Leading Indicators Update...

Unlike yesterday where watching the market was literally painful as it was "trying" to put in a positive divergence for a bounce, but was just shut down at every turn, yet Leading Indicators refused to give in, apparently at least until that bounce got some wind under its wings, today is much more exciting and enlightening.

Yesterday, last night, the Monday and Friday I said that I won't be hypocritical and say that a head fake move isn't a probability after preaching how common they are and in what environment we most often see them which would include this environment for at least the SPX, see last night's Daily Wrap for a more comprehensive explanation of the concept in current circumstances, but visually it's easy to show with a simple chart.

After our upside target of the descending triangle's upside breakout was hit, we have to redraw the trendlines giving us a range above in the daily SPY/SPX that is a very enticing trap, there's a more extensive discussion in last night's Daily Wrap of the concept in this particular circumstance.

As you can see, the market is moving toward that area as if it is trying to get a head fake move off, there are mitigating factors which again are covered in the Daily Wrap from last night, but the drop in volume and the internals are certainly not broadly supportive of a true breakout, but a head fake move which I often estimate at 80% probability no matter the timeframe, no matter the asset as long as there's an obvious range, technical level, moving average, etc. that will cause traders to take action.

This morning's EU / Greek rumor gave the market a head start via USD/JPY which is yet to come down, but as we have seen all day, there's little to no confirmation in today's move which is exactly what defined a true head fake move or "false move".

For instance, just looking at Index futures...

 As mentioned earlier today, it looks like someone front ran the trial balloon of the Greek 6 month extension rumor that was not sourced and even denied by some official sources, but it got the market giddy thinking there may be an end to the Greek /Troika stand-off. The retraction from Germany sent the Futures lower, but they seemed to have capitalized on their breakout which they couldn't pull off yesterday,  however nearly every where I've looked today from Index futures to averages to individual stocks, there's no support for the move which looks to be desperately trying to hit some target before it is rejected lower, I'm guessing that's the SPX range, but it could be just a move higher and the sentiment shift that comes with it.

 Here's NQ Futures, the most important part of the chart is to the right, the lack of any intraday confirmation of the move, it doesn't have long with no confirmation and it's getting parabolically desperate.

The IWm or TF futures looked the worst well before today and still do.

As for Leading Indicators, they are not yet "screaming", but they are improving i the direction expected which is toward negative dislocations.

 The red custom indicator is our SPX:RUT Ratio and it was not confirming yesterday, but today is far worse.

I showed the Pro Sentiment leading indicator during the cash market yesterday which was leading positive, by the close which was in last night's Daily Wrap, it deteriorated in to the close which is not so visible now, but you can see the chart in last night's post.

This looked like a clear effort to get something going yesterday at the SPX afternoon lows and then fading in to the close, it's certainly fading in to today's price action which is finally some movement in Leading Indicators that I have been waiting on.

 In addition, HYG is lagging the SPX today, this is more Leading Indicator confirmation or at least a good start to it that we have not had the last several days, now in place.

HYG's 3C trend is and always has been one of the most telling indications we have, whether to call bottoms like the October lows almost a week in advance while everyone was as bearish (in some cases new record levels of bearishness in some measures) as you could get or whether to warn of impending HYG/SPX divergences calling tops.

The intraday noise is here and there, but the trend is clear, remember the base for this cycle started 1/29-2/2...

The base for this chop/bounce cycle is to the left in white on the time axis, the 10 min chart is a clear, clean trend with little noise telling us what HYG's most probable intentions are, LOWER.

 Here TLT outperforms the SPX intraday, normally it "should" be making lower lows as the SPX makes new intraday highs, but it refuses to which effects yields, one of my favorite leading indicators as they act like a magnet for equities. The last several days, yields have been leading the market, supporting an upside move toward them, today that changed.

This is what I meant about yields leading to the upside (in red vs SPX in green) and the SPX followed, which is why I like them so much for their dependability, but here's the change today...

 The SPX (green) reverted to the 30 year yield's upside on the Greek rumors and early strength, but then because of TLT's relative strength, yields fell and are now for the first time in several days leading the market to the downside, not just the 30 year either.

 The 5 year is doing the same, now the pressure on the market is to the downside, taken with no 3C support intraday, it starts to become very dangerous, especially if a head fake move is achieved.

And one of the most stubborn indications, PIMCO's HY Fund which has been leading to the upside for the last nearly 2 weeks shows its first major break with the SPX, not only not leading and not in line, but leading to the downside. It's about time we get some movement.

More on the way.