Daily Wrap

On a day in which the F_E_D had very little to say, except that Q1 weakness was transitory, exactly what the market did not want to hear, we ended the day just as last night's Dominant/Price Volume relationship suggested with small caps and transports underperforming.

There were earlier divergences pre-F_E_D, but my opinion was that they were not nearly enough to support a knee-jerk move or at least not very long which worked out well as we did not get one.

I would say the divergences pre-F_O_M_C , we're nearly perfectly suited to the post-F_O_M_C price action or lack of it.

The major averages with a tiny move post F_O_M_C. Transports lagged the worst -1.24% followed by Small Caps/Russell 2000 -.99%.

For some STRANGE reason today, Bad news wasn't taken as GREAT news on the Q1 MASSIVE GDP miss at +0.2% vs consensus of +1% (pre. 2.2%). This is what the F_E_D considered, "Transitory" weakness. Ironically for as often as the F_E_D's forecasts are wrong, the Atlanta F_E_D's GDPNow real time GDP forecasting model had forecasted a GDP print of +0.1%, much, much closer to reality than consensus.

Leading Indicators are taking some abuse as they have been mildly supportive the last couple of days, I wonder what would have happened without their support... I think we'll find out shortly...

 Our custom SPX:RUT Ratio indicator that had been supportive (mildly on a short term basis at white), just fell apart today.

Not sure if I need to remind you of the big picture, but since things changed today...

 SPX:RUT was leading the market (positive) in to April 2nd and was one of many indications leading to the April 2nd forecast, since then though it has deteriorated badly, I didn't expect it to get this much worse (in yellow). The indicator "would" follow price (green) if there's confirmation of the trend.

 High Yield Corporate Credit (just as 3C forecasted almost 2 weeks ago), fell apart today as well. It seems institutional traders are even less interested in risk assets than equity traders which should be a red flag.

 VXX saw a lot of volatility, but underperformed the SPX (green price inverted to show the normal correlation) today on a significant scale.

VIX volatility is picking up, remember volatility increasing is a hint that a change in trend is near, this is on an intraday basis, suggesting the larger trend expectations we have to the downside look to be moving toward that point on intraday charts.

 And the Daily SPT VIX which we saw and suspected would make a Crazy Ivan / head fake below its triangle's apex, a break out above the apex and its 50-day (yellow) should be hard to recover from. (Remember the market trades opposite the VIX).

And yields which have been supportive this week as I've shown each day so far (white), turned after the F_O_M_C and reverted down to price. I suspect we will see this deteriorate more in the next day or so.

The Dominant Price/Volume Relationship which was Close Up/Volume Down yesterday, the most bearish of the 4 possible relationships, was Dominant in the SPX, R2K and Dow today with 196, 854 and 13 stocks respectively.

The Dominant P/V relationship was Close Down/Volume Down, which is the least biased relationship and ( as an aside) the most common relationship during a bear market. Since there's very little next day bias unlike yesterday's that suggested a close lower today, I have nick-named this relationship, "Carry on" as in "Keep doing what you were doing" as there's no near term overbought/oversold condition and often stocks /averages will do the same thing the next day (down).

However, Sector Performance is in the realm of 1-day oversold with 8 of 9 S&P sectors closing red with only Energy green at +.78%, lagging was Health Care at -.91%.

Likewise, of the 238 Morningstar groups, only 53 of 238 closed green.

This does denote a 1-day oversold condition. 

EUR/USD was very interesting (strong) today, considering a possible counter-trend bounce in $USD (it's a little too early to say with high confidence, but it makes sense), so I'll likely update EUR/USD tomorrow.

As for futures, we are seeing a fast move in the 7-15 min charts which were all over the place yesterday, today I'd say they are 2/3rds there. However, as I posted several times earlier, I believe the rounding top and head fake move (The Igloo with a Chimney) price pattern are already in place, meaning trade positions are of utmost importance right now as we want to be as close to the pivot as possible for risk:reward purposes.

As you probably know , generally speaking, I believe the next move lower (unlike the last two "U" shaped tops without head-fakes and without a head fake above 2015 triangles) is a primary trend move to stage 4. I am expecting the October lows to be taken out (not all at once of course), this will change the entire trend classification of the market since 2009.

In any case, I mention that because long term futures are showing signals that would be in line with that tend expectation.

 ES Daily distribution on a huge scale.

Overnight, as suggested earlier, NQ and TF have a positive divergence like this which fits with a 1-day oversold condition and makes trade entries a lot easier.

However as I said above, I'd say the 7-15 min charts are about 2/3rd there, considering they weren't even close yesterday, that's quite a move. Remember, they need price strength to sell in to.

To give you a baseline...

 NQ 7 min

ES 7 min

NQ 10 min

ES 10 min...

TF has the most work to do so I suspect in any upside move, it will be the best relative performer, you can see the "Blah" nature of the TF 10 min chart.

Both ES and NQ 15 min charts look like this NQ 15 min so they are almost there.

That will do it for tonight, I think there's a lot more to the F_E_D's rather simple policy statement, I don't think the removal of dates means the hikes will be put off further and I do think there's something they are more afraid of if they don't hike than what a rate hike will do to the economy, housing and not to mention the market.

I'll see you in the a.m., hope you had a fantastic day.

PS-Thank you for all the inquiries about my mother's surgery, it was tough for her, a lot more complicated than thought, but she came through just fine, just a lot of pain as the incision is near her diaphragm making breathing painful so keep her in your thoughts, I REALLY DO APPRECIATE IT MORE THAN YOU KNOW!!!