Quick Market Update

Believe it or not, since the Actavis placement of $21bn in 18 month to 30 year fixed junk bonds, completed today, the intraday breadth of the market has seen some declines and the intraday signals have seen some deterioration, it's not screaming, but as we saw something was going on in bond land last week, the reason for the TLT short/TBT long call, I see something changing since the issue above prices out (
4.5x oversubscribed).

The point being, you know our leading indicators and how Treasuries move opposite yields, yields move with the market, so even our trade idea in TLT/TBT was telling us as you'll see in the post that it should help the market short term.

In any case, now that issue is over and priced out, Treasuries I believe are going to start to return to a more normal state which I think is what is causing some of the intraday changes and breadth changes toward deterioration.

Remember Yields tend to pull the market toward them and they have been up almost since we put out our TLT short idea (TLT moves opposite yields, thus opposite the market).

That strange $21 bn dollar placement seems to have effected the equity market maybe indirectly, but also directly through bonds/yields, when I show you Leading Indicators it will make more sense.

However for now let me just post the intraday TICK and our custom TICK indicator and you'll see the change in character, however slight right now , since the Actavis issue priced, with the assumption the bond market
(Treasuries) should be returning to normal without the Actavis overhang.

 This is the intraday NYSE TICK Index or intraday breadth, remember I always say to draw a channel and look for a break of that channel as an early head's up warning? Well in yellow while not screaming, there's certainly a reduced upside ROC and in fact more of a downside bias since Actavis priced.

Here's our custom TICK vs SPX indicator, you can see TICK declining this morning with more stocks selling of and then it improving and then declining again after the Actavis issue has been finally prices.

The result or effect that had on yields and Treasuries is the reason our TLT/TBT trade worked, but likely had an unintended consequence of being supportive to the market, even though it was totally unrelated, except for any investors that are tired or concerned about the reach for yield in equities and would rather own Actavis debt, it's certainly plausible as the $21 bn dollar issue was 4.5 times oversubscribed.

 Passively the 5 year yield has gained ground since the 25th, the day after our post for the TLT short/TBT long. Here in white you can see 5 year yields leading the SPX, this is one of our leading indicators that has been very reliable. While humans may have been able to make the connection and discount the Actavis offering, algos certainly would not have unless they were taken off line and reprogrammed just for the Actavis issue.

Remember Actavis' offering went from 18 month floaters out to 30 year fixed? This is the 30 year yield also advancing and the 30 year treasury is declining , the reason our TLT short made money and TBT long made money. This also had the effect of sending 30 year yields higher and we use yields as a leading indicator as they tend to attract equity prices toward them

However in this particular situation, I guess you could call Actavis a short term anomaly that likely lent more support to the market than many parts of the market even realized and why.

The point is, it's done and over and since the ICK has been deteriorating along with 3C signals. Again, not screaming, but there seems to definitely be a correlation. The foot bone is connected to the leg bone and so on...