It seems even the short term leading indicators yesterday that forecast a consolidation today or more likely a bounce, but a short lived one are proving that it indeed is to be short lived, not just by the standards of price action, but leading indicators themselves.
I'm already getting emails from some of you who faded this morning's move which is brilliant, never trust those parabolic moves. I hope those of you who wanted positions in assets like SQQQ as posted yesterday,
QQQ Update & Trade Set-up, were able to use price coming to you to get a better entry, lower risk and most likely an awesomely timed entry. Let the trade come to you!
Perhaps more importantly and I'll get to this as soon as I can, I'm already seeing action in the currencies, the EUR/USD is working on a positive divergence, it's early, but it's working. The Euro is also, but more importantly the $USD is going negative which means the USD/JPY which did NOT have 3C confirmation on today's move higher, is susceptible to a quick move lower and with bonds closing at 2 p.m., the USD/JPY will be the key algo guidance/correlation. I'll get to that as well as some trade ideas, but first leading indicators.
Unlike yesterday, but just like the 3.5 trading days before, VXX (Short term VIX futures) are showing better relative strength vs the SPX (green), which as usual I have inverted SPX prices so you can see what the normal correlation would be (moving together) and the relative performance. This scaling is difficult to see it, but look at where the SPX closed yesterday at the light blue trendline and where VXX closed, then you can see the relative outperformance and flight to protection in VXX.
It's the same story for Spot VIX, outperforming the SPX correlation.
20+ year bonds / TLT is also outperforming (flight to safety) the SPX.
Now SPX prices below are no longer inverted, but normal.
30 year yields are somewhat flat and you can see how they've led the market lower, which is why I like them as a leading indicator.
However replace SPX and put in the IWM/Russell 2000 and look what you get...
IWM in green... According to this chart, this move in the IWM, which has been the key to our entire forecast, is going to fail and fail miserably as 30 year yields are very divergent not only above on a local basis, but on a mid term and long term basis.
As for High Yield Credit, there were some weak signals hinting at higher prices today, but they were weak, also suggesting that it would be as I called it yesterday, a
"Brief reprieve".
Here's HYG, one of the 4 main ramping levers and despite any divergences, you may recall last night I said that the divergence may just be to give HYG enough support to keep from collapsing lower until the market can get this move to the upside off.
In any case, longer term or even intraday, it is leading the market lower.
HY Credit showed some intraday positive activity, but again very small and today it is back in line leading lower after the morning highs in SPX met with a HY Credit negative divergence intraday.
HY Junk Credit also has done the same intraday at the SPX's morning highs.
And PIMCO's HY Fund which was never positive yesterday is making a new leading negative low vs the SPX.
As for our Pro Sentiment Indicators...
They are both still in positive intraday position, we'll have to see if there's anything to this as they are the only two or actually 3 of the Leading Indicators supporting the market here for either consolidation laterally or higher prices.
Our second Pro sentiment indicator positive intraday vs the SPX.
One indicator that I like and trust is the 3rd indicator that is also pointing to additional support or gains for the market intraday, it's my SPX:RUT Ratio...
Here you can see it not confirming SPX price action and leading a bit, this could change quickly so we'll see and I'll keep checking it.
The VIX Term Structure indicator below (green) was very useful in giving buy signals around the 12th , 15th and 16th, but right now it's not giving any such signals and it seems like that cycle that actually started on the 15th is winding down, still you know the level that we need to see for the next major market move (down), that's below IWM $118.
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