Index Futures Update

All of last week I have been making known the 3 conditions that I'd be looking for in the market to mark a pivot area to the downside. The week before the forecast was for last week to see a breakout move from some pinched volatility areas that have made trading very difficult short term as triangle-like price patterns not only in the major averages, but a healthy percentage of watchlist stocks as well, keep squeezing their range as they moved to the apex of these triangles.

The "rough" SPY triangle and diminishing volume on the breakout, which was not only forecast, but also as a failed move or a head fake which allows us to use it for letting trades come to us.

Also during this period internals have been indicative of weakness including the Dominant Price/Volume relationship which has been at the most bearish reading for a good part of the week of the 4 relationships.

The 3 conditions were for the 3C charts for the averages to deteriorate out to their 15 min charts as that's how far the positive divegrence the week before indicating last week's move had moved. The second condition was for 7-15 min Index futures charts to deteriorate as well, once again their moving positive almost 2 weeks ago was one of the 3 conditions that led to the April 2nd forecast for last week's price action and subsequently early this week. And finally Leading Indicators as they too were positive enough to offer market support for last week's move as they remained in line most of the week.

I believe the $USD which was also forecasted on April 2nd to be nearing some short term strength to be followed by a bigger move to the downside is also tightly connected to this particular move...

SPY 60 min (green) at the triangle's apex and last week with the US dollar Index in red.

You may recall we've been tracking some negative $USD divergences building near term and some positive $Yen and Euro which would suggest the second half of that larger assessment that the $USD sees a larger move to the downside after a near term bounce, is also on track which seems to be fairly well correlated with the broader market as well and it being on track.

Last week's The Week Ahead post, expected the move to try to continue early in to this week as the 3 indications have been making steady progress toward the anticipated signals:

"I believe we are not done with last week's forecasted move which has been slow to make the moves expected and fast to fill in the expectations without completely fulfilling them. I have no doubt of the move's purpose as expected last week as the charts have been exceptionally clear."

I think I've kept you pretty well up to date on the market averages and Leading Indicators. Most of last week, Index futures were in line as they should be during a move, but toward the end they start to weaken and we saw that late last week, especially in Nq/NASDAQ 100 Index futures in the 7-10 min range and a slight 15 min negative beginