Leading Indicators

This is definitely an interesting scenario because if the divergence didn't get run-over, the minimum 3C target concept comes in to play which is wherever we first saw the divergence which would have been around 1 p.m. yesterday, the market will almost always surpass that level, which would make for one heck of a short term bounce, but more importantly to the bigger picture, it would significantly increase volatility even beyond today's huge pump of volatility, which leads us to decline either way you look at it. Again, a win/win scenario.

There are still positive divergences among the averages, the best looking is probably SPY and the worst is probably IWM. There was major damage done as you'll see on the intermediate to longer term charts, while the positives are kind of small piece shell collecting to ready for a move that should come, but they know won't hold otherwise the accumulation would have been on the intermediate charts rather than distribution.

First the averages...

 SPY 1 min has been pretty consistent. Those of you watching ROC of price should note some divergences by now as you can see SPY is moving laterally in some kind of "U" shaped potential base pattern. Volume also looks good inrtraday and on the day, although I must say this is one ugly daily candle, but this is what we have expected since long before this bounce or the F_O_M_C knee jerk appeared so no one should be surprised.

 SPY 2 min is positive and showing migration, that's something that's missing from nearly every other average, they have a few positives, but they don't have the consistiency of the SPY, which is why I think it will show better relative performance even though it already has today and you might expect the Q's or IWM to have the most to retrace,

3 min SPY

And out to a 5 min SPY.

If it were not for the SPY divergences, I probably wouldn't even bring up the possibility of a bounce, which should really have no bearing on anything you may be doing other than taking some gains in options that you think might suffer in the case of a bounce as I did today.

I do not think this should be traded long and I do think if there is a bounce, no matter how strong or weak it may look, it is certain to fail, as certain as I have been through this entire year even when knowing we needed to break above the market's early 2015 range.

 This 10 min SPY chart is what I'd call intermediate, it is about the right timeframe to track the moves in the market for 2015 which have been volatile, but more or less largely lateral compared to previous quarters/years.

As you can see, the February cycle's stage 3 top saw strong leading negative distribution, there was a positive divegrence in between as we had suspected on the 10th of March and the bounce off that and the F_O_M_C saw heavy selling, especially in to the F_O_M_C knee jerk reaction and we are now at a new leading negative low in 3C so major damage has been done.

 DIA 1 min large relative positive

DIA 3 min leading negative and then leading positive.

15 min DIA distribution in to the F_O_M_C and post F_O_M_C. How do you think we retraced the entire knee jerk reaction? It was used to sell in to which is what we did as well.

QQQ 2 min doesn't inspire a lot of confidence.

The QQQ 5 min looks a bit better and suggests a bounce.

The 15 min is leading negative at a new low for 3C meaning this last bounce we first identified as a probability on March 10th, and then saw even more upside on the F_O_M_C, has seen some of the heaviest distribution of the year.

 IWM 1 min

However there's nothing after the 1 min and this 5 min  shows sharp distribution in to the F_O_M_C knee jerk move,  this is why I ALWAYS warn about these,

The IWM 10 min is also showing a very strong bout of distribution in to this bounce and F_O_M_C knee jerk.

As for Leading Indicators, there's EUR/USD so long as that holds up, you've seen that earlier today.

Then most leading indicators are positive here, a few are mixed, but I can't blame anyone as this was one of the ugliest days since

 This is HYG, High Yield Corp. Credit, the go to asset to ramp the market and it was supportive yesterday, today it looks like some people who were holding those shares in support of the market got cold feet real quick. However, as you know the longer term and primary trend are extremely negative, but just slightly longer than this 1 min chart there's still some support from HYG unless it loses that tomorrow as well...

5 min HYG leading the SPX, this is about the area the SPX "should" bounce to not only based on HYG, but where we first saw the divergence yesterday and the concept of 3C targeting based on those observations.

 In addition, High Yield Credit is leading today as well and yesterday, so both days looks ready for a bounce.

You have to remember one of the biggest things we are looking for in a bounce is increasing volatility. It will take quote a lot to out do today, but that increasing volatility is what makes real downside moves and makes them stick.

The longer term trend of HY Credit on this 5 min chart shows not only it calling the February cycle top, but also calling this bounce as a distribution event and even a bounce here won't change that.

 Here I have inverted the SPX (green) so you can see the normal correlation vs VXX (VIX short term futures), intraday it was right on, but...

On a 5 min chart, VIX short term futures are still underperforming which is another reason of clue as to why I don't think this is the move down that takes this market apart, but it is right around the corner and a lot of damage was done today.

 Spot VIX IS largely inline with SPX (inverted here).

One of our Pro sentiment indicators is leading the SPX (normal) as you can see, the second we use for confirmation...

 was leading and fell apart today in line with the market.

Interestingly, bonds were sold today as the 5 year yield is leading, this acts like a magnet and pulls the SPX / market toward it so short term it is supportive (today's divergence).

The 10 year yield is as well as is the 30, but these are all short term. Anything intermediate or longer is deeply dislocated to the downside and the market should revert to that reality much lower.

Most of what you see above will serve as the Daily Wrap for tonight as the market is what it is, today it gave us nice gains on recently opened positions and put out longer term positions that much closer. I suspect a bounce the same as yesterday, but if fear runs this thing over, then what have we really lost except maybe some extra gains on short term option trades?