Fade Divergences are Worse

The market divergences are taking effect, now just to determine if there's any pin involved, but I suspect most options are calls and thus a move lower makes them worthless tomorrow.

In some way, just about every ramping lever that could be used was used, apparently for a gap fill, but the opening almost always is a reversal of the pre-market trend. Typically there are at least 2 to 3 intraday trends through the day so where we go from here and what the usefulness of the trend right now is, is important.

The VIX, as you probably saw had some "erratic" behavior this morning to say the least, smashed higher, while VXX short term futures outperform the SPX. HYG intraday was employed until the gap fill as well as a pullback in TLT, not exactly the SPY Arbitrage, but all the same movements, obviously supportive of the fade/gap fill as TLT's pullback and 30 year bonds sent yields higher.

The ramping assets seem to be fading off with TLT putting in a positive divegrence now, HYG stuck in the red at a flat range, no longer moving higher, Yields should reverse with the 30 year bond/TLT , as mentioned VIX short term futures are outperforming and the divergences in the averages are worse and worse.


Volatility is plainly increasing in the market as today's open took out the lows of the last two days in every major average except the IWM with the VIX smash coming just after the open.

A few quick charts and since US PMI just missed making it a global full house, I thought I'd throw in Dr. Copper and for others, their preferred Dr. Lumber....On a side note, thus far Financials look like they are showing real relative weakness.

The divergences are not only stronger in time and depth on intraday 1 min charts, but more importantly migration as they move to the 2 min and longer charts. Lots of whiplashing going on with increased volatility, remember the market NEVER makes it easy or obvious.

The averages...

 SPY deeper intraday 1 min negative

 SPY migration to the 2 min chart with a deep leading negative intraday.

 QQQ 1 min

QQQ 2 min migration

 IWM 1 min

IWM 2 min

The Levers...

 VIX vs SPX (no inversion), VIX is smashed and trashed, yes...This looks like normal, non-manipulated trade...(sarc)

However the short term VIX futures vs inverted SPX (green) are outperforming.

Volatility is still bid. Don't forget the VIX buy signal, 1 of 3 signals in the last year and a half, the other two were dead on and the Bollinger Band squeeze.

 HYG used intraday, but still red on the day

HYG's divergence...

The levers are giving out.

TLT used intraday on the pullback and 30 year to send rates higher.

30 year yields gap lower with the market (normal) and then higher on bonds pulling back, however...

TLT has an intraday positive divegrence on the pullback and 30 year Treasury ,futures...

 Are also regaining 3C support.

As for Dr. Copper and Dr. Lumber, the forerunners of market analysis, thus the title "Doctor"...

 If you have heard of "Dr. Copper" or the newer Dr Lumber, then you know what these mean, copper above, Lumber below.