2:36:20 p.m. , $1 billion is E-mini's in a second

That's right, some of you were wondering "What happened to the market this afternoon?" Really with a n SPX gain of +0.54%, not a lot, but as to the specific question of the afternoon, the founder of the HFT/market tracking Nanex, tweeted this...

That's right, I'm not sure if the levers all failed, USD/JPY failed, HYG was there but failing and VIX failed to do much in to the close, closing down only 0.98% and pretty much a perfect Doji  with the last 3-days all inside days.

That's 10,000 e-mini contracts in one second, who does that? Appaloosa's largest holding on their Q1 10Q was about a billion dollars and that's no small fund. Positions like those take a lot of time to build as to not drive price against your position. Whoever picked up a BILLION dollars in E-mini's at 2:36:20 in 1 second, was obviously not concerned with moving the market against them.

In fact, the transaction only resulted in a move of +.00078% over the full 1 minute bar which saw an additional 8.6k contracts in addition to the 10k. The SPY at the same time saw $64 million which boosted it +0.002%, not a lot of ground , especially for the E-mini contracts.

I've been looking at what was going on in the market at the time.

First the USD/JPY lever, as expected has failed and should be moving to make a lower low, if you're thinking EUR/JPY or AUD/JPY might take USD/JPY's place, they are in even worse shape.

 ES's gains during regular hours (white) weren't matched by USD/JPY. The last two weeks we've seen at least a half dozen dislocations like this from the correlation, every time ES has returned to the correlation whether it was below or above.

Here's a 30 min chart of USD/JPY around the area of the bear flag that gave the market sling dshot momentum after a Crazy Ivan and short squeeze (as the most shorted names have seen 6 consecutive days of gains). ES dislocates and reverts to the correlation. That might be a problem this time.

About a week of so ago I warned that this range in the SPX was too large, too obvious for it to move to the downside without a head fake move first, the same reason we exited MCP on a day when we had a +6% gain, probabilities said MCP couldn't have a solid breakout without having first put in a head fake move.

This daily chart, range and head fake move are essentially the same as MCP, but in reverse (we expect MCP to break out to the upside and the SPX to break down to the downside).

Here you can see the concept of "loitering", the 60 min chart of USD/JPY broke the psychological level of $102 support and then the 200-day moving average, often after that price will "loiter" near former support as USD/JPY did for several days giving the market a little boost, but this concept almost always sees a new low put in and I believe USD/JPY is now rolling over to make that new lower low so it too is another broken lever.

 This is a 1 min chart of 30 year Treasury futures (candlesticks) vs ES (purple) for today, at the time the 10k contracts of ES went through in a single second, the 30 year rolled over, I had seen some negative divergences in TLT earlier in the day starting to form. As I said when I closed the TBT (TLT UltraShort) about a week and a half ago, I expect to be short TLT or long TBT again soon, but the new dynamics of TLT are still an unknown and will be until we see how it reacts to a pullback, it may be that the market and treasuries are forming a new correlation, one which I don't understand, but we'll sort that out as the data comes in.

At 2:36 when the 10k E-mini contracts were bought, 30 year treasury futures moved to the downside, I had mentioned this earlier in the day as Treasury yields supported the market intraday in a Leading Indicators post.

 3 min TLT negative divegrence, so far the divergence is only to about 5 mins so I can't consider it very serious yet or worth a trade, but it is very much worth watching and figuring out what the dynamics or new dynamics of the market are. I've always said that this move since 2009 would present one of the best trading opportunities of our lives, maybe of the last century, but IT WILL BE THOSE WHO FIGURE OUT THE NEW DYNAMICS FIRST THAT MAKE THE MONEY.

This is TLT vs the SPX intraday with support for the SPX earlier in the day and then again after the 10k transaction went through, but I'm not convinced that there's an inverse correlation, that remains to be seen, although 1-day hardly makes a trend.

As for credit,

 HYG provided intraday support for the market, but as this chart shows, it was falling apart fast.

As for High Yield credit which usually rallies with the market, it fell apart in to the EOD, I can't help but wonder of that 10k transaction was to hold the market up as these other levers started to fail, whether op-ex or month end window dressing.

Yields provided some support from very early on today, well before the 10k transaction, but they are severely dislocated and they have been one of my favorite leading indicators because they are so consistent in reverting to the mean, this is the exact situation from the summer of 2011 that led to a nearly -20% sell-off in little more than a week.

