Early today it looked probable the open was going to see downside as the A.M. Update showed with negative divergences in Index futures, but most clearly in NQ/NASDAQ 100 futures.
By late morning it became obvious the market was finding a toe-hold and would likely be putting in intraday lows with an attempt to move higher in to the afternoon, Quick Market Update.
All in all, the Dow lost some 242 points off opening highs to intraday lows , then rallied approximately 195 points in to the closing hour, putting in an approximate 437 point round trip to close up a mere +0.02% on the day, that's what I was talking about last week in saying that this is a day traders market.
I was a bit surprised by the underlying signals in the selling, it seemed stronger than I'd anticipate, as I posted late in the day, it was the averages like the QQQ which moved up the most that had the worst looking intraday 3C charts, while those that were red like the IWM had more neutral looking charts, More Sell Strength? compare the IWM to the QQQ intraday charts for an example.
Or take the NASDAQ Biotechs / IBB which were up +1.70% on the day...
Again, compare to the IWM linked here, More Sell Strength? to something that moved.
I don't want to assume too much, there are several things that could be in play here including a possible scenario to line up with the ECB policy announcement Thursday. In my view, the bounce that has been building a base through the last week or so, is still very much a probability.
The typical levers we'd expect to see are largely there (still)...
As mentioned, Index futures reflect much the same (although the timeframes between the averages above and Index futures are not directly comparable...)
NQ/NASDAQ 100 futures 1 min seem to show intraday action the best, although the same is seen on the ES and TF Index futures. You can see the cash open and close at the green and red arrows (vertical) with a negative divergence just before the open as posted in the A.M. Update, a positive as posted around noon or so and a negative in to the close as shown on QQQ charts in More Sell Strength?.
Even the 5 min charts which showed positive strength Friday as was posted Friday saw deterioration today. Many times in the past I'd use this 5 min chart's divergence as a gauge of which way to be positioned short term or what market expectations were short term. The fact that there's deterioration in to the close leaves the door open not only for selling in to strength on a broader/bounce basis, but for migration of the divergence to longer/stronger timeframes, possibly altering the bounce scenario or shortening it prematurely as it appears to have happened off the 1/6 lows and bounce in to 1/8.
The 7 min charts are where things are mostly in line with Friday's positive divegrence and the larger positive in the area- at least from 1/14.
If this 7 min chart were to start seeing the same kind of deterioration seen on the 5 min chart, I think probabilities would go way up that we have a sell any strength scenario, causing a premature end to a bounce that hasn't begun yet.
This 15 min ES chart shows the end of the last bounce attempt and the sell in to strength concept with quick parabolic moves failing just as quickly.
I showed yields earlier today in Leading Indicators . You may recall the 5 year being closer to inline with the SPX while the 30 year was leading negative, this is because there was more curve flattening today between the 2 and 30 year with the 2 year up approx. 1.19 bps and the 30 year down -6.793 bps which has moved the 2-30 year spread to a new 6 year flat.
The SPX:RUT Ratio custom indicator also shown in Leading Indicators didn't see any positive activity, in fact worse since the earlier post linked above.
The VIX Term Structure buy signal is still there, still valid (they tend to be a little early) and the SPX:RUT ratio was positive in to the lows where the buy signal appears (same as the January 6th lows), however since, the SPX:RUT ratio (red) is not confirming price action and just worsened since today's earlier update. It's still not a smoking gun or enough to think about making short term forecast changes, but again, we need to know what the strengths and weaknesses are and where they move to next.
The two Sentiment Indicators we use put in their first negative reading since marking a positive divergence at recent lows. Again, it's not enough to call for any changes to expectations, but it "could" be the start of a change in underlying conditions and or worsen in to a bounce exponentially and far faster than expected, in similar manner to the 1/6 bounce.
I didn't get a chance to cover it today, but I believe the USO bounce is still a high probability, here are just a couple of charts...
The closest thing to a Dominant Price/Volume Relationship tonight was Close Up/Volume Down which is the most bearish of the 4 possible relationships, but I'm not posting that tonight as the Dominance just wasn't overwhelming or what I'd think is statistically significant to be of much use, but again it's another one of these scenarios where there's deterioration today, not enough to call off a bounce, but enough to make it interesting that it's spread so far and wide. This all could be wiped away tomorrow, but the other side of the coin is it intensifies and if that's the case, we want to know first and early.
5 of 9 S&P sectors closed green, kind of luke-warm, the only interesting thing is it's not like the recent trend of the last couple of weeks in which the market has been leaning more toward oversold, this is not an oversold condition. The leader was Tech at +0.84 and the laggard was Consumer Discretionary at -.57% with Financials right behind at -.43%.
Morningstar groups were luke warm as well, 107 of 238 green.
None of the above 3 indications we watch every day are very exciting in any way tonight which is in itself a change of character.
Breadth Indicators, like most everything else breadth concerned, were luke warm as well , slightly leaning toward deterioration, but not one interesting enough to capture and post.
Most futures have a slight negative as seen above on the 1 min NQ chart, I'll check these again after the State of the Union tonight, and of course if anything pops out, I'll let you know, but for the most part today there were just a lot of things looking like a thread hanging out that if pulled on could unravel, yet until that thread is pulled on, that's all they are at the moment.
For now, no changes to the near term expectations for a bounce. We'll have a BOJ rate decision overnight and Thursday the ECB, expectations very high that they'll launch some sort of QE, however I think some of the most interesting comments today were from the F_E_D, Bullard specifically who made almost the exact same comments last April... Comedy Central Bank
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