Daily Wrap

Today was a choppy day, early on it looked like a key 1-day reversal day may be forming, but even then the caveat which was very real was it was much too early in the day to expect price to hold in that spot for another 6 or so hours.

In to the A.M. Update we had seen several things that didn't look like they'd hold water much longer, for instance the USD/JPY which rallied overnight...

 The USD/JPY rallied through the overnight session (European open un green) and right to the US pre-market/pre-open, but...

This divergence in to the open suggested the USD/JPY had made its high in premarket and in fact it did nothing else the rest of the day except chop around and it was a pretty choppy day.

The $USD had rallied overnight (strength for the USD/JPY ) , but it too had a negative divegrence in to the open and was flat the rest of the day, it currently has a leading negative intraday that may take it lower and as for the other half of the USD/JPY, the Yen...

It too had a positive intraday divegrence after declining most of the night, it just chopped around at the US open and through the day.

The $USD strength sent gold to its worst day in 4 months (how I wish I still had the November 22nd  GLD puts closed just before the F_O_M_C).

 Gold fuures had their worst day in 4 months, but as you see, nearly all of the damage was done in the illiquid overnight session, after the US open (green arrow), gold didn't do much.

Silver had its worst day in 13 months despite a story in the media about the US Treasury running out of Silver Eagles.

Again, almost all of the damage was done from yesterday's close, overnight with very little to none during the US day session (green arrow).

Crude popped to its best day in 2 months, I still have the USO November 22nd calls, but this was on a pipeline explosion and ISIS terrorist fears, other than very short term, I'm not crazy about oil here.

As previously stated, stocks were choppy with the NASDAQ 100 apparently not getting the memo...

The major averages today. While the Dow led, you have to remember the weighting of the index as Visa alone accounted for 40 of its 85 point gain, 1 stock accounted for nearly half of the 30 stock index's gain. The NASDAQ 100 never came back after the 1:15 downturn and closed red on the day with the Russell 2000 not too far from doing the same with a meager gain of +0.14%, the Dow was the clear winner with the SPX in close second.

As I showed earlier in the day in the Leading Indicators post, despite mostly negative leading indications, the SPX was tracking 30 year rates nearly perfectly as we have featured just about every night for the past 4 days or so,

 30 year rates (blue) vs the SPX (green), we don't see what happened the last hour as the bond market closed, but that's where it got interesting...

 I said I'd keep an eye on 30 year rates which were in decline until the A.M. update in which a positive divegrence suggested that decline halt, TLT did put in this positive divegrence intraday which sent 30 year rates lower, according to the day's correlation you'd have expected the market to move lower in to the close...


However for the first time today the SPX diverged from yields and headed higher in to the close.

SPX prices are inverted because I'm using TLT as the bond market closed at 3 p.m., but you can see the clear divergence which in the past, has always favored 30 year rates when the SPX diverges as it has in to the close.

More on that in a minute...

 There's a larger 60 min TLT positive divegrence forming, but I don't see a lot between the 1 min and 60 min so it's not a trade I'd take, although it's something I'd keep a sharp eye on as a rising TLT means lower rates and the SPX has been following rates...

For example, I know you have seen it before, but...

As I said above and probably a half dozen times over the last week, whenever the SPX and 30 year yields (blue) disagree , Yields win and the SPX follows along, that's why this large dislocation between the SPX and Yields looks like a significant decline which is exactly what was expected long before the dislocation developed (before the rally started).

As for other Leading Indicators, they are largely the same or worse than the afternoon update. Sentiment on 3 different timeframes in 2 different leading indicators is calling for lower prices with a significant divegrence, as I talked about last week, I'm often surprised at just how consistent these leading divergences are.

 FCT, the first intraday selling off against the SPX,

Our second version, HIO intraday selling off against the SPX and this isn't just today. On a longer basis...

A sharp leading negative indication among pro sentiment

and our confirmation indicator showing the same and their longer term track record...

The July top and in to the July Decline, the August cycle top and in to the stage 4 decline ad a horrible signal now that looks a lot like the 30-650 min divergences I showed in this post this afternoon...SPXU Update (with FAZ, SQQQ and some other indications).

And our confirmation (second) indicator showing the same.

As for High Yield Credit, it wasn't buying it, literally.

 HYG vs the SPX , HYG closed red as well

HYG vs the SPX after moving up in to early stage 2 mark up after the breakout and diverging.

And HYG's track record on a longer basis, again the current divergence is the worst of the bunch as we have seen in several leading indicators and several longer 3C indications today.

HY Credit which is not a manipulation lever also sold off intraday vs the SPX..

IT has on a longer basis in the trend since the October base

And it's longer term track record of a leading indicator with the same deep leading negative divegrence now.

In fact, even the safe haven Investment Grade Credit wasn't buying it today...

Investment Grade Credit vs the SPX.

So what gave us that end of day pop, if you thought a VIX Whack-a-mole, you'd be right.

Despite VIX short term futures outperforming and obviously holding a bid, spot VIX was whacked in to the close sending stocks higher, but still a choppy, sloppy day in front of tomorrow's interesting ECB decision being Mario Draghi was thrown under the bus yesterday.