Right now ES, NQ and TF intraday charts are all going negative, FINALLY NQ 5 mins has joined ES and TF in a leading negative divergence, this makes a full house with all 3 Index Futures leading negative from 5 mins to 60 mins.

Tomorrow is an op-ex Friday, typically price will open near Thursday's close and stay in the area until the majority of contracts are closed by 2 p.m., then price moves, but it's the 3C signals after 2 pm on Friday that give us some of the best information for the week to come.

My gut feeling is the bear flag that saw a Crazy Ivan that gave sling shot momentum over the last week is seeing severe distribution now and that move as a mini cycle is wrapping up, this seems to be evidenced in more and more assets looking ready to trade as I've put out more Trade Ideas in the last 2 days than the last 2 weeks and certainly well above the 90% drop off of the last 2 months as the market remained in a +/- 3% range, a meat grinder.

EOD Market Update

It has been a pretty dull day today, I think about a half point is the best the market could do and it's losing that. The $USD/JPY had a small intraday bounce that may have been helpful intraday, but that's in a full negative divergence now as well and looking about to roll over.

I have received word that max pain as of now for the SPX is $1900 for op-ex tomorrow, that is usually updated after the close.

As for the charts, DIA went negative too.

 DIA 1 min leading negative intraday. It's pretty hard to sustain a move when you can't even get confirmation on a 1 min intraday chart.

The 2 min is even worse as you might expect.

QQQ 1 min leading negative, if this closes this way, it should pick up where it left off tomorrow morning with negative early action.

And migration already on the 2 min

SPY 1 min is one of the worst looking, no confirmation at all.

And the 2 min chart.

SPY and QQQ are going Negative in to the close

FB Follow Up

FB doesn't look like a textbook H&S top, but that's where people miss a lot of good opportunities as only about 5% of H&S tops look like the cherry picked textbook examples, however, the volume confirmation as an FB H&S top is absolutely perfect and whether it is or not, the volume in the area is very bearish (high on the declines, fading and low on the rallies and getting worse the further to the right the chart moves.

 When FB was the MOST HATED stock as it came out as a new issue, we were probably the first in the retail crowd to see past that and trade it long at the white box to the left, we actually bought on the low of the move and had a nice run in FB, it has given us good signals for a while. This is a 5-day chart and it is proportionate for the 4 stages and the H&S top is the right size considering stage 1 and 2.

This is resistance in FB, I haven't seen overhead resistance like this in a while that is so persistent, but there are multiple attempts to break it and all have failed. This area would be the right shoulder where volume has fallen off dramatically.

 This is the daily 3C chart, you can see the initial accumulation when we first went long FB in 2012, the current divergence is by far the largest FB has seen.

As for intraday, it looks like there's month end selling in FB

3 min

10 min- the selling is strong, but specifically the last 2 days on a tactical basis, the daily chart shows there has been a lot going on for a lot longer time on a strategic basis.

This is a pretty intense 30 min negative for the last 2-days so there's excellent confirmation of month end distribution.

Today's daily candle too looks like a Doji Star, loss of all momentum and a common downside reversal candle.

And this is the trend of the 60 min chart in the area of the H&S pattern.

There's really not that much risk as a stop can be placed a few percent above, as long as it's not an obvious place and I prefer mental stops.

Trade Idea: FB (Short)

I'm going to go ahead and open a full size equity trading SHORT in FB, with op-ex and window dressing, I'd normally want to wait at least until 2 pm tomorrow, but the charts here just look so bad, they are jumping off the screen.

Random Market Charts & Thoughts

I'm being a bit cautious on filling out the partial short positions (today) which I've been waiting for an opportunity to do so and as the earlier post, MARKET UPDATE made clear from a post back on May 16th, Market Update and Some Probabilities, this is the move I've been looking for to do so.

So why am I waiting? For one we have options expiration tomorrow which tends to be stagnant until about 2 p.m and 2, tomorrow is May 30th, the last trading day of the month which means the market is doing its best not to stumble as Window Dressing is nearly over, Monday it will be. It will be interesting if we see the F_E_D lending money to the banks again as they did at the end of April to fool investors and regulators in to thinking their cash position is much stronger than it is, it was, for a day at the end of April.

As far as some charts, I have been saying how strange the 10-year (actually across the entire treasury spectrum) yield falling with the market rising is and what happened last time this happened...

 This was the last time treasuries rallied with the market and yields (which move opposite treasuries) fell

 The chart above is the current situation.

