Friday March 7th my assessment was that the following week, last week (March 10-14th) we'd see the market build a little base and move up,
however I often say that "Wall Street doesn't run these cycles without a reason", this was a rare case in which I believe the cycle was not about the market as usual, making a price head fake move to open up short and selling opportunities or vice versa, I BELIEVE THIS WAS ABOUT VIX FUTURES WHICH ARE ALREADY IN FANTASTIC LONG TERM SHAPE.
I believe it may have had something to do with the new contract rolling in for VIX Futures, but for our purposes it was to accumulate them and since we already have a huge positive in VIX futures, this was more of a smaller move that we usually use to determine timing,
when VIX futures drop enough (which means the market has to rise), they'll be accumulated, they'll put in a reversal process and we'll know that we are at the end of stage 3 in the market and pivoting in to stage 4.
That's not to say the market is in good shape or impressive by any means. The SPY is up a mere +0.63% with yesterday and today's move thus far since Feb. 28, that means for 2.5 trading weeks the market has virtually gone no where at all which is the kind of lateral movement we see in stage 1 bases or stage 3 tops, in any case even without that the 3 stages are clear on the issue we are at stage 3.
Without going in to the horrible looking long term charts, I just want to go over where we are now, what the expectations have been since that Friday (Mar. 7) and how, thus far, the market is moving EXACTLY as we expected and
need.
NOTE THAT THERE'S A HUGE DIFFERENCE BETWEEN 3C TIMEFRAMES THAT WE OFTEN DON'T SEE OR TAKE FOR GRANTED, THE NEXT FEW CHARTS WILL SHOW YOU THAT THERE'S A HUGE DIFFERENCE BETWEEN A 3 MIN AND 5 MIN OR A 10 MIN AND 15 MIN CHART.
First the averages this morning and overall since the week of March 10-14 and beyond.
First on the SPY intraday 1 min we have confirmation of this morning's price movement via 3C.
This is the same for all of the averages.
Here we can see the positive divegrence that popped in and out all of last week to end with net distribution only reached 3 min, there were only a few brief moments over the last week any divergences reached a 5 min chart.
This is one of the examples, there's a large gulf between a 3 min and 5 min chart, it wouldn't seem so from the actual timeframe of 3 and 5, but it is the difference between light activity overall and institutional activity.
This is the SPY 5 min which is
in leading negative position with no confirmation, no positive divegrence.
I already mentioned all of the averages are confirming price action this morning so no need to repeat all of those charts, what matters is the 5 min charts like the QQQ above, again this had a brief 5 min positive at the very lows, but has since lost it in leading negative position.
And the IWM 5 min, no positive, no 5 min confirmation.
Even the Index futures tell us the same...
ES 5 min
NQ 5 min
TF 5 min
So where did the market get the support to make a move? This is important because it shows that smart money has not been willing to put enough short term accumulation (buying) in the averages to move the market, they don't trust them to hold is my take so rather they used the well known market manipulation lever of High Yield Corporate Credit, HYG which has the added advantage of only needing to buy 1 asset instead of spreading enough accumulation through all of the market averages to move them.
When the algos which is about 70% of the market, see HYG move up they interpret that as a risk on posture and buy so if you move HYG you can move the market, these machines are not as smart as you'd think,
they are programmed for a specific task, they are not free thinkers and they get in trouble when situations arise that require assessment, they are designed for a task such as monitoring HYG and trading based on its moves, not whether or not the overall market is seeing the same support.
Here I've compared the SPY to HYG, the move in credit, specifically HYG which has NOT been the same as HY Credit because HYG is the only form that is used to manipulate the market, has been near exact where the market needed support to push a rally, but when it's done, they don't want to be caught holding HYG when the music stops so it tends to lead the market as you see at the red arrow below. THIS IS CLEAR EVIDENCE (AND WE'VE SEEN IT HUNDREDS OF TIMES) THAT HYG IS USED TO FOOL THE ALGOS IN TO THINKING SMART MONEY IS TAKING A RISK ON POSTURE WHEN THEY ARE ACTUALLY SELLING IN TO PRICE STRENGTH.
As I said, these aren't multipurpose synthetic lifeforms capable of reasoning, they are machines built for a purpose, my cousin works on a black box Algo out of Atlanta and it does 1 thing, it follows 1 signal only.
HYG
This is another instance in which we see a HUGE difference between a 10 and next timeframe, 15 min chart. HYG has been positive on the 10 min for a while, that's been the accumulation there to move the market, we even have a head fake stop run in yellow before its move started and the divergence is clearly leading, you'd think the HYG 15 min chart would be similar, but this shows how much difference there truly is...
If we look at HYG 15 min, there's no accumulation of any chart after that,
this should tell you how much difference there is between a 10 min and 15 min signal for future purposes.
Yesterday I mentioned what looked like some early VXX accumulation (Short term VIX futures) on their decline, I wasn't sure without further evidence and we'll get to that, but interestingly the opposite, HYG was showing and is still showing some short term 1-2 min negative divergences in to strength, the exact opposite and the exact correlation you'd expect "if" VXX was accumulating yesterday.
This would mean that slowly they are now starting to move out of HYG now that it is doing what it was meant to do, they can't sell it all at once at a moment's notice without crashing the asset and crippling their P/L.
The reason I said the market needed to rise wasn't for a market or average/index based head fake, it was to move VXX lower as they have an inverse correlation and the only reason to move it lower is to get that last accumulation area at lower prices and higher supply as stops are hit, this was what I saw and still see as the reason as we see this on a chart like VXX just before it takes off (the market would do the opposite as they are doing now).
This is yesterday's accumulation in to price weakness in VXX 1 min, I wasn't sure if it was just an intraday anomaly until I saw more data, this morning's continued positive divegrence makes me think they started accumulating as soon as lower prices started, it doesn't mean they'll end here, but it will form an average lower position price.
In addition, there's migration to the 2 min chart and that's what I needed to see
so I believe the process we are looking for has already started which would usually be premature as they would often knock the asset lower before starting to accumulate, THIS MAY MEAN THEY FEEL THERE'S MUCH LESS TIME TO GET THE NEW CONTRACTS AND PROTECTION IN PLACE THAN NORMAL.
The VIX futures 5 min chart is confirming that yesterday VIX futures were under accumulation so we have good confirmation now, more importantly our theory and expectations are being proven right which means we know what to do when we get where the market is heading which is a means to an end, not the other way around as it sometimes seems to be.
At 3 mins where VXX went negative to move lower, we are still in line or at confirmation of price with 3C, this also shows the enormous difference between a 2 and 3 min chart even though I consider both intraday steering and 5 min the first institutional timeframe intraday.
We need to see this go positive as well, I have no doubt it will, that's where I'd put out VXX long signals for new/add-to positions. MORE IMPORTANTLY, THIS IS WHERE I BELIEVE WE'D HAVE A CLEAR SIGNAL THAT THE MARKET'S PRIMARY TREND (AS IN BULL OR BEAR MARKET) WILL PIVOT TO THE DOWNSIDE, however that last bit of protection in the new contract needs to be accumulated.
VXX 10 min is clear on the negative divegrence, it too will have to go positive before we are ready for a turn, but once again, look at the wide gulf between a 10 and 15 min chart, below is VXX 15 min.
We have a huge leading positive divegrence here and on longer timeframes, this is the underlying trend,
they've been accumulating protection for a while and in size, they obviously know what's coming.
I'd expect more downside, we need the accumulation and downside is what they buy like we often do, take Friday for example.
Then we need a reversal process (yellow arrows), this need not take long, but it needs to happen, so now you know what we are looking for and why.
There's a lot happening that we've talked about from the Yen carry trade to China with its second ever credit default, the Bear Stearns moment in China, Japan's Abenomics are failing miserably, the worst print in GDP since Abe has been in power, of course the Russian crisis, but I think that's less of a long term market influence at least for now and of course the Emerging Markets crisis, there's much more such as the lock up of credit in China, that's what did the US in around 2007-2008.
There are plenty of reasons without even considering that the only thing that has held this market up since 2009, POMO/QE is now being removed and a rate hike considered, the rate hike alone is a bull market killer.
We need to see the broad strokes of the big picture, however for the moment, let today's market be enough, tomorrow's will come, but today's is what will help prepare you for tomorrow, JUST IMAGINE WHAT MY PUTS THAT WERE CLOSED FRIDAY AT HUGE GAINS WOULD HAVE BEEN WORTH TODAY.
