Daily Wrap

There are so many concepts, fallacies about the market and otherwise ironies today that I barely no where to start. I suppose fir with overnight action in the USD/JPY pair, losing about 100 pips as "Profit Taking" is declared as the reason for the decline and the reason for the profit taking is the pair had been ramped too high on the same story at least 4 times this week. This 30 second soundbite in which an explanation for why the market did what it did is ridiculous, but people like surety, they like to hear a reason for why the market did what it did and I understand as the market is probably the most dynamic organism in the world generating huge mass emotional swings, so yeah, it's understandable that people want to know why something happened. However the bottom line is the market is never so simple that it can be summed up in a sound bite, that's just media pandering to people's need for assurance.

If the above reasoning for the USD/JPY decline overnight was correct, then why could we see in pre-market the following (From this morning's A.M. Update)...

"With Asia closing green and Europe fairly deep in the red, futures are down on the USD/JPY which has been one of our near term expectations, but nothing moves in straight lines. My initial take is that there are enough positive divergences in the Index futures to at least try for a gap fill and the yen looks as if it could pullback, bouncing the USD/JPY which is sitting above the 115 level."

The USD/JPY lost ground overnight from $116.09 to pre-market lows of 114.87, then after the post above rallied all the way back to 115.72, not quite the overnight highs, but darn close and this in support of the positive divergences in Index futures mentioned above in the A.M. Update.

Using the same charts and logic as the A.M. Update, USD/JPY looks to be getting set for a move lower, as mentioned earlier , "There is a roof on the USD/JPY move", that roof was positive 7 min Yen charts and negative 7 min $USDX charts, not to mention the even larger macro trends in the Futures update yesterday and of the last week or so; Futures Indications

 USDX intraday using the same chart as pre-market that called a near "V" reversal at the cash open.

And the Yen, also using the same exact chart that put in a near "V" reversal on the cash open, both are pointing to a lower USD/JPY coming soon. Again, this is not even considering the larger macro implications of larger charts covered yesterday in Futures Indications

The above may be the reason why the Nikkei 225 futures are not looking very good near term...

5 min Nikkei 225 (/NKD) Futures with a negative divegrence in to the high and leading negative continuing, USD/JPY weakness would not be helpful to the Nikkei.

Next, last night while talking about the Rounding Top or Igloo with Chimney Concept (Chimney being a head fake move that is a timing marker that calls out a stage 4 decline just after the move-creating a price pattern that looks liken igloo with a chimney at the right side) which would look like this (from last night's post, Daily Wrap)...

"While I suspect the market will end the way it started, there's always the concept of the Igloo top/Chimney as rounding tops become more obvious , a head fake move used to lock in longs that may start to waiver, but also an excellent timing signal for the start of a stage 4 decline as we saw with the August cycle.

The August cycle's Igloo/Chimney top and the sharp "V" bottom, I have suspected we'd see symmetry in the top with a shaper downside reversal, likely a big gap down day, but the concept has been right about 80% of the time, even though this "V" bottom was one of the times in the 20% in which the reversal was more an event than process."

Continuing from last night's  Daily Wrap...

"The IWM looks to be the most at risk for such a move because of its base.

The IWM had a larger base than the SPX, DOW or NASDAQ, the market tends to have a lot more symmetry than you may first notices with upside reversals being tighter than downside reversals (tops)."

Not even getting in to the last 30 min stock ramp-a-looza that failed to close the S&P and Dow green, which they barely managed yesterday with a VIX knee-caping and the NASDAQ green by +.20% solely because of AAPL 1.41% gain and heaviest weighting on the NASDAQ 100,  it was the IWM last night that was identified as the most likely to see a head fake ramp if there were to be one based on the above but also on the below...

The IWM's resistance level was becoming too obvious, which leads to limit orders piled up just above resistance, that's why I mentioned last night when talking about the subject, "there's always the concept of the Igloo top/Chimney as rounding tops become more obvious "

In addition, the IWM, unlike the S&P, Dow and NASDAQ had a wider base, which was discussed last night under the symmetry of base's / tops.

Making the IWM in my opinion as of last night, the most probable average to see a head fake breakout move if there were to be any and the IWM was the only one that showed such behavior today, although it was fairly tame compared to what they usually are, it may in fact be a great timing indication and put buying opportunity. Again as discussed last night and hundreds of times before as a broad concept, 

"a head fake move used to lock in longs that may start to waiver, but also an excellent timing signal for the start of a stage 4 decline as we saw with the August cycle."

Ironically while this apparent risk on move was taking place in the IWM, not so much the other averages with SPX and Dow closing red, the VIX is easily outperforming the SPX correlation.

The VIX in blue vs the SPX in green (prices inverted to show relative performance) is easily outperforming the normal correlation  because the VIX's protection is being bid up. While some say this is hedging (the same some that said the USD/JPY sold off overnight on profit taking from old news repeated) , there's nearly a 3 week trend of higher 3C leading positive highs in VIX futures with an emphasis on the last 4 days.

VIX 60 min futures hit a new leading positive high today as prices flatten out, again BID.

The exact opposite happened at the October SPX lows, however no where near as big as this divegrence which should tell us something about the scale of the expected decline. The scale of the rise certainly was more extreme than anyone imagined and didn't have signals like this/.

Yields dropped on the bell and then put in a "V" shaped recovery, however the last hour can't be seen as the bond market closes at 3 p.m., I suspect the 20+/30 year bond has a surprise waiting for us, not only short term, but see yesterday's Futures Indications post.

 TLT 1 min and the small intraday double bottom mentioned near the close.

TLT 2 min

TLT 3 min

TLT 10 min

And like many indicators, the size of the divergence at the October lows that led to the rally pale in comparison to the size of the divergences or Leading Indicator dislocations now, take this 60 min TLT chart for example, the same can be seen in Futures Indications posted yesterday asset wide, but specifically in 30 year treasury futures as well.

30 year yields vs the SPX intraday, the 10 and 5 year yields were less exuberant.

HYG underperformed today after yesterday's afternoon melt-up to get the SPX and Dow green, 

 HYG's support looks to be over as HY credit is clearing out just as VIX protection is being bid up.

Even High Yield Credit sold off in to the closing ramp attempt.

HY Credit.

As mentioned, beyond the S&P and Dow failing to make a few measly 10ths of a percent to close green, the NASDAQ looked like the only reason it was green was because of AAPL's weight on the index and its nearly 1.5% move today, otherwise, it looks like AAPL gave institutional sellers any easy out of the Q's.

 QQQ 5 min trend from leading positive at the October lows base to a new leading negative low today. A closer view of the same chart...

It looks like AAPL strength was used for QQQ distribution.

Some other stocks/assets covered recently that I'll update quickly....

 While SLV definitely has a change of character and IO expect something will be going on soon there to the upside, I'd like to see a little more lateral or rounding  or "W" shaped base, something SLV can really get some traction off of, this may be the first Silver trade in a long time and for good reason, the manipulation is insane.

Just today JPM was called out for tripping stops of its own clients in FX to its own benefit, attempted to manipulate rates and inappropriate sharing of data about their own clients with other firms. The details get worse, much worse and it was many more firms than just JPM, but getting to the point, UBS was caught fixing rates and MANIPULATING PRECIOUS METALS PRICES, , FNMA's punishment was to demand that UBS keep those traders' bonuses at only 200% of their base pay, THt was their punishment, while at the same time to bankers who embezzled money in Afghanistan go to prison for 15 years, here traders do much worse across global markets and their punishment is their bonus can only be 200$ more than their base salary! Enough said...

 In any case,  we follow the money. Gold looks like it will be up to something, but for now I',m staying away from any trades long or short in gold and miners.

 USO, even though it cracked to fresh multi-year lows today, looks like something is starting, I'll be keeping an eye on that as the short squeeze there should be epic.

UNG we expected a pullback, I don't think it's finished.

I have a 10 and 22 day moving average on the chart, I'd expect the 10 day to hold, but we'll have to see more accumulation than what we've seen thus far. The Trend Channel stop is still just above $21.

And BABA should pullback, but I'm hoping it stays sideways just a bit longer so we can decide if there's a high probability/low risk trade there, the stop is at $114.90 , that's when something big has changed otherwise I have a range for the pullback target, $115.70-$116.90.

Again today there was no Dominant Price/Volume Relationship, the second consecutive day after a week 3rd day.

The S&P sectors saw a weak looking 4 of 9 close green with Consumer Discretionary the big winner at a gain of +0.47% and Utilities lagging at -1.75%

 MorningStar Industry Groups were nearly as dull with 144 of 238 green today, this was all reflected in the very narrow TICK range of the last 2 -3 days.

Again there was virtually no movement in Breadth indicators, for some this makes 7 days, others are on 2 trading weeks. There were a couple hi momentum/beta type stock groups like 2 SD's above 40-day moving average that saw a sharper than normal decline, showing some of these momentum stocks sold off today harder than the rest of the group, that's the first real movement in over a week.

As I wrap this up, futures are showing a severely negative $USDX and a VERY sharp positive in the Yen, the $USD/JPY should see downside very soon. There's also a strong positive divegrence in 30 year bonds, which would send yields lower, stocks have been tracking 30 year yields and finally the NKD/Nikkei 225 futures have a negative divegrence developing in them as earlier, I suspect because of the moves in Yen/USD or to come in USD/JPY.

I'll check futures before bed time and report anything out of the ordinary.

Quick Update

There's tons of movement. High Yield Credit is crashing in to the last 20 mins of trade, professional sentiment is falling in to the same area, TLT looks to be finishing an intraday base between 2:15 and 3:45 to launch higher (yields lower), 30 year treasury futures are doing the same, VIX is holding up stronger than it should be, HYG has failed, the $USDX is in worse shape, the Yen better shape and thus the USD/JPY in worse shame and TICK is breaking down right now.

As I said, a lot which is why it's a quick update as it would take 15 minutes to load all of those charts.

NASDAQ 100/QQQ NDX Futures

Looking at the QQQ and the /NQ (NASDAQ 100 Futures), they look an awful lot alike and with the only two means of support seemingly giving way, I'm taking these charts seriously.

 QQQ 1 min with this morning's positive just before the European close and a leading negative now, very similar to NASDAQ 100 futures...

You may recall the positive divegrence seen this morning in the A.M. update which led to a move up on the opening bell, again a similar leading negative divegrence currently.

 The 2 min QQQ chart looks a lot like both above.

And for a potential head fake move, the leading negative 5 min chart right at the move is a little more than interesting.

The same with the 5 min /NQ NASDAQ futures, amazing symmetry in the signals  between the Q's and the NASDAQ Futures.

Market Update - USD/JPY & IWM

First off USD/JPY is losing support already which was to be expected as signals at the a.m. update were in the 1 min range.

However first last night I was talking about the increased chances of an Igloo top/Chimney head fake. I said last night the following...

"The August cycle's Igloo/Chimney top and the sharp "V" bottom, I have suspected we'd see symmetry in the top with a shaper downside reversal, likely a big gap down day, but the concept has been right about 80% of the time, even though this "V" bottom was one of the times in the 20% in which the reversal was more an event than process.

The IWM looks to be the most at risk for such a move because of its base."

And the support zone being so clear...

The psychology is simple, "Keep the bulls enaged", that's hard to do when price is sliding which is pronbably the reason why these head fake moves or Igloo tops with a chimney, chimney being the head fake move , make such excellent timing indications as the bulls are once again engaged, doubts about rounding or sliding price thrown to the wind, thus the need for a fast transition to stage 4 decline  and thus the reason these moved tend to make such good timing markers.

Also discussed in last night's post was symmetry, the market )(except for the IWM) took off on a rare "V" bottom rather than a wider base, there's often symmetry in tops/bottoms, this is why I was up in the air about a head fake concept that has proven itself to be about 80% while the bottom was one of the few times in the 20%. Head fake moves tend to be larger, more convincing, but for a market I'm not even convinced has the same 80% probability because of bottom/top symmetry, ,it's a coin toss on the concept, not the direction of resolution of the market though.

Perhaps the USD/JPY is giving us part of the answer.

There's a sharp leading negative divergence in the pair...

 USD/JPY intraday which has been market support with a sharp leading negative.

Just like this morning, confirmation was from the $USDX and Yen currency futures.

 The $USD has seen rapid deterioration intraday and the other side of the pair...


 The Yen is seeing a positive building.

 The TICK Index continues to trend lower and deteriorate with larger volatility building in recently/

While the 3C intraday charts of 30 year Treasuries suggesting an upside move have seen yields turn down and the SPX with them above (yields red/SPX green).

TLT / (/ZB) 30 year Treasuries

TLT is actually 20+ year treasury bond fund, but it worked beautifully yesterday as a proxy for 30 year rates being the bond market was closed.

Here's what TLT is looking like now, there was an obvious set of divergences and the current one is suggesting TLT is going to see higher prices and thus far today's move is was as expected in the A.M. Update, short term intraday. The larger implications for the market again are not good.

 This 2 min TLT chart from yesterday confirms the yields hints we were getting yesterday were right on at leat on the open as they have a positive divegrence at yesterday's lows sending TLT gapping higher this morning in to a small negative divegrence and a current leading positive divegrence that is building now.

A 1 min chart has more detail for intraday trade...

 This is the gap up and almost immediate intraday negative in TLT, remember yields move opposite bonds/TLT and with the market.

Again there's a positive intraday divegrence building as seen above.

30 year Treasury futures are giving the same signal intraday...

 Leading positive in to the a.m. decline.

 The stronger 3 min TLT shows yesterday's positive and today's building positive migrating to longer timeframes telling us it;s building/getting stronger.


The big picture implications for the market are not good as the 60 min TLT chart is leading positive, TLT up, Rates down and the market following yields.

We see the exact same in 30 year futures on a 60 min chart as well

This is during a flat-ish range, a typical y accumulation area, this is a large and strong divegrence, it makes sense with the flight to protection in VIX futures (60 min) as this would be a flight to safety trade.

Market Update / Leading Indicators...

For a 3rd consecutive day, VIX and VIX short term futures are outperforming the SPX correlation, this clearly implies there's a strong bid under VIX futures, normally I might say it's hedging, but it's hard to believe that when the VIX futures themselves are nearly off the chart as you'll see below, and SKEW's recent moves look like it's upside ROC is about to change to the much more volatile (Tail Risk).

 VIX trending up and clearly outperforming the correlation with SPX (green with inverted price so you can see the normal 1:1 correlation).

 VIX short term futures also outperforming, you can see yesterday's late day (last minute) slam of VIX to get the Dow and SPX green (+0.007% and +0.07% respectively), seems pretty desperate.

 While VIX futures (I'm losing the left side history, but there was a negative divegrence in to VIX futures highs mid October at market lows) are putting in an even larger divegrence at a new leading high, this does not look like hedging.

There also seems to have been a more desperate move to accumulate VIX Futures since last Friday through this week, not just from the above, but from the 30 min chart below.

This looks like someone has incentive to get moving on getting a position finished up.

 near term you can see HYG's  desperate pump in to yesterday's close giving the SPY Arbitrage about a $.60 cent SPY leverage which was the difference between a red and green close. HYG has fallen out today, but the most important signals for HYG (High Yield Corporate Credit) are on longer charts.

As per the October cycle...

 HYG in blue vs SPX in green, that's trouble. HYG led the August cycle to the far left in white by about 7 days if you recall right from the lows and also led it to the downside and stage 4 decline to a new lower SPX low. This dislocation is sharped than the August cycle's.

However the really important HYG chart is the one below, especially looking at the SPX as a Broadening Top...

HYG 60 min through 2013 in line and 2014 making primary trend lower lows and lower highs. I haven't seen an occasion where HY Credit and Equities tangle and HY Credit doesn't come out on top as the leader, perhaps that's why the saying "Credit leads, stocks follow" is so common.

Intraday earlier in the A.M. Update I had posted,

"My initial take is that there are enough positive divergences in the Index futures to at least try for a gap fill and the yen looks as if it could pullback, bouncing the USD/JPY which is sitting above the 115 level."

It turns out the A.M pre-market Indications were right on, but also right on 1 min charts, intraday in meaning, not strong trending charts.

The USD/JPY is supporting SPX Futures as can be seen below...

 USD/JPY(candlesticks)  pushing higher just after the US cash open and ES (purple) getting some support from the move.

The charts in premarket that suggested this was the most likely outcome in to the open were the $USDX and Yen currency futures themselves on 1 min charts.

 The Yen took a dive just after the US open as the negative intraday 3C chart suggested and the $USDX...

Advanced just after the cash open.

However as also posted in the A.M. Update, there's a roof on this move at the 7 min chart where $USDX is in line on a larger downside trend and the Yen is leading positive.

The other support is coming from the 30 year yield as it gapped lower as our best guess using TLT inverted yesterday (as the bond market was closed) implied.

30 year rates (red) vs SPX (green) intraday today. The 5 and 10 year yields are much less exuberant and not leading like the 30 year's reversal  around the European close.

This makes the 30 year bond futures and TLT a key asset today in intraday trade, I'll update those on their own as fast moving charts tend to be stales by the time these larger posts get out.

TICK DATA REMAINS VERY STALE AGAIN TODAY IN AN EVEN TIGHTER RANGE OF +750/-250. 

NOT MUCH MOVING ANYWHERE.