Daily Wrap

The theme today was the same as we first suspected early in the day and were proven right later in the day. We expected a bounce this week from last week's accumulation which was really on 2 days, Tuesday and Thursday, thus the post from Friday, THE WEEK AHEAD.

After having looked at all the averages (the IWM has the strongest base, but it has been hit the hardest recently and on the year) and looking at inverse ETFs as well as my watchlists, this theme was prevalent through the entire market, sell price strength.

 SPY's bigger picture outside of a bounce on the 10 min chart, not good for the SPY.

This 5 min SPY shows the accumulation from last week, but also how fast we saw an intraday leading negative divegrence today as the market couldn't gain any ground after the initial Most Shorted ramp.

Even the 10 min SPY intraday lost ground which is unusual for a single day, sellers were most definitely in control.

As the market was looking like it may lose more ground or perhaps a late day ramp by market makers and specialists/HFTs, as 3C almost always picks up where it left off, we did see minor late day 1 min and 2 min chart accumulation.

This is one reason I don't think the bounce is over, but I suspected it would be longer than a single day, just seeing the charts today now makes me wonder how long it can hold out.

Here are some inverse ETFs that confirm the SPY action, UPRO is a 3x long SPY ETF

 It saw the same intraday 3 min negative divegrence as the SPY.

SPXU is a 3x short SPY ETF and it saw 5 min positive divergences , all confirming what we saw on the SPY and other averages. It was almost as if the proceeds from sold longs went in to short ETFs immediately.

Here's the QQQ 1 min with the same afternoon positive divegrence, but on the charts that really matter...

5 min leading negative today, you can see last week's positive divegrence that led to today's bounce.

In the 3x short ETF for QQQ, SQQQ...

 We see 5 min positive divegrences today, confirming what we saw in QQQ 5 min negatives.

We even saw 15 min positives in SQQQ in what is already a well formed positive divegrence in the 3x short QQQ ETF.

 TQQQ is the 3x long QQQ ETF and it saw the same negative divgerences on the 5 min chart as the QQQ did today as well as the other averages which is quite a bit of movement intraday on a 5 min chart.

 Here TQQQ with a similar positive divegrence from last week sees a 15 min negative intraday today, that's a lot of underlying flow and a chart that's already looking good for a drop.

AAPL saw the same kind of action as the Q's, 5 min negative.

 3 min negatives as well and...

That late day 1 min positive which should gap the market up tomorrow or at least give it some early strength in price, underlying trade is quite different.

 IWM 3 min with last week's positive seeing intraday distribution.

The IWM 5 min chart is still intact and one of the strongest 3C charts.

However, like the SPY and other averages, this area has already seen a lot of damage, thus I think the bounce as the IWM was down 4% last week and has lost all gains for 2014.

Gold and GDX were both expected to pullback, GLD was down -2.38%, the biggest move down in GLD for 2014. GDX was down 2.64%, you may recall I closed the DUST position at a nice gain for a single day trade, I suspect that is short term and we may be re-emntering. GLD found support intraday around its 100-day moving average, GDX found support right at its breakout area from last week. I suspect a short term bounce, thus I closed DUST, I'm thinking maybe a day or so, but I do suspect both gold and GDX have more downside to go, but we'll let the market tell us that and when to get back in.

Before the close I said I thought we'd have a continuation of the bounce, this was largely based on leading indicators, but they also tell two stories, short term and longer term which is quite extreme.

For example..

 I suspected last week HYG /SPY arbitrage would play a big part in a bounce, HYG barely moved today, it still may, but it was unusual seeing VXX accumulation.

Longer term HYG is severely dislocated from the SPX, this is why we use leading indicators, these are the charts that tell us the most about the market and it's telling us credit is not buying any of this, in fact it's selling it.

High Yield Junk Credit barely moved when normally it would lead to the upside intraday and longer term...

It too has sold off aggressively, these again are the signals we look for in Leading Indicators, they are rare, but have been very useful.

Pro sentiment intraday is right with the SPX so I suspect there's more to go on the upside, but take a step back and...

Not only have they been selling, but specifically since Q2 ended right at July 1.

Our second pro sentiment indicator looks the same intraday, but again take a wider view...

And it has been selling off, it got much more extreme July 1st, the end of Q2 Window dressing.

Volume for SPX futures was 30% below its average. The Dow briefly hit an all time intraday high, but lost it. VIX had a bit of a strange close.

First VIX outperformed the SPX intraday, but look at the pop near the close, that's the opposite of what we have seen the last several years.

And the SKEW index rose again and remains in the red zone.

SKEW Index.

Initially I was considering whether a piggy back long for a bounce would be safe and worthwhile, from today's action I don't think it's safe or worthwhile so I'd rather stick to the bigger plan which is to short stocks on our watchlist when the signals have turned enough that they look to be right at the cusp of a turn to the downside.

I cannot emphasize enough how prevalent the trend today was throughout all of the major averages as well as our watchlist stocks, many look like they are in excellent position right now, but being in sync with the market as well is where the highest probabilities are.

Other than that, we had some nice gains taken off the table today and hopefully some nice ones on the way (UNG, etc.)

