Of course QE in the European Union is not on the table and never will be unless they change the charter, akin to a constitutional amendment and one that Germany will never support, even as Draghi's own colleagues throw him under the bus just 2 days ago in a virtual mutiny criticizing his leadership, decisions, secrecy, and many other aspects, what they don't seem to realize is it doesn't matter what they say, Draghi, an ex-Goldmanite takes his orders from GS and thus there's no debate, he's not interested in what colleagues have to say because the decision has already been made for him right from GS and he's far from the only European leader who's alumni and have given GS plenty of money making opportunities(including the Italian and Greek PM's),
Can you spot the Draghi press conference?
However, don't get too attached to the current currency prices, we did some in depth analysis just yesterday and the take away was a lower $USD coming which is already showing up in 3C tonight.
In fact, USD/JPY has a current negative divegrence right now that seems to already be sending the pair lower.
So far this is also having the effect of sending ES Index futures lower on their own negative divegrence.
In fact, Russell 2000 futures are looking pretty bad themselves.
This is not a good week for Kool-Aide drinking bulls, they lost F_E_D QE, the Japanese GPIF stock buying is a farce that was priced in to the market 3 weeks ago and now it appears they won't even be able to engage in any stock buying for up to a year, "IF" they get the laws changed governing the nation's pension fund and the ECB had no Kool-Aide - that's 3 for 3 and the GPIF story that was priced in 3 weeks ago needs to be unwound as a panel member of the GPIF said this week it could take a year before the law is changed allowing the GPIF to make good on the new, higher stock allocations!
Reading some headlines, you have to laugh, it's hard to take the following seriously...
For real? In a matter of 2-days back to back?
By the way, that's USO vs the SPX above, either the market can't make up its mind; the headline talking heads have no idea what they're talking about; or Those who know don't say and the market didn't move for the reasons they say.
Earlier today I brought up correlations, specifically the 30-year yields strong 1.0 correlation with the market which we saw in action today and compared it to the days in which the USD/JPY carry trade correlation was co consistent, you knew exactly where futures were just by looking at USD/JPY and before that it was the EUD/USD. While I conceded that although this is not the correlation it once was 2 years ago, it's sometimes still there as a market ramping method, especially on overnight trade. Today was one of those days in which the USd/JPY led the market by the nose all day, to the point of absurdity as its more than obvious algos are tuned in to the carry pair.
Still the 30 year yield had its correlation as well...
As mentioned, the Bond and currency markets are bigger and more sophisticated (better informed) than the equity market and they seemed to be hand in hand today, so why the need for HYG support? I took a quick look at the SPY Arbitrage from Capital Context and was surprised to see it active. This is a short term form of market manipulation by sending HYG higher and VXX/TLT lower, it fools algos in to thinking the market is risk on.
I found that a bit odd, but more importantly where the divergences in HYG and TLT as well as 30 year treasury futures.
As shown earlier, the HYG divergence started at 1 min intraday, but soon after as it stayed flat and no longer led the market, the divegrence migrated out to 5 mins in o time at all.
Also as shown and another aspect of the market lever, SPY Arbitrage, 30 year rates which are up today on 30 year bond/TLT weakness saw TLT and 30 year bonds putting in stronger divergences as they were stuck at 1 min and 60 min oddly yesterday.
Interestingly as Index futures are fading momentum right now, the 30 year T Futures are right there to put in a positive at the same exact time (keep in mind the market has been moving with 30 year yields and the 30 year bond trades opposite yields, thus this positive divegrence tonight...
I showed quite a few Leading Indicators the past several days that are leaning to extremes way beyond the October lows, even though they were a "part" of forecasting the move higher. Thus the only interpretation I can take away from that is they are pointing to a stronger, more volatile downside move.
Pro sentiment ended the day worse off than the intraday Leading Indicator update and as already mentioned and confirmed in the last post, Looking Back To Move Forward., which confirmed that LEading Indicators weren't that strong at the October 15th low right from an October 15th update as opposed to how strong they are now, implying an even stronger leg down than this last move up.
The fact is, smart money is quiet about what they do unless they want you to know which of course will always be to their benefit. However we've found more than a few ways to identify their actions such as 3C or the leading indicator above.
So why selling in to price strength? Price strength offers demand which is needed to move positions of a billion dollars in a single stock (not uncommon).
