Above Their 40-Dayn Moving Average" which in normal times hovers around 35% has seen a rally peak of 25%,  but has fallen off to 16%, 9% points in just the last 3 days.

The New Hi / Lo Ratios from 1-day to 4, 13 and 26 week are falling like flies.


And some of the Breadth Indicators are coming apart fast...

 The Zweig Breadth Thrust is falling apart as it did at the past 2 pivot highs.

As is the McClellan Summation Index which has failed to even cross above zero in a large 5 month divergence.

And as can be expected, The McClellan Oscillator is also falling apart as it did at each of the past pivot highs.

As for the late day divegrence, I reiterate, this was an intraday 1 min divergence in most cases which may have been just to ramp the SPX out of the red and back to VWAP or it could be for tomorrow's op-ex max pain pin as the market typically pins around Thursday's close or as I warned, in increasing volatility, small divergences like that tend to get run over more frequently.

I may not have the exact time and date of a decline, but I can tell you I'm as sure we are going to get a massive decline as sure as I am I'm going grey.

If anything interesting pops up in Futures, I'll be sure to let you know.