Market Update

I can't get as much information out in this update as I'd like just because things move pretty quickly and I'd like a little more time to take a look at some other assets and indications which I'll post in a follow up.

Thus far today is acting like a normal options expiration max-pain pin day (open near Thursday's close, range bound price, no big divergences)...

 SPY intraday range today.

The Daily IWM chart with a Doji Star today, again a very tight range intraday.

Intraday TICK is rather range-bound too.

TICK isn't in an ultra-tight range, but is trending laterally and not seeing much in the way of extremes.

This is also in line with yesterday's Dominant Price/Volume Relationship and market breadth indications, both suggesting the market calm down and maybe even close red today.

Looking through the averages, I see several signals here and there that are starting to jump out, I don't think we are seeing any thing suggesting this bounce is at an imminent reversal, so I'd try to remain patient, I know it can be difficult.

The one thing I have found with the market averages is that a few have deeper negative signals, all in to higher prices as we have expected and waited for (smart money doesn't sell in to lower prices unless it's a Black Swan Event), but there's not very good confirmation between the averages where some of the stronger signals may be seen in one, they aren't in another which would normally just tell me that we are still in the bounce process and to continue to be patient and let it work through it,  the signals will show up.

However, it is not that simple and I am seeing some things that are at minimum showing selling in to price strength, distribution and perhaps something even more... perhaps that, "Aggressive" selling we saw in on the first bounce attempt the first half of January.

I'm seeing this more so in Index Futures and some early signs in Leading Indicators which is the area I want to look at more closely.

 ES 1 min is nearly perfectly in line with 3C, this looks like the typical max-pain options expiration pin. The only time (on TF or NQ charts), I see any divergence, has pretty much been a "steering" divergence to keep price in the peg range or in the NDX futures' case, some distribution signals, but otherwise, nothing too exciting here and really more in line with what I'd theoretically expect to see on an op-ex pin than we usually see.

 It's the longer charts where things are showing real movement like this ES 5 min which was negative yesterday and continues today . This is a clear indication of distribution/selling inn to higher prices. 

As to the question, "When is the reversal to the downside?" the answer really would mostly be, "When we see deep enough divergences that we know all of the gas in the tank form the accumulation stage is long gone" in addition of course to other indications that tell us the market is setting up for a new trend change like HY Credit, etc.

 The 15 min ES chart shows the base area (white trend line marks the approximate breakout level from the base area) and negative 3C divergences in to higher prices. Interestingly, even today when prices haven't moved much higher, but are still elevated above the accumulation range, we see a leading negative divergence which may be the evidence I was talking about in regard to the same "Aggressive" selling that caused the early January bounce to fail on the 8th.

 The 30 min chart gives you a view of part of the accumulation zone/base as well as 3C distribution in to higher prices. This is a pretty serious timeframe and the moves that occur on this timeframe are fairly large.

Just like yesterday, I see an intraday positive in VIX Futures.

On a 5 mi chart of short term VIX futures (VXX) there's a leading 5 min divergence in place and building. This is one of the leading indicators I need to do some more analysis of.

 TLT (20+ year bond fund) shows a positive divegrence at yesterday's lows and a gap up today, sending yields lower.

And what really grabbed my attention... HYG, High Yield Corporate Credit, which is one of the mainstay ramping levers used, it's such an effective giveaway that it has been a big part of makoing every major call through the entire year from the September highs to the October lows and rally, to even this most recent move's base.

 This intraday (1m) HYG 3C chart is more aggressive than I'd expect given the kind of day it is and the other 3C charts on other assets which are much closer to inline intraday.

This looks to be migrating since the ECB statement to longer charts, this would be early in the process, but it can happen quickly.

Even the 5 min chart is showing the migration of the much sharper 1 min negative.

This is a dead give-away when we have a strong signal. I'll be the first to admit that 1 or 2 days does not make a trend and it's dangerous to make assumptions based on the limited information, that's why I need some more time to look closer at these assets , but so far it looks like we are in the process already of seeing these levers getting ready to pack up and leave the market's bounce as they move back to their longer term bearish trends.

I wanted to get this post out, but at the same time I do have more to look at and I will update you.

For now, just like earlier in the week when I said we are still expecting a move higher, I'd say be patient, we are still in the process. However, we might just be seeing the very early, initial signs that this may not be as long lived as the base's gas tank might suggest.