In any case, even the flight to safety Investment Grade Credit was hit as posted last night.
Some are calling this ( "some" = very few) are calling this a "Sucker's rally", I'm not really too interested in blanket statements unless there's something in the way of objective evidence that screams to you, "Pay attention".
Several of his reasons included the Dow's advance was recently almost half because of 1 stock, VISA responsible for 123 of 221 Dow points. "Little Institutional support", beyond some levers like HYG, I'd say there's virtually no institutional support, example just below...Also the diminishing volume on the rally, well that's obvious; and weak market breadth-see below at the bottom-this is as on as can be.
Any real institutional support looks to be more on the "We won't start selling yet" and lasted until right about...
As for the shakeout concept which was a theory in late September during the last week of window dressing, it's absolutely no different than the H&S "3 places I'll short a H&S top", with the one place I won't being a break of the neckline, exactly where technical analysis teaches traders to go short and place their stops just above the neckline.
Take the Russell 2000 / IWM for instance, this is the 1 stock that should lead any risk on move in the market, so much so that even in Congressional testimony Bernanke always refereed to the Russell 2000 as his bellwether, not the household names like Dow Industrials or S&P-500.
Just so you don't think I'm cherry picking a concept, I randomly chose a post on the concept and came up with HLF from August 5th (although we can find posts years old talking about the EXACT same concept), HLF (Long Term) Position Trade Follow Up / Set-Up.
Here's the actual chart and the actual text with the chart...
"As always, these are the 3 areas I'll short a H&S top and the one I won't, the head, the right shoulder, never on the break of the neckline and then after the new shorts who entered on the break of the neckline are shaken out which is where we added to the HLF partial position short on July 22nd as it was up +25.45 %,, Adding 25% to HLF Short Position, which wasn't an easy short trade to make emotionally, but the charts showed us it was the right place and time to make it."
Now, considering what I thought about the resolution of the market after this monster rally which you can read as it was written at the time in Mid-October BEFORE the rally started, which was that after the move, we'd see a new lower low as the move is only a means to an end, NOT the END... Tell me you don't see the concept in the larger primary trend of the IWM / Russell 2000?
Walk the talk...
Now for the end of post stuff, the Dominant Price Volume Relationship was nearly EXACTLY the same as yesterday, so much so it's creepy. The Dow , SPX and NDX all had Dominant Relationships, Close Up and Volume Down, the most bearish of the 4 possibilities just like last night with the Russell 2000 having no dominant relationship just like last night. It gets creepy when you look at the numbers, 15 of the Dow 30 stocks (vs 16 last night), 47 of the NASDAQ 100 (vs 46 last night), None of the R2K (just like last night) and 202 of the SPX500 (205 last night)...
Not sure what that means, but I doubt it's a coincidence.
As for the S&P sectors. 7 of 9 green (8 of 9 last night) with Energy leading at1.26% and Utilities lagging at -1.70%, the opposite of last night as they led at +2.26%.
Of the Morningstar groups, 170 of 238 closed Green, not too far from last night's 161 of 238, something is up with these internals, I've never seen anything like it with them this close. I don't know what it means as I've never seen it other than the S&P leader flip-flopping to the laggard the next day.
Again, breadth indicators for the 5th night have barely moved and any moves were so slight they were not even worth commenting on (both declining and advancing, but nothing more than a percent or so. Considering new ATH highs and a near 1% gain the last 2 days in the SPX, you'd expect some movement, another aspect from above
Tomorrow morning is Non-Farm Payrolls, one of the biggest data points of the month, I have no guess what they'll be or how the market would react in either case, I'll just remind you that what happens in premarket is 180 degrees different than when the opening bell rings. We also have weekly options expiration, typically they'll \pin the market near Thursday's close, at least until 2 p.m. The last 2 hours of the day give us some of the best data of the week.
I'll be checking in on the Nikkei 225 as it has not been looking good on the charts (remember I almost wrote about it last night as there was a large plunge in just under an hour of nearly 400 points.
The chart for Nikkei 225 futures is just as interesting...
The Nikkei 225 may tell us more about the GPIF and thus the market's view of more BOJ Kool-Aide than anything else including Abe and Kurida's say anything, like the European Union's Jean Claude "Sometimes you just have to lie"Junker.
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