Daily Wrap

I'm not sure how much any of today's indications are going to mean once the market starts to discount the late, end of day events out of the ECB.

What we do know is we expected Oil/USO to pullback, and while I don't think it's cool to make funny of anyone for making calls in the market as it takes some guts, sometimes I just have to laugh with Cramer just because he's so over the top and because of the reservations I have about him and his loyalities.

After Crude (15 min Brent Futures above) put in a positive divegrence and then rallied 24%, what the media considers a technical bull market, today oil gave back about 11.5% (off the intraday futures' highs) and USO -6.78%  and this just after Cramer smells a bottom and all of the other bottom callers come out as we mentioned yesterday, right in time to be crushed.

The expected pullback in MCP also took place after a potential gain of up to 240%. I know some of you made some decent trades and navigated MCP superbly, we'll see what the future has in store, but like USO, I suspect there's still more gas in the tank after a correction finishes.

Here's what the major averages looked like today as they briefly, finally made it green year to date...

The late afternoon ramp was apparently due to comments from Warren Buffet who said that he thought the F_E_D would have a tough time raising rates given world events. I totally agree with Warren, add in the fact that the unemployment rate is much higher than the headline number (that tends to happen when people who fall off unemployment benefits are no longer counted as unemployed because they are no longer considered part of the work force), additionally the F_E_D would have a hard time given US Macro data which we have talked about and inflation expectations/targets.

However, what I think Warren may have missed is the fact that the F_E_D already put everything in place so they can hike despite these facts, for instance, making the unemployment rate look better than it is (that's really coming from the BLS, not the F_E_D), upgrading the economy despite its obvious headwinds and saying they feel comfortable hiking while inflation is below their long run target so long as they "feel" it's headed in the right direction. Considering they have been wrong on inflation forecasts for 2.5 years, really it doesn't matter, as long as they say they "feel" like they'll be headed in the right direction, they already introduced the concept that they can hike BEFORE inflation hits their target of 2% and similarly, they don't have to worry about incoming data as long as they keep upgrading the economy. For some reason I think the F_E_D has to hike, whatever it is, I'm guessing it is scarier than the damage a rate hike will do to the economy, employment and possibly inflation not to mention the market.

As we correctly surmised last week in USO Update & Effects, the bounce in oil lifted the entire Energy sector which lifted the entire market. The last 3-days Energy has been the leading sector, but as mentioned last night, when this thing in oil heads back south, the opposite effect will take hold.

Of the 9 S&P sectors, today was the first day Energy didn't lead, Consumer Discretionary led with a +.67% gain and Energy was the biggest laggard at -1.65% today (after 3-days of leading Energy still is up 45 on the week). Only 3 of the 9 S&P sectors closed green, a far cry from Monday and Tuesday and of the 238 Morningstar groups and sub-industries, only 78 of 238 closed green, again, easing that overbought condition that was developing the first two days of this week.

However as I said above, I'm not sure today's data is going to count for much because of this...

After hitting green year to date, all of the averages fell back to red on Draghi's effective cutting off Greek bank funding, that's what happens when you play nice and try to work together, they were better off threatening to put a Russian seaport on the Greek coast for bailout funds from the Russians.

In other words, because of the very late day move, a lot has to be looked at again from a new light, a new perspective and a new market discount. I don't think that effects positions like oil and MCP moving forward, but for the market, it could have a very profound effect.

Intraday the SPY and the other averages were going for green YTD on the back of Buffet's comments...

 The 1 min intraday charts were pretty much in line with this move, but when it came down to it and the fragility of this market...

With a little stress, the market moved quickly toward the higher probability 5 min leading negative charts I have shown since this little bounce got started, again, this is why I like to keep my positions in line with the direction of highest probabilities.

Treasuries saw some buying and yields some collapsing in to the ECB action late today...

 Intraday (1 min) 30 year treasury futures lifted in to the close on the ECB action against Greece, but note the overall negative tone of the 30 year's 3C chart, this is right in line with the recent Bond post, Treasury Futures/ TLT Update.

This may take on a different tone as we move forward, but note the negative divegrence that was in place even before Draghi (also remember higher bonds=lower yields=lower stock prices generally).

 We see the same thing in the 10 year, not only the lift of the 10 year bond future at the ECB action, but the intraday negative divegrence, we'll see if that changes now that the ECB has made a new move in the market.

As our post, Treasury Futures/ TLT Update basically concluded, it looks like there's a move toward shorter duration as the 5 year treasury futures also moved higher, but had 3C support, this was the gist or my take away from this post, Treasury Futures/ TLT Update.

As for the Dominant Price/Volume Relationship, it's pretty weak and non existent in some areas, however again since the ECB action so late in the day, it may not be representative of the market moving forward.

The Dow (16), the R2K (831) and the SPX (222) were all Close Down/Volume Down which is the least influential P/V theme, I often cal it, "Carry on" as it has no real next day bias, although in today's case, "Cary on" hardly has any meaning. The NDX had no dominant theme at all.

As for some of the currency expectations from last night, we'll we saw a few, I think maybe the Euro wasn't moving down fast enough for Draghi...

 As we expected, the Euro (EUR/USD) came down, just for other reasons-ECB.

The USD/JPY tried to ramp the market on the open or thereabouts and had no success, then toward the close ES took off without the carry pair, but by Draghi time, they both reverted to the mean on the downside.

HYG underperformed today, you likely saw last night's charts of the negative divergences in HYG which tend to be a great leading indicator, they already took effect in HYG's price today.

HYG (blue) vs SPX today.

In addition, PIMCO's HY Fund started a move down...

 PIMCO HY Fund

And we already know where HY Credit stands...

Still, I suspect a lot could change overnight so I'm not going to expend too much energy on a situation that has clearly become VERY fluid.

I'll likely check Index Futures later tonight, right now they are lower than the 4 pm cash close with a very minor positive divegrence, but it's very minor and 1 min only.

I really expect that today's move, so soon, so dramatic from the ECB is setting the stage for a real showdown with people who feel they've been humiliated, had their dignity stripped from them and now are being backed in to a corner and essentially threatened to get in line or else, as I said 2 nights ago when things initially looked all cheery, "I don't think this ends well for anyone".