I'm not sure if the initial move higher ay 10 a.m. on the disappointing ISM, PMI and Factory orders (bad news is good news) suddenly turned south or this maybe has something to do with the leaked 3 ECB bond buying options, the 3rd of which seems the only plausible one, in which National Central Banks would buy their own country's sovereign bonds rather than the ECB, this was one of the 3 options and the only one that doesn't violate the ECB charter. Whatever may or may not come about, the leaked "3 options" didn't receive a favorable response judging by the spreads in the EU sovereign bond spreads.
Either way, the market didn't like something this morning...
SPY 1 min this morning breaking red.
However the point of this post wasn't on this subject, this just happened to materialize during writing it.
The point was the levers that are used to move the market and why I believe this is a short term bounce, a corrective oversold bounce.
Beyond the levers themselves, you already saw the 5 min futures charts for Index futures (positive) and some other charts for the averages in the same area...
Other than the 5 min positive in the SPY, note price actions pattern, it looks like an upside down Igloo/Chimney reversal point.
QQQ 3min positive, but judge the divegrence size compared to the negative that preceded it. Using the concept of "Price will move at least to the area the divergence was first seen", would mean we could expect a move in QQQ to at least $102.75.
The same is almost exactly true of the IWM and it's minimum bounce target would be $118.20.
Again though, my point was to show you the things that make this a weak bounce or rather a bounce that is not well supported, one that I would feel very confident in shorting in to.
This is the 3 min HYG positive I mentioned yesterday, still not very big, but there's generally only 1 reason they accumulate it at all and that's as a ramping lever for the ,market.
Here it is on a 10 min chart for perspective so you can see it really is not that big.
And compared to the positive divegrence at our 12/12 forecast and the December 15/16th lows, it's not even on the same scale.
VXX 10 min shows the recent negative, also a ramping lever, but again compare to the larger positive at a basing/rounding area for VXX, this should reassert itself soon.
And TLT which has been in line shows the first crack on intraday charts today.
However at 2 min there's no negative divegrence .
So even the ramping levers have very small divergences suggesting a very brief move, I didn't say a weak move or at least didn't mean that.
The SPX: RUT ratio indicator was also giving an early head's up on a positive divergence which seems to have moved the market to a small base, it has given out, I assume after having done its job or at least reflected it.
Of the HY credit assets I have been following, this one gave initial support, but hasn't done much since. Junk HY Credit isn't helping out much.
However PIMCO's HY Fund is showing a small base here.
I believe the bounce is still on, but either way, bounce or not, we are in good position to either let short positions continue working or taking advantage of a bounce and then return to let short positions work.
The 5 year yield is not helping the market and is dislocated to the downside, any SPX bounce from here just makes that dislocation worse, thus I believe this is another bit of evidence of the short term nature of any such move with what we can see right now.
The 30 year yield is also in a position in which it is putting substantial downside pressure on the market so I don't think any bounce gets too far with these tractor beams pulling at the market in the opposite direction.
However first, the market needs to recover from the morning downside. Keep an eye on the intraday NYSE TICK, if you see it break it's channel to the upside, you'll have an early head's up on a reversal intraday.
No comments:
Post a Comment