However the 10-year benchmark just fell to a fresh low of 2.4% for the first time in 11 months, breaking key support from October in the process.

The result of the 2011 Yield/market divergence?

The market fell nearly 20% just like that, however the F_E_D was still there supporting the market and giving not a single hint that they'd ever let up at the time whereas now they are backing out of policy.

Also strange has been the Spot VIX Green the last several days despite the market (the two usually move opposite each other. Last week we saw the divergences suggesting VIX wasn't going to be used to ramp the market because of real, actual fear and demand for VIX's protection and it was posted in the "Broken Levers" post.

Here's The VIX today vs the market...

 VIX is in blue, SPY/SPX in green, both are moving up again today, this isn't normal and the only explanation from the 3C charts that forecasted this move, is institutional traders know the jig is about up and are accumulating protection, enough that it's moving the VIX not only sideways, but up.

 This is the same chart with SPX prices inverted, normally VIX would follow the SPX inverted prices nearly tick for TICK, here though you see massive outperformance in VIX.

Even VXX, short term (2 month) VIX Futures are moving up with the market SO IT'S NOT THE VIX SUPPORTING THE MARKET.

WHAT DID I FIND...

 You already know there's a massive dislocation between Yields and the SPX as seen above and Yields tend to act as a magnet and pull equity prices toward them (down), however, on an intraday basis (and I'll look at TLT closer as well as T Futures)...

There's some support intraday coming from Yields, you can see it on TLT's chart as well, as far as I can tell, other than an intraday bounce in USD/JPY, this is about it.

This is TLT's longer term dislocation with the market, again this hasn't happened like this since 2011 and you saw how that ended.

However intraday there's some weakness in TLT, one of the SPY arbitrage assets and that is just enough to keep the market in place it seems.

However, don't imagine there's any broad strength...

 Intraday NYSE TICK breadth is about as flat as it gets (the number of advancing NYSE issues minus declining issues), it has been flat at +750 to -500 most of the day, that's about as flat as it gets.

My custom NYSE TICK/SPY indicator shows a trend intraday of weakening breadth.

As far as the Risk sectors that should move the market, Financials...

 Financials in red today vs the SPX in green

And Tech...

XLK in red vs SPX in green. 

Even Utilities are dragging, so don't imagine that this is out of any strength in stocks, in fact...
THIS LOOKS TO BE NEARLY 100% OP-EX AND WINDOW DRESSING INSPIRED just to keep the market in place, rather than declining.

I'd think after 2 p.m. tomorrow would be the best time to fill out short positions as the op-ex pin wears of, even better Monday as the month end window dressing ends.

As for the second estimate of Q1 GDP that came in from +0.1 to -1% on consensus of -.05, the first decline since q1 2011; if you subtract Obaamacare, Q1 GDP comes in at -2%.

Remember two back to back quarters of negative growth = recession.

MARKET UPDATE

As I said earlier, I'll be looking to fill out some short positions, first in leveraged Inverse (Short) ETFs like FAZ, SQQQ, SRTY, etc. I like to have broad coverage for initial reversals until I can see what individual assets are doing, what their relative performance is like. There's nothing worse than being right on market direction and failing to capitalize because of bad sector or stock selection, however I will also be looking for strong signals in specific assets, some of which we've already posted the trade set ups (what we are looking for as the trade comes to us).

The main theme this morning was distribution right off the open and since then, in line for the most part intraday.

However as I had been showing around 5/15 and 5/16 when a gear flag formed with positive divergences and before we had any kind of solid head fake move above a large, very obvious multi-month range (as head fake moves are seen just prior to reversals in about 80% of reversals-think NUGT specifically today) , our expectation was that the bear flag would be used for upside momentum to create a head fake move as the regular ramping market levers were breaking down, it's kind of a "Technical Failed Expectations Sling-Shot" that creates the momentum. We didn't have specific data for a Crazy Ivan shakeout to create or increase that momentum, but as a concept it was a natural assumption that turned out to be right.

As you see the SPY charts, I try to show the entire process. The other charts are largely where we are intraday and where this week has taken us as distribution is huge on the move above the range , exactly where we expected a head fake move and thus far the distribution in the area confirms it is a head fake move, this is also largely used to create reversal momentum, but there are a number of reasons why they run them that are linked in my "Understanding the head fake move" articles that are always linked at the top right of the member's site.

Charts...

