Market Update

Looking around this morning, it seems like yesterday's late day intraday 1 min divergences were in fact likely both a move to SPX green on the day/week and VWAP as well as bringing price to the options expiration max pain pin level as prices in the averages have not strayed far from yesterday's closing prices and the 3C charts seal the deal.

For instance...

 Yesterday the SPY saw a negative divegrence on the a.m. highs as well as some other divergences like 30 year yields. The late day positive that I saw and posted here Volatility Ahead Part 2 seems to have been much less about volatility and just getting the SPX green for the day and the week as it had been testing red, as seen in last night's Daily Wrap , the move was more about those two things as price closed at VWAP and apparently about the Max-Pain op-ex pin, which as almost always, opens and pins right at Thursday's close, you notice we haven''t strayed too far from yesterday's close today.

The A.M. Update this morning expected very little price action and more max-pain op-ex pin behavior as 3C was in line with price, that has continued as you see above in ES futures/SPX E-mini futures as well as NASDAQ and Russell 2000 futures...

TF- 1 min R2K futures...

 Even the HYG divergence has returned to in line this morning...

And the TLT divergence that looked like it would be headed lower was just to get it to the pin area, note yesterday's yields spike around a p.m. were not a move for the averages to follow, but rather a move toward the low end of TLT's accumulation zone and as mentioned last night, the move was accumulated as seen above. The yellow trendline is yesterday's close so 20+ year treasuries have had very little movement.

VIX was also included as it looked as if it were to come down, but only to the area of yesterday's close with a slight negative this morning as it has been a bit above yesterday's close.

The intraday internals are similar to the last several days, very narrow, very thin, trendless...

 TICK is very narrow again, but the spikes have been to the downside.

Although everything looks like an op-ex max pain pin today, there are still signs things are deteriorating, there's still a message from the market...

 Take the SPX/RUT Ratio Custom Indicator, it has been right on with price moves, yesterday it called a top in early SPX action as I mentioned above (as it was in several indicators), but right now it is calling for lower prices, just follow the tredlines and where prices and the indicator are relative to the trendlines, SPY owes some downside according to this, but it's in a op-ex pin for now...

30 year yields also called a top yesterday morning in the SPX as they refused to make a higher high and again, like the SPX/RUT indicator above, they are calling for lower prices as well, but again, right now Wall St. isn't going to give up all the premiums they wrote by letting the max pain pin slip.

There are other indications as well, many were already seen yesterday in Leading Indicators, but a quick round up...

Like the macro trends on the 60 min charts, the near term 5 min charts, suggesting timing is right there show the $USD getting weak, the Yen getting stronger and the Euro getting stronger which will only weaken the $USD more...This should also have the effect of knocking the USD/JPY down as its macro trends indicate as well.

 $USD 5 min negative

Yen 5 min positive

Euro 5 min positive

The value in these shorter term charts is the macro charts, the larger picture that show the path of highest probability which eventually the short term charts should follow as they are now, take the longer term $USDX and Yen macro charts for example, both suggest the USD/JPY sees strong weakness...

 $USDX leading negative

Yen leading positive.

These are not waiting for additional strengthening or weakening, these are huge signals over a long period, they can and should fire off nearly any minute and these are the types of signals and confirmation that I don't ignore and for very good reason.

The averages are far beyond there which may want to cause you to dismiss such charts as mistakes, the fact is they are at the most serious divergences of the year and are easily confirmed using simple breadth charts that have broken down and showed more stocks trading lower than higher during the same period. What these charts are telling us is the move to come is well beyond the emotional intensity and percentage move of the October rally which was a means to an end, not an end.

 SPY 30 min

QQQ 30 min

I don't see charts like this very often, I see them fail even less often and the moves they make are beyond my immagination in selecting downside targets. Increasing volatility as we have seen this week just tends to make the actual break much quicker and more unpredictable, this is why I have ZERO problem maintaining my short positions. This isn't information the masses have, they see a new high and a strong move and assume that's institutional buying, if it were, why did we see institutional buying up to 2 weeks before this rally and were able to not only call the rally within 3 days, but call the intensity of the rally due to the size of the institutional buying?

We also called the reason for the rally, put simply, as I said near the lows, "I get nervous about calling a top being in when so many other people are saying the same, Wall Street often flips the script when too many people are on the same side of the trade, they can't make money in a zero sum game when everyone is on the same side of the boat"...
Which was the case at the October lows.

Additionally...

VIX looks like it's going to put in a huge upside move while Treasuries, the flight to safety trade look to do the same...