Futures Update

Well the USD/JPY keeps losing ground since our earlier posts today suspecting it would and specifically the 4:39 post, USD/JPY Lever About to Give Way which wasn't only accurate, but timely.

Here's the pair now...

 As you can see, the USD/JPY has retraced all of the 9:30 cash open ramp and then some, really about 2/3rds of all gains since Sunday's open of futures.

 This is USD/JPY with ES in purple at the 9:30 open this morning and the ramp off the lows, ES was not well correlated to USD/JPY before the cash open, so they were obviously being run by algos.

However right now, ES is in a flat holding pattern despite the losses in USD/JPY, I don't expect this to hold out forever with no HYG, TLT or VXX support.

The USD/JPY is putting in a 1 min positive divergence so I'd expect some overnight bounce.

Interestingly, as bad as the $USDX looks and has looked all day which is why I thought a negative divergence in USD/JPY 1 min was showing up earlier, in fact it has been Yen strength sending the pair lower...

 This is the Yen 1 min chart moving up which is responsible for USD/JPY moving down, however it does have a negative divgerence which may be the reason the USD/JPY 1 min is now showing a 1 min positive divgerence, but this is not where the real potential weakness short term is in the pair, it's in the $USDX

The $USDX has had this wicked leading negative divegrence since pre-market.

The 7 min Yen is going positive again so even though the 1 min may go negative, this is the higher probability resolution, that the Yen continues higher, if that happens with the $USDX divegrence kicking in and moving lower, the USD/JPY will just fall that much faster.

The 15 min Yen has a strong leading positive divegrence, even stronger than the 7 min.

And the 60 min is just about finished with a rounding bottom and a large positive divegrence, this is what I suspect will be a part of the market's downside along with the USD/JPY.
The $USDX in the longer timeframe is negative as well with positive Yen, this means USD/JPY lower.

USDX with a small positive sending it higher and a leading negative divegrence on a 60 min chart.

As for 30 year Treasury futures, they have been moving up, yields down which pressures the market lower, the same process around the same time happened at the two previous F_O_M_C meetings after their knee jerk move higher on the policy announcement, once the 30 year Treasury started rising with the knee jerk move in equities and yields started leading to the downside, it was 2 and 3 days after each meeting that the entire knee jerk move higher was retraced and as mentioned earlier, in the case of the September meeting, this led to a sharp sell-off which landed us at the October lows. Few probably remember how bearish sentiment was, but that was the mass psychology analysis that led us to call for a very strong move higher, a sentiment changer and days after we received 3C confirmation as well as HYG accumulation, TLT distribution and VXX distribution, the exact same way the rally we called on December 12th that started on the 17th unfolded.

Right now the 30 year Treasury futures are in line in the overnight session, confirming the continued upside move which is not normal for the market to be both risk on with equities, although that is generous given today's closes and risk off or flight to safety with a rising 30 year bond as well as a flight to safety in German Bunds and Japanese JGBs.

As for the overnight 1 min 3C chart for ES, note the very tight range, this is the type of quiet market that we often see the heaviest underlying action, which is why I always warn not to become complacent in a seemingly boring market. My analogy as you probably know is , "It's like the kids in the room next door being a little too quiet, you know they are up to something".

NQ 1 min has the same tight range since the close at the vertical red arrow and a leading negative divegrence as well.

TF 1 min is in line with price action thus far. I was looking for this earlier, but perhaps we see it soon, a Key 1-Day reversal with a gap up above the intraday highs (perhaps in Russell 2000/IWM) and a close below Monday's intraday lows, this would be an exceptionally strong reversal signal appropriate for such a large downside reversal so if we do see a gap up in the morning in the IWM, don't make premature assumptions without confirmation.

5 min ES with the cash open and close marked with a clear negative divergence setting in post cash close like the 1 min.

The same is true for TF/Russell 2000 futures, a strong leading negative, much of it during today's cash session as we saw in 3C charts, but also after the close in to the overnight session.

And NQ / NASDAQ 100 futures 5 min is also showing a couple of leading negative divergence, one as the futures opened Sunday night for the new week, another at the cash market highs today and post close in the overnight session, especially at the flat range.

The ES 30 min chart (even though we have stronger negatives in 4 hour, daily, weekly and monthly) shows the entire process, except when we first had the theory of a head fake move above the IWM's range on December 12th. The Crazy Ivan shakeout/bear trap of the 15th and 16th shows the accumulation that was the evidence of our theory or forecast from the previous Friday, then the inline status as the levers like HYG, TLT, VXX and USD/JPY gave the initial upside ignition until the bear trap kicked in with a short squeeze, powering the rest of the rally above the IWM's range. Since completing the objective, the distribution signal is VERY clear and at a new leading negative low.

With a chart this accurate thus far and in this bad a shape currently, I don't see this market as having much time which is why for the first time this month I have been actively putting out short calls, had I done it earlier this month it would have been too early and there would have been drawdown, I didn't know that at the time, I just knew the signals for such calls were not there, now I know why.

3C will always show us what smart money is doing, but by the time you understand why, it's too late to profit form the information. However the fact 3C did not give short sale signals in retrospect was the indicator doing what it should do. Sometimes saving money is just as good than making it as losses are difficult to make up. For example a 50% loss requires a 100% gain to get back to break-even, so I'm happy with 3C performance as well as leading indicators, I just feel that right now we have those strong signals like the ones above that we didn't have earlier in the month and ironically, it''s right where we suspected they'd be, right as the Santa rally draws in more longs creating a stronger, larger bull trap.

I suspect if these 1 min negatives in the Index futures keep up within such a flat range, we'll be seeing overnight downside in the Index futures. I don't see any levers left to hold the market up and the reason they were needed in the first place is because the Russell 2000 didn't have enough strength on its own to break out of its range for 6 trading weeks.

That's it for now.