Daily Wrap

Tonight is date night so I'm going to keep it short.

Just some fun factoids, since the NASDAQ hit 5000, the Dow has lost 611 points and we're just getting started, this is what I mean when I say, "Price is deceiving", what's going on below the surface often tells the true tail and it has been that 60 min ES/SPX futures that has been confirming what we expected back in January when we forecast the range would be broken to the upside before any real downside would begin.

The Dow and S&P are seeing the worst performance in 2 months with both below their 50-day moving averages and joining transports in red year to date. It's amazing how fast things change from a new high at a head fake move to that being a great downside timing signal which is why I like to use them.

One of the big problems is excessive leverage whether NYSE margin interest or the carry trades, there's a massive $USD shortage and it's forcing an unwind of carry trades which means that the positions bought with the proceeds have to be closed as well (equities). I suspect this is just going to get worse so we'll be keeping an eye on that as the $USD appreciates at the fastest pace in 34 years.

Yields are down as we expected, Credit led the market (HYG) as we expected and on a short term basis, 3C picked up where it left off if you saw last night's post calling for weakness that was evident in futures as of the Daily Wrap post, then they really fell apart after midnight.

We are still looking for a bounce to re-open QQQ and maybe AAPL puts as well as any other assets that are offering a nice looking opportunity and timely.

There really wasn't much in the way of 3C strength anywhere to call for a bounce, a lot of it was pieces of the puzzle, the way price moved laterally, the intraday breadth, but there were a few other signs.

 Our SPX:RUT ratio was supportive of the market intraday, but that's about all.

Our Pro sentiment indicators were also supportive of a dead cat type bounce.

HY Credit is not going along with any risk and continues to lead lower.

Even though yields were down today as we expect, they are still mildly supportive bigger picture, 5 year.

Intraday though, nothing-30 year

Commodities led on the way up and are leading on the way down.

Intraday, they flattened out, while not positive, they are giving the market a chance to try to bounce,  I obviously don't think it's anything more than a dead cat bounce, normal market movement.

Any slight3C strength the market tried to build like SPY...

 SPY 1 min intraday...

Was torn up at the close, you can see on the SPY, but even more in IWM...
IWM leading negative in to the close and just about destroying even a 1 min positive divergence intraday.

However, you know the case I made and why as well as why I chose to close the AAPL and QQQ puts when I did, dimply so I can add them back on a bounce.

To that end other than a few leading indicators, price and volume acting like a bounce is a possibility here,  the biggest indication of a short term oversold bounce was in breadth.

The Dominant P/V Relationship was in everything except the Russell 2000, the Dow saw 27 stocks! The NDX, 88! The SPX 333! The relationship was Close Down/Volume Up which is the most oversold condition among the 4 relationships and the second most bullish short term.

Even worse, all 9 of 9 S&P sectors closed red and to my disbelief, of the 238 Morningstar groups I track, ONLY 5 ENDED GREEN !!!

That's a massively oversold 1-day condition that should end with a green close tomorrow which plays right in to out hands.

There's really nothing in the charts that trumps that on a short term basis.

As for that ES 60 min chart and the divergence that has been warning us to be ready for this (which I like because it's just management now, not a lot of detective work)...

ES 60 min with price catching down to 3C and the entire head fake move in SPX retraced. All of the gains since February 2nd (actually on the whole year) are wiped out, any long chasing them and not having sold is underwater just like that.

This has to be one of the ugliest markets I can recall seeing and how quickly it turned, but this was expected before the Feb. cycle even began.

I just hope we get a chance to add some additional positions, I wouldn't have closed AAPL/QQQ puts today if I didn't think we'd get better entries with longer expirations. Tomorrow will tell, assuming the global carry trade doesn't collapse overnight.

When I get back from date night, I'll check on futures and let you know if I see anything like last night even though the weakness didn't increase until after midnight.

Have a great night.