Futures Follow Up

As I said, if I see anything interesting.

In tonight's /Daily Wrap , if you had time to read it yet, I ended with,

"I'll check futures before turning in and update if I see anything exciting, but I'm expecting some JPY  or USD/JPY overnight weakness, again the opposite of the overnight session last night."

This is one of obvious levers for ramping the market in overnight trade which it did last night, but I suspect from the looks of $USD and the Yen futures (/6J) that we'd see some USD/JPY weakness, which looks to have been building all day.

Well just as I published and looked at futures, USD/JPY started getting volatile on the downside.

 The USD/JPY which stalled out through the cash market right around the European close is now starting to make some moves to the downside (far right) on this 1 min chart.

The reason I suspected USD/JPY weakness are the individual currencies (futures)... for example...

 Yen positive 1 min divegrence building all day, so much so that it migrated over to the next longest chart at 5 min.

Yen 5 min leading positive divegrence. Since the JPY is second in the pair, that's essentially long USD and short the Yen which causes USD/JPY to rise and most Index futures tag along although over the last 2 weeks the carry trade correlation has been badly damaged, another message of the market as I suspect carry trades are being wrapped up. If the Yen strengthens and believe me, I've seen stranger things, the carry cross starts to become a very big loss at the leverage they trade FX pairs at.

Of course it takes two to tango so looking at the $USDX...

The 5 min chart is in a huge leading negative divergence with no 3C support whatsoever for the last parabolic ramp to the right, meaning it's free to "free-fall" which would send the USd/JPY lower and have ripple effects through the commodity complex, but more specifically to Index futures which I suspect are going to end their 1-day selling climax from yesterday morning or the 1-day oversold condition, especially in light of tonight's internals (Dominant Price/Volume Relationship, The S&P and MorningStar sector performance, all exactly the opposite of last night's deeply oversold suggesting a 1-day (today ) bounce.

As for the Index futures themselves, recent 3C volatility has picked up in certain areas...

 ES intraday 1 min which is not a great chart for the entire overnight session, but as of now it's getting ugly just as the USD/JPY is seeing volatility rise and downside in price.

Also the winner today, Russell 2000 futures (/TF) is also showing a sharp leading negative divegrence in after hours that's moving very fast, there's no doubt these are connected to the FX market action mentioned above.

NQ/NASDAQ 100 futures are still in line, but I suspect tomorrow the bounce ends and volatility on the downside picks up, but as today goes the NDX was the worst performer and of the 9 S&P sectors that all closed green (the opposite of last night), XLK//Tech was the worst performing at a mere +0.02% gain, thus it's likely to see rotation in tomorrow and perhaps that AAPL trade will fire off. I suspect everything starts falling aapart after that and relative performance see's the QQQ outperform tomorrow, although its divegrence is very poor from the start.

Not much has changed in the Index Futures 5 min space, which you can see here in today''s Futures update, Index Futures Update

While not leading negative, you can see the 5 min charts all saw negative divergences/distribution in to today's cash market gains, that is the same, but may deteriorate further as the night goes on.

The Nikkei 225 futures should be effected as well and they look as if they are...

Nikkei 225 futures in line on the uptrend or 3C confirmation (5 min chart), but recent sharp negative 3C action right as the USD/JPY as well as $USD and Yen all signal USd/JPY overnight weakness as suspected today and tonight.

I'll post anything else that pops up. So far it looks like an interesting opportunity to use price strength in the averages on the bounce to short in to, although I and many of you are already set up and just being patient.