 These 1 min intraday charts are a bit older because there were so many captures, the Index futures are going negative really quick and the current 1 min charts are starting to reflect that to the far right, but since these are about 10 mins. older, you don't see that reflected on these charts. If I think it's necessary or helpful, I'll post them in a shorter post that will have more timely charts, but this is why I want to get some of those short positions filled out and soon.

As mentioned above, the SPY 1 min like all of the averages was leading negative right off the open sending them lower in to a small intraday positive that sent them to an "inline" status.

For timing purposes, I've been watching these as far as filling out positions and possibly some option positions.

 There were quite a few posts around the time of the bear flag formation in mid-May, I don't have time to go back to every post that mentioned it, but this one is from around the time and gives some forward guidance on what we should expect...

Market Update and Some Probabilities May 16th... (This is the mechanism that allowed the momentum to be created to get us above the range, our head fake move of true significance...

"Now that we are getting more data in since we saw the first positive divegrence yesterday after the move lower, we are starting to get a few possible scenarios , which I like to try to put out there as it may help you with closing or opening certain positions, whether they be short term option trades or core positions entries/exits."

"So, the point here would be, the appearance of a bear flag alone suggests a high probability of a head fake move which would be to breakout to the upside first, however while they can manipulate short term trading action, they can't hold the manipulation long, there's a reason there's a bear flag forming and that's because of the strong sell off of the preceding couple of days, that trend almost always re-emrgers despite a head fake move, thus they are excellent to use as entries, in this case we'd short in to the head fake breakout above the bear flag."

""If" this were a real bear flag, I would not expect to see positive divergences in to its formation, I'd expect to see distribution in to the correction to the upside, thus the case for a head fake move above the bear flag just got stronger."

Volume above the range has fallen off substantially and the size of the head fake move is reasonable enough to do what they are meant to do, to swing sentiment from neutral or bearish to bullish, that's really the only way large institutional money that typically carry $500 mn to $1 bn dollar single positions get the demand they need to move those positions.

 This is the actual trend of the 1 min chart from the move above the bear flag set-up/trap and specifically this week the distribution has been very strong, I suspect with the 3-day holiday as well as op-ex pins last Friday, we weren't going to see much that was actionable until this week.

Speaking of op-ex pins, we'll have another tomorrow.

 This 3 min trend shows the SPy/SPX bear flag on 5/15-5/16, the Crazy Ivan with the move below bear flag resistance which became support after the first move above it, being broken and setting the bear trap/short squeeze that basically gave us sling-shot momentum around the bear flag and up, this was seen very early in the process as there was small accumulation in to the bear flag, which you would not see if it were a legitimate price pattern.

Just as the other levers have broken down (Treasuries, Credit, VIX and now the loitering period of USD/JPY, the divergence this week is very clear, very strong and in the right place, right at the head fake above range resistance.

 The longer charts have less detail, but clearer trends, note there wasn't significant distribution UNTIL the head fake  area above the range was reached, that was the goal, that's the place that allows them to move shares in to demand at higher prices, that's what they waited for before distributing.

The leading negative is now at a new leading low for the chart

 And this whole scenario was based on the February cycle (red), note the trend of the 15 min 3C chart

DIA 1 min today, again distribution right off the opening gap.

 DIA 15 min, the last minor break above the range saw intense distribution causing a failed breakout, we have as bad or worse now. The "BF" is the bear flag area and the "CI" is the Crazy Ivan area.

AGAIN, THE TREND SINCE THE START OF THE FEBRUARY CYCLE/RALLY AND THE TREND OF THE 15 MIN 3C CHART.

 IWM negative on the open, in line after.

As I said, if there's need for an intraday update, I'll post that alone to be more timely, but these are the signals I'm waiting on to fill out shorts, the rest of what I need to see is already there, I think the failure of USD/JPY which was bound to happen as it was only loitering (which is to say that the asset breaks support and then rallies back up to it or slightly above it to clear out shorts, loiters there for a short time before resuming the original trend lower and making a lower low) is a significant event for the market this week.

 IWM 3 min trend, specifically the distribution this week in a flat range.

IWM 10 min since the bear flag area of mid-May

QQQ 1 min with the same distribution on the open. This is really the last holdout on a 5 min chart of Index futures, all other timeframes are negative from 5-60 in NQ, ES and TF.

QQQ 10 min trend, especially this week, leading negative at a new low.

QQQ 15 min leading negative at a new low and doing it in the last 2.5 days.