Several of the averages are also giving the somewhat rare custom DeMark inspired buy/sell signal...

 SPY with buy and sell signals with a rather large sell signal right here, the previous signals are near perfect.

And the NASDAQ Composite with the same.

The Dominant Price/Volume Relationship was found in the Dow with 16 stocks, the NDX with 46 and the SPX with 205, the relationship was the most bearish, Close Up/Volume Down. This often results in a next day close lower, only the Close Up/Volume Up is a stronger next day lower close.

Of the 9 S&P sectors, 8 of 9 closed green with the defensive Utilities leading at +2.26% and Healthcare lagging at -.10%.

Of the 238 Morningstar groups, 161 of 238 closed green. These aren't high overbought signals except maybe the S&P sectors, but they are weaker signals with the lower volume on a higher close, the most bearish of the 4 P/V relationships.

Breadth indicators made absolutely no gains today, they are literally frozen in place over the last 3 days so there's no creeping improvement any where to be found.

Tomorrow we have the ECB (European Central Bank ) decision, strangely a day and a half before other central bankers who work with Draghi came out and threw him under the bus criticizing his leadership and decisions. It's not widely expected that he'll make any significant changes and if there was, it wouldn't be until the December meeting, but it could introduce some much needed volatility as the market is in a virtual stall.

Don't forget we have the volatility inducing Non-Farm Payrolls Friday as well. 

As I have said several times this week, especially with Leading Indicators now posting such strong signals, I have no problems being short here at all, I'm actually excited to be, however I'm on the lookout for any volatility, any upside price volatility that offers better entries or lower put premiums I'd take very quickly. Other than that, I have little doubt we'll be headed to new lower lows and I can't imagine it will take much longer (I can understand the market in a holding pattern through ECB and NFP, but not after that).

SPXU Update (with FAZ, SQQQ and some other indications).

SPXU is not one of my personal current holdings, (3x short S&P-500/SPY) just because I have broad market exposure via SQQQ , FAZ and SRTY which also gives me exposure to tech via SQQQ, small and mid caps via SRTY and Financials via FAZ although SPXU would also give some exposure to financials as the S&P has a fairly high financial component representation.

I've thrown in not only some multiple timeframe confirmation, but multiple asset as well as a few other assets that have very similar chart patterns that are what I'd call, a bit abnormal.

First SPXU (3x short S&P 500/SPY)...

 The 60 min chart in SPXU has no divergences except at the far right (positive). Even though there was certainly distribution at the October highs, if it is not strong enough, it will not show up on these longer timeframes which represent large divergences or underlying action.

The form of the positive divegrence here reminded me a lot of another asset...

 FAZ 60 min, 3x short Financials and while the S&P is not a majority financial components, it has one of the strongest financial component representations just as the NASDAQ/QQQ would have one of the largest Tech representations, so I suspect this odd signal that again in FAZ (3x short financials) shows no divergence until the positive to the far right like SPXU above for the same reason, the Financial component in the S&P.m These two charts would suggest that component or Industry group is much weaker than other groups on a relative basis and judging by Window dressing and the use of the F_E_D's 1-day reverse repo facility on the last day of the quarter  (window dressing) which showed 4 tenths of a trillion dollars in balance sheet/collateral shortfalls among banks, I imagine relative weakness in the sector is not that far fetched.

SPXU 30 min, again no divergence or barely one at the top which suggests the negative wasn't strong enough to reach the 30 min timeframe in any meaningful manner. However the large 30 min positive suggests there's quite a bit of movement in underlying trade in SPY short/SPXU long.

 Again looking at FAZ, 3x short Financials, we have nearly the exact same signal, except no negative at the top.

Everything else other than the current positive 3C signal is in line.

SPXU 10 min is still a very strong timeframe, but more detailed as smaller divergences or smaller underlying action are clearer on this chart including distribution at its top, yet not the strong distribution that was lacking on 30/60 min charts and a strong positive divegrence currently.

 Returning to FAZ 10 min, it is in line, even at the top  until the most recent positive divegrence, so the negative which there was some distribution, wasn't even strong enough to reach a 10 min chart.

In other words, FAZ long which is one of the positions I'm personally carrying, looks to be a strong long/Financial short.

 SPXU 5 min showing in line in to the mid-October highs (lows for the market and SPY) and of course a clear 3C positive divegrence.

 SPXU 2 min would show a lot more detail being a much smaller timeframe and it's pretty detailed, the interesting thing here is the size of the positive divegrence. I'm not only thinking of the concept of price's tendency to move beyond where a divegrence first started, in this case around the $45 level, but the scope/size and intensity of the divegrence also have a lot to do with its performance.

UPRO-3x Long SPX/SPY (this is the opposite of SPXU above and moves with the SPY, just with 3x leverage). UPRO is included as part of multiple asset confirmation.

