Leading Indicators/LEVERS

Yesterday I think we made it quite clear that the market was utilizing the market ramping levers simply because it's not strong enough to do it on its own.

I showed you a TLT negative divegrence yesterday that should send TLT lower today as it did, which means yields higher which attract market prices toward them, HYG (High Yield Corp. Credit) also with near term positive divergences as it leads the market (Credit leads, stocks follow) and the 3rd which was VXX (short term VIX futures) which was already in line and acting as a lever yesterday.

Today VXX is nearly perfectly in line with the SPX, HYG is leading as we expected from yesterday's signals (short term)...

 HYG vs the SPX intraday obviously leading...

 HYG's slightly longer term in which it was already in a leading position...

 5 year yields in line with the SPX

longer term 5 year yields...

And as for the TLT negative divegrence from yesterday, TLT is lower, yields are higher and the SPX is in line.

These are the 3 main levers, in fact, so much so that Capital Context's SPY Arbitrage Model that tracks the 3 assets (below) shows the boost the SPY got from the 3 levers being used at once today...

At least $1.50 boost for the SPY...

The SPY is up about $2.38 and $1.50 of that is due to the HYG/VXX/TLT levers.

That's short term market manipulation and we could see it pretty easily yesterday.

In fact in last night's Daily Wrap we had a breadth condition that would normally be considered 1-day overbought with a red close the following day (today), however this is what I said about the condition last night...

"In all 4 major averages, the Dominant Price/Volume theme was Close Up / Volume Down, the MOST BEARISH of the 4 possibilities and in every average except the Russell 2000, it was EXTREMELY dominant....If you know anything about advances on weak volume, this is akin to that, but instead of looking at the average, we are looking at every component stock in the average, thus we are seeing very weak tone in that regard, very much in line with a head fake move. This is part of the reason so many market levers were activated!

Normally I'd say we are at a 1-day overbought condition, but I think this move has to get off the ground, they need it to get off the ground and there's probably a reason for that which has nothing to do with what you'd think, like they need to relieve themselves of some inventory in to demand and higher prices if possible or short in to the same. I'm holding off on calling this a 1-day overbought event which normally sees the next day close red because of the levers and their divergences."

Looking at the SPY chart above, the break above the descending triangle isn't that surprising, it really isn't that important of a technical move right now as it's still in the January chop zone.