Tricky Market

Either there's some indecision in the market related to the F_O_M_C minutes due out in a little under an hour or this is on of the more elaborate head fake bounces I've seen. If the latter is true, I "may" even consider playing a piggy back long trade until we get to the point in which shorts should and can be entered, otherwise I'll just stick to the plan.

One chart than sums up some of the conflicting short term vs intermediate (bounce) signals in our custom SPX:RUT Ratio and VIX Term Structure.

 The red SPX: RUT Ratio is not confirming short term price action to the upside today, however the VIX Term Structure yesterday gave a small buy signal. I suspect these are not contradictory signals, but a more elaborate set up having to do possibly with an initial knee jerk reaction.

Remember we have had the worst 5 day performance since 2013 and the worst 3-day start of the trading year EVER recorded, we are deeply oversold on a short term basis.

 The 1 min IWM is not confirming price action today and looks like a pullback toward yesterday's lows or even below them as a head fake move is likely, however this is an intraday steering chart, not an important signal for a bounce.

 the IWM 5 min is showing a respectable 5 min positive which should lead to the kind of bounce we can short in to at our advantage.

However the 15 min IWM chart and beyond, show the highest probability resolution, in my mind a near certainty to the downside.

Everything I've looked at this morning from the $USD, Yen, USD/JPY, VXX, VIX, VIX futures, yields, 10 and 30 year bond futures, Index futures, Leading Indicators and the 3C charts for the levers like HYG, VXX, TLT, etc.) all suggest the same thing to some degree, some even greater than they were yesterday which is why I might consider a piggy back long, depending on the set up and what the charts look like, because unless the minutes were leaked, they remain a wild card.

We'll see shortly, but I wouldn't assume any near term downside is a break lower and that the bounce has been scratched, in fact just like you saw in the last post of NASDAQ Biotechs and the IWM example, often a downside move is very useful in creating upside momentum so we'll see how things react during the minutes, but I suspect these charts are probably reliable which would mean a bounce and perhaps a quite impressive one, although perhaps short lived followed by additional downside and the breaking of the SPX support at the 100-day moving average.