 On a 60 min chart UPRO shows the negative divegrence that was clear at July that led to a 4% SPX sell off and about an 8% Russell 2000 sell off in to the August lows where we saw accumulation over a week long base at #2. After the mark up stage we have a rounding top at #3 (yellow arrows) and the Igloo with Chimney head fake concept at #4 which almost immediately led to stage 4 decline. As I often point out, head fake moves tend to be some of our best timing signals and entries. At #5 the August cycle is in stage 4 decline , breaking to a new lower low, just as I suspect this current cycle will as it reverses to the downside (a low below the October low) at #1b.

Again, that weak , non-confirmation leading negative divegrence at #2b just like we saw above in SPXU 60 min and FAZ 60 min.

 In fact, TQQQ (3x long NASDAQ 100/QQQ) also shows the same type of divegrence on a 60 min chart at the same place as well as having the same signals and Igloo/Chimney head fake top at the August cycle top before stage 4 decline to a new lower low.

 UPRO (3x long SPY) 30 min also showing the same as UPRO 60 min from the July distribution leading to a -4% SPX move and -8% R2K move to stage 1 base at #2 which was the base for the August cycle, the igloo with chimney head fake top at #3 and #4 followed by stage 4 decline at #5 leading to a new lower low at the October lows at #6 and that same non-confirmation leading negative divegrence at #7 on even a 30 min chart, just like FAZ and SPXU (3x short Financials and 3x short SPY) leading positive divergence (nearly a mirror opposite) on 30 and 60 min timeframes.

 At the UPRO 10 min chart we finally start to see more detailed charts as the divegrences or underlying trade is smaller and more detailed with a positive in to the October lows as we saw for nearly 2 weeks in some cases and the leading negative currently, again confirmed on SRTY, URTY, SPXU, FAS, FAZ, etc...

 UPRO 5 min with the positive at the stage 1 base and a leading negative that has hit a new low (3C) below the October 3C readings.

 UPRO 1 min with the distributionary signals I mentioned several times yesterday in to the 30th with HYG built already as support in to the 31st, the last day of the fiscal year for most mutual funds. After that we see more leading negative divergences.

While I'm not personally holding SPXU, that's more out of circumstance and current holdings rather than preference, I like SPXU just as much as I like SRTY or TQQQ.

SQQQ & SRTY Update

These are both positions I have personally (long) and I continue to like them quite bit. This isn't to disparage other assets, I just wanted to get an update out on these two and I'll try to get more out.

One thing I expected was a more parabolic reversal since most of the averages made a parabolic move off a sharp "V" base, with the R2K/IWM having a larger base than the others.

However as we have seen numerous times in the past, the reversal process from a top turning down has always been about 2x or bigger than the reversal process at bottoms which tend to be much more narrow relatively speaking. However, this is still a pretty tight reversal process.

For whatever reason, if you look at enough of these, you find there's some symmetry between the stages like the stage 1 base and stage 3 top, there tends to be some proportionality. So even with a very sharp "V" bottom, the reversal process here at what I believe is a QQQ top, is still within that proportionality of about 2x+ longer at the top reversal than the stage 1 base.

As for SQQQ and SRTY updated charts...

 SQQQ 30 with the reversal process in yellow and the sharp top to the left, that was the mid October market lows.

SQQQ 10

SQQQ 3 as we have the longer strategic timeframes in place we start looking to the shorter tactical timeframes for timing.

 SQQQ 2 m

Other than multiple timeframe analysis, I always try to confirm via multiple assets, that would include QQQ, QID, QLD, TQQQ, SQQQ , so as you can imagine with 3 or 4 charts for each, I could have you busy looking at charts all day, but I did want to show some multiple asset confirmation because I think this is an important concept in building high probability analysis

TQQQ 3x long QQQ, the opposite of SQQQ above.

 This is a larger picture view, 60 min chart going back to the August cycle and top as well as its stage 4 decline to a new lower low and the base and most recent rally with the 60 min chart almost never getting off the ground as the positive divegrence never made it this far, leaving TQQQ with a deep leading negative 3C divergence.

 The 10 min with the October low base, you can see the accumulation/divergence made it to the 10 min chart, as well as the current signal. The longer the timeframe, the stronger the underlying flow , trend and probabilities.

 TQQQ 2 min trend from the October lows. That looks like pretty decent confirmation for SQQQ.

SRTY 3x short IWM/Russell 2000

 60 min, interestingly unlike TQQQ above, the 60 min positive 3C divegrence DID make it this far in SRTY.

30 min from the October SRTY highs, market pivot lows and current leading 3C divegrence

 10 min chart with a negative divegrence, downside confirmation and a leading positive divegrence, pretty much what I'd call a nearly complete cycle.

 Short term 2 min and in yellow about the area I'd call a reversal process, actually probably a bit further back.

And as far as multiple asset/timeframe confirmation, this is URTY, the opposite of SRTY

 This is a long term 4 hour chart, it looks very similar to the IWM's long term chart (remember this is essentially a 3x long IWM ETF).

 URTY 30 min leading negative 3C divegrence

URTY 10 min leading negative below the October lows.

I'll try to get some more assets up as I keep watch over the broader market as well and some specific assets.