Overall the tone of the market is exceptionally weak.

Tomorrow

From a quick look around, I'd say that last week's accumulation which wasn't that strong, still has enough in the tank to push the market more, I initially thought it would be at least several days of bounce, but after today, it's hard to imagine as so much damage was done so quickly.

UNG Charts

These are the charts that are behind the earlier UNG call position posted today...

UNG under the range, this is a common area for a head fake move, even to shake out new shorts. It will likely take a little time before we know if this is a long head fake move or a short shakeout being the range was so well defined, the daily chart suggests this is a shakeout of new shorts before continuing to a lower low.

 Intraday charts oddly go very positive as soon as Q2 window dressing is over.

3 min chart with the same window dressing effect, we've seen a lot of this.

5 min chart looks ready to go on an upside move which should move to the $24 area to shakeout new shorts.

15 min chart, so there's pretty good support for this move.

As well as a 30 min chart

And the 60 min shows the negative divegrence sending UNG below the range and some accumulation since.

We'll see how it acts on a move up, that will tell us a lot about the longer term direction.

Market Update

While the theme of the day has continued, there are some very minor changes on 1  min charts, I don't know if they are anything even significant. If they were significant, I'd guess they'd only be significant on a gap fill of the major averages today, meaning perhaps some accumulation in to a gap fill. However that still leaves us with the 3 and 5 min charts which have deteriorated all day and migrated to longer timeframes such as 5 min.

Many of the stocks that are in my watchlist to short on a bounce are acting the same way as the broad market.

Again, these 1  min charts may have no real value at all or perhaps they may be trying to get the averages together short term for either a gap fill or another gap tomorrow morning, but  make no mistake, the trend today has been to sell/short price strength and it is eating away at last week's positive divegrence that was the catalyst behind today's move up.

 5 min leading negative now nearly leading to a new low on the chart, this is a lot of damage done today.

The 3 min chart also showing the same.

However very recently...

1 min for the other averages and a 2 min for the SPY show a small positive divegrence which may be several things, but it doesn't hold a candle right now to the overall deterioration taking place at a very rapid pace.

Closing Friday's DUST Long For Now

I'm not sure if this is just GDX accumulating weakness as we'd expect on a pullback, if so it's stronger than I'd expect at this time, or perhaps a gap fill, either way, DUST's gain today is decent and this is not a position I'm in love with it's the GDX/NUGT pullback long, so until the situation becomes more clear, I'm taking the DUST gains off the table.

DUSt almost 8% gains for a day.

GDX's 10 min chart still looks like a solid pullback should be on its way above and beyond today's.

GDXJ shows the same on a 15 min chart

However intraday, that's a lot of accumulation fast , GDXJ 1 min

The same is seen in NUGT (3x long GDX-goldd miners)

 DUST IS SEEING A LOT OF INTRADAY DISTRIBUTION, 2 MIN

As is JDST. I'd rather just take the gains and wait for the smoke to clear, maybe re-enter.

Trade Idea (Short Term/Options) UNG Call

UNG has seen a pretty dramatic decline of nearly 15% over the last month to put it below a 5 month range. I haven't done all the analysis on the bigger picture, but for trading positions (short UNG), I'd be taking them off personally and I'm going to go with a full size, August (standard) $22 call. I'll have charts out shortly.

Market Update

Not much has changed as far as the theme of the day goes, as far as intraday damage, that has grown worse, still not enough to make me call a reversal to the downside or put out immediate short sale ideas, (not  even a full day of distribution vs. nearly a week of accumulation) however as far as what last week's accumulation was actually for, the kind of sentiment changing, spectacular bounce we have been use to seeing in the past or a sell on any strength at all, it seems to be the later.

Here's an idea of what things are looking like which has been , thus far deterioration all day.

 QQQ 3 min worse in the day

QQQ 5 min to give some perspective, but also show that the negative has migrated to the 5 min chart intraday.

 SPY 3 min worsening

An intraday view

And it has also hit the 5 min chart as well

This is to give some broader perspective as to how weak this area is with a 10 min SPY chart.

IWM 10 min shows the strongest positive divegrence, it has not been effected as of yet, this would have to be seeing deterioration for me to start making some short calls.

However like all 3 min charts, more deterioration as the day goes on

 The TICK data lost enthusiasm early, but has gone on to hit an intraday print of -1250, that's a lot of stocks being sold very quickly.

The MSI which has taken a beating is one of the levers I suspected would push the market higher, but this is no where near a short squeeze.

Index futures...

 ES 15 min shows the accumulation last week, most on the head fake / stop run move we predicted we would see that showed up Wednesday.

However since Futures have opened for trade for this week, look at the damage that has been done since Sunday night.

 5 min ES

TF 15 min shows the divegrence which is why I called for a bounce this week, but since then...

A lot of damage occurring on the 5 min chart for TF as well

 NQ 15 min even seems to be seeing some damage already.

The 5 min chart clearly has.

I'm going to go through some other watchlists as well as leading indicators, it almost seems as if someone changed their mind over the weekend, the only thing I can think of ii the Portugal banking troubles, but that may have exposed how fragile the system is as sovereigns were effected immediately.