Early Indications

So far we're pretty much right on track, we have a bounce, although I wouldn't call the day this early in the morning, but as expected:

VXX/VIX futures are declining (part of the ramping lever mechanism because the market doesn't have the strength to bounce without help)...

It looks like a gap fill is likely, we're almost there, but as this 5 min VXX (short term VIX futures ) shows, there's a large positive divegrence and base backing it up , that is still in effect and will soon lead to VIX / VXX heading higher...thus the reason I believe we are seeing only a 1-day oversold bounce today. I made reference to this yesterday and this morning as well, A.M. Update,  when looking at the Index futures timeframes, only the shortest are positive and after, the more powerful longer term starting at 5 and 7 mins are positive, again, only a short term oversold bounce...

HYG is somewhat helpful intraday as a market lever, but the bigger story here BY FAR...

Is how Institutional money and their risk asset (High Yield Credit) is diverging from the weighted averages of dumb money. Smart money is selling thei risk assets nd HYG is deeply leading the SPX negative, by far the largest divergence between the pair we've seen since using leading indicators. The area in white is today's help on the upside in HYG, it's insignificant beyond today's intraday trade.

TLT as expected has also gapped down, although it is showing a growing positive divegrence intraday.

TLT's gap down this morning and positive in white. However I'll be updating Treasuries on their own. THERE MAY BE A CONVERGENCE TRADE IN THE MAKING WHICH IS BONDS DOWN/YIELDS UP AND SPX DOWN AS THEY REVERT TO THE MEAN. For example...

SPX (green) vs 30 year YIELDS which move opposite 30-year bonds/treasuries. Thus TLT moves down and the red yields move up as the SPX moves down. This is the opposite of conventional wisdom in which you'd expect bonds to rally on the "Flight to Safety" trade, but if that bounce in yields (pullback in Treasuries/TLT) is not conventional wisdom and rather a "convergence pairs trade" (short SPX, short Treasuries), then we may be looking at a convergence trade. I'll have to update TLT and Treasury futures in another post to see if this looks like a probability.

The other lever expected , specifically in overnight trade to be ramped as mentioned in yesterday's update, USD/JPY, is right now at a new high on the week at $119.28, helping the market broadly as a lever.

 USD/JPY ramped overnight as posted yesterday,

"I suspect we get some kind of overnight ramp/support"

 ES in purple (SPX futures) weren't following until the cash open at 9:30 when they shot up to USD/JPY's lead from the overnight lift-a-thon in the JPY pair also as expected yesterday.

However as we have been pointing pout, the once mighty 1.0 correlation between USD/JPY and ES is dead, you can see that on a simple 5 min chart, even this morning's ramp on the open in ES isn't close to the correlation... More evidence this is a bounce only, best sold/shorted in to.


TLT, VXX and HYG have come together to do what we also expected, activate the SPY Arbitrage lever which is good for about $.30 cents of the SPY's +.74 gain today alone without USD/JPY.

You could have (and I hope some of you did) play at least a dozen trades, many using weekly options just on yesterday's bounce analysis alone and have a tidy profit to show for it already this morning.

From this morning's 8:02 A.M. Update I said,

 "I do expect Russell 2000/IWM outperformance on a relative basis and NASDAQ/QQQ underperformance on a relative basis."

Thus far, IWM has tripled the QQQ's performance with SPY in the middle...

Also both Silver/SLV and gold/GLD have gapped down as expected yesterday as well, I'll update these separately also.

TICK remains fairly neutral, it hasn't done much above +750 which is pretty mmild with the IWM up over 1%, but I'll be addressing that as well.

I'll likely have some shorter market updates today as I expect things to move faster in underlying trade and by the time I post all of the charts for a regular update, things have already moved. I'll also be updating opportunities I think are interesting as I said yesterday, a bounce is a "Gift Horse",

So far, so good. I hope you made some money on some of the ideas/analysis from yesterday, last night and this morning-all saying the same thing. If you didn't, no big deal, this is a better opportunity (sell in to strength or short).