Sunday Night Index Futures

I hope everyone had a fantastic weekend / Holiday weekend! I'm so proud to tell friends and family how lucky I am to have such a great group of members; how so many of you are not only great friends, but like extended family. 

There aren't many people who can identify, understand and when necessary, empathize with what we do no matter how caring and well intentioned they may be. It takes a certain kind of person to do what we do (and an even more rare quality of person doing what we do) and I think if you don't live and work as we do, it's simply incomprehensible... So this Thanksgiving when we sat around the dinner table, after recognizing how blessed I am to have such a fantastic partner in Andrea who not only empathizes, but has taken up trading as well, my next thought was how lucky I am to be able to do what I love, to do it in a way that hopefully helps others and to do it with people who couldn't be more deserving. It's truly remarkable and defies even basic statistics (or what I usually call the 80/20 rule) to have so many truly fantastic people to work with every day over the years. So... THANK YOU!

 Myself and Andrea...

Andrea's new job as pilot for Sky 10;  she recently left flying Trauma EMS as many of you know and loves the new job- I love the helicopter rides. This is a rally and fund-raiser for volunteer firefighters which we brought the helicopter to for the kids to have their pictures taken in. Believe me, the pre-flight check was extensive as they had turned every dial and flicked every switch!

As for the market.

I was just poking around looking at Index futures as they begin to trade tonight and while we have a long night ahead of us, after Friday's last post, CHANGES IN CHARACTER LEAD TO CHANGES IN TRENDS... when considering recent SKEW volatility, of course VIX's (custom indicator) buy signal and pinching Bollinger Bands and maybe most significantly Friday (not the SPX finally breaking below the 5-day moving average) and last week on the whole, was the HYG distribution leading to the near crash in High Yield Credit, I found the near term charts flying the same red flag as the macro probabilities...

For instance...

 As you probably know, I won't take any directional; trade unless at least the 5 min Index futures 3C chart confirms. Above is ES/SPX E-min futures with not only a negative divegrence, but a very clear negative in to Friday after the market was propped up for Black Friday.

While most citizens aren't going to understand PMI's, ISM, Initial Claims, Non-Farm Payrolls, etc...they will understand the radio on the way home from work saying something like, "The Dow closed red today" or the "Dow Closed down 200 points today".


This is the 5 min NQ/NASDAQ 100 Futures 3C chart, it too shows the same negative 3C divegrence as ES above and quite specifically in to the end of the week, just as it seemed that HYG's support of the market was also over on distribution through the week and a sharp decline on Friday.

 HYG's (light blue) perfect support of the SPX (green) after accumulation on the 19th and then distribution in to the move higher in HYG as HYG up and VXX down is all that's needed tp activate the SPY Arbitrage lever and HYG alone is often used to lever the market.

HYG/3C confirmation of the down trend to the left (green) with a 3C positive divegrence which I commented on as "bothersome",  just like in early October, "There's only one reason to accumulate HYG-to support a rally."

However it seems the lever pullers weren't willing to stick around long in HYG and started taking profits as soon as it moved above the 19th's lows were it was bought until distribution overwhelmed HYG and they were out with the correction and near HY credit crash Friday.

Credit leads, stocks follow...

 This is the last major pivot when HYG diverged (price) vs the SPX, at the August cycle/rally's September stage 3 top head fake high which led to the 1200 point Dow loss in to the October lows. Now compare that divergence (above) to now...

The white arrow is the accumulation and leading of HYG to support the market as we saw clearly in early August, then the September head fake high and divergence vs SPX (green). The size of the current divegrence is enormous and that's just on a shorter scale/context.

 Back to the 5 min Index future charts...

 TF/Russell 2000 Futures 5 min 3C chart shows the same after an initial pump, it clearly dumped in to Friday as it would seem Black Friday sentiment wouldn't be swayed at 1 p.m. on Black Friday, EVERYONE IS ALREADY SHOPPING.

Impressively, as the shorter term charts migrate to longer timeframes as the divegrence grows in strength, the 5 min chart's negatives include the 7 min charts as well.  These shorter charts tend to be "timing divergences" when we already have macro themes in place on the long term charts as we do...

 7 min ES/3C trend, again negative/Distribution in to the "Save Black Friday Sentiment" week of trade we saw last week...

 NQ/NASDAQ 7 min showing the same trend...And I thought Friday would be a quiet day...IT'S ALWAYS THE QUIET DAYS THAT HAVE THE MOST UNDERLYING ACTION...

This is one of the reasons I say, "Price is deceptive".

TF / Russell 2000 futures 7 min chart also with a sharp negative 3C divegrence and the Russell following the 3C warning.

This is interesting not only because of all of the things in place mentioned Friday (as well as numerous other times), but specifically the "Full House" effect of the intermediate timeframes...

 Such as a 15 min chart (TF) with the Black Friday save or small positive divegrence to keep prices from sliding further and the distribution in to the highs and then Friday's behavior during the cash market.

This includes the 30 min charts as well (TF 30) which shows the initial HYG divergence I saw on the 19th and commented on, that it was arousing some suspicion. However look at that leading negative divegrence to the far right of the chart in to Friday.

These are only part of why this is impressive, it's the macro trends already in place and the shorter term timing divergences jumping in as well when the levers such as HYG or USD/JPY's correlation to the market/Index futures has also failed. All of the market ramp levers are breaking/broken.

USD/JPY (candlesticks) vs. Es/SPX Futures (purple line)... Remember we saw this break up starting well over a week ago as this has been a macro trend not only for the JPY carry pairs, but the $USD and Yen independently.

The normal near tick for tick correlation is busted as ES sees a Black Friday SENTIMENT save and falls sharply out of correlation with USD/JPY (the JPY pairs)...

Add the Macro Index future charts...

 ES 4 hour at the July highs leading to the August lows. The divergence at the August cycle/rally's head fake move in to September (yellow) and the decline to October lows and a worse divegrence now (look at where price and 3C are now relative to the past 2 negative divergences).

 4 hour TF / Russell 2000 and the same pivots.

And NASDAQ /NQ 4 hour looking virtually exactly the same.

However, the real macro trend is the weekly charts such as ES below...

 The green arrow is in line, there's no divegrence large enough to disturb the trend or call a divergence until we move in to 2014 and there it gets very sharp. For a divergence to show up on a chart this long, it has to be enormous.

The main point is the Index futures are showing what I call a "Full house" across multiple timeframes (multiple timeframe and multiple asset analysis, confirmation).

This is what really grabs my attention.

I'll take a look at futures before I turn in, if there's something very interesting, I'll post it. Otherwise, get some rest after all of that turkey and I'll see you in about 12 hours.