Daily Wrap

Today was a choppy day, early on it looked like a key 1-day reversal day may be forming, but even then the caveat which was very real was it was much too early in the day to expect price to hold in that spot for another 6 or so hours.

In to the A.M. Update we had seen several things that didn't look like they'd hold water much longer, for instance the USD/JPY which rallied overnight...

 The USD/JPY rallied through the overnight session (European open un green) and right to the US pre-market/pre-open, but...

This divergence in to the open suggested the USD/JPY had made its high in premarket and in fact it did nothing else the rest of the day except chop around and it was a pretty choppy day.

The $USD had rallied overnight (strength for the USD/JPY ) , but it too had a negative divegrence in to the open and was flat the rest of the day, it currently has a leading negative intraday that may take it lower and as for the other half of the USD/JPY, the Yen...

It too had a positive intraday divegrence after declining most of the night, it just chopped around at the US open and through the day.

The $USD strength sent gold to its worst day in 4 months (how I wish I still had the November 22nd  GLD puts closed just before the F_O_M_C).

 Gold fuures had their worst day in 4 months, but as you see, nearly all of the damage was done in the illiquid overnight session, after the US open (green arrow), gold didn't do much.

Silver had its worst day in 13 months despite a story in the media about the US Treasury running out of Silver Eagles.

Again, almost all of the damage was done from yesterday's close, overnight with very little to none during the US day session (green arrow).

Crude popped to its best day in 2 months, I still have the USO November 22nd calls, but this was on a pipeline explosion and ISIS terrorist fears, other than very short term, I'm not crazy about oil here.

As previously stated, stocks were choppy with the NASDAQ 100 apparently not getting the memo...

The major averages today. While the Dow led, you have to remember the weighting of the index as Visa alone accounted for 40 of its 85 point gain, 1 stock accounted for nearly half of the 30 stock index's gain. The NASDAQ 100 never came back after the 1:15 downturn and closed red on the day with the Russell 2000 not too far from doing the same with a meager gain of +0.14%, the Dow was the clear winner with the SPX in close second.

As I showed earlier in the day in the Leading Indicators post, despite mostly negative leading indications, the SPX was tracking 30 year rates nearly perfectly as we have featured just about every night for the past 4 days or so,

 30 year rates (blue) vs the SPX (green), we don't see what happened the last hour as the bond market closed, but that's where it got interesting...

 I said I'd keep an eye on 30 year rates which were in decline until the A.M. update in which a positive divegrence suggested that decline halt, TLT did put in this positive divegrence intraday which sent 30 year rates lower, according to the day's correlation you'd have expected the market to move lower in to the close...


However for the first time today the SPX diverged from yields and headed higher in to the close.

SPX prices are inverted because I'm using TLT as the bond market closed at 3 p.m., but you can see the clear divergence which in the past, has always favored 30 year rates when the SPX diverges as it has in to the close.

More on that in a minute...

 There's a larger 60 min TLT positive divegrence forming, but I don't see a lot between the 1 min and 60 min so it's not a trade I'd take, although it's something I'd keep a sharp eye on as a rising TLT means lower rates and the SPX has been following rates...

For example, I know you have seen it before, but...

As I said above and probably a half dozen times over the last week, whenever the SPX and 30 year yields (blue) disagree , Yields win and the SPX follows along, that's why this large dislocation between the SPX and Yields looks like a significant decline which is exactly what was expected long before the dislocation developed (before the rally started).

As for other Leading Indicators, they are largely the same or worse than the afternoon update. Sentiment on 3 different timeframes in 2 different leading indicators is calling for lower prices with a significant divegrence, as I talked about last week, I'm often surprised at just how consistent these leading divergences are.

 FCT, the first intraday selling off against the SPX,

Our second version, HIO intraday selling off against the SPX and this isn't just today. On a longer basis...

A sharp leading negative indication among pro sentiment

and our confirmation indicator showing the same and their longer term track record...

The July top and in to the July Decline, the August cycle top and in to the stage 4 decline ad a horrible signal now that looks a lot like the 30-650 min divergences I showed in this post this afternoon...SPXU Update (with FAZ, SQQQ and some other indications).

And our confirmation (second) indicator showing the same.

As for High Yield Credit, it wasn't buying it, literally.

 HYG vs the SPX , HYG closed red as well

HYG vs the SPX after moving up in to early stage 2 mark up after the breakout and diverging.

And HYG's track record on a longer basis, again the current divergence is the worst of the bunch as we have seen in several leading indicators and several longer 3C indications today.

HY Credit which is not a manipulation lever also sold off intraday vs the SPX..

IT has on a longer basis in the trend since the October base

And it's longer term track record of a leading indicator with the same deep leading negative divegrence now.

In fact, even the safe haven Investment Grade Credit wasn't buying it today...

Investment Grade Credit vs the SPX.

So what gave us that end of day pop, if you thought a VIX Whack-a-mole, you'd be right.

Despite VIX short term futures outperforming and obviously holding a bid, spot VIX was whacked in to the close sending stocks higher, but still a choppy, sloppy day in front of tomorrow's interesting ECB decision being Mario Draghi was thrown under the bus yesterday.

Several of the averages are also giving the somewhat rare custom DeMark inspired buy/sell signal...

 SPY with buy and sell signals with a rather large sell signal right here, the previous signals are near perfect.

And the NASDAQ Composite with the same.

The Dominant Price/Volume Relationship was found in the Dow with 16 stocks, the NDX with 46 and the SPX with 205, the relationship was the most bearish, Close Up/Volume Down. This often results in a next day close lower, only the Close Up/Volume Up is a stronger next day lower close.

Of the 9 S&P sectors, 8 of 9 closed green with the defensive Utilities leading at +2.26% and Healthcare lagging at -.10%.

Of the 238 Morningstar groups, 161 of 238 closed green. These aren't high overbought signals except maybe the S&P sectors, but they are weaker signals with the lower volume on a higher close, the most bearish of the 4 P/V relationships.

Breadth indicators made absolutely no gains today, they are literally frozen in place over the last 3 days so there's no creeping improvement any where to be found.

Tomorrow we have the ECB (European Central Bank ) decision, strangely a day and a half before other central bankers who work with Draghi came out and threw him under the bus criticizing his leadership and decisions. It's not widely expected that he'll make any significant changes and if there was, it wouldn't be until the December meeting, but it could introduce some much needed volatility as the market is in a virtual stall.

Don't forget we have the volatility inducing Non-Farm Payrolls Friday as well. 

As I have said several times this week, especially with Leading Indicators now posting such strong signals, I have no problems being short here at all, I'm actually excited to be, however I'm on the lookout for any volatility, any upside price volatility that offers better entries or lower put premiums I'd take very quickly. Other than that, I have little doubt we'll be headed to new lower lows and I can't imagine it will take much longer (I can understand the market in a holding pattern through ECB and NFP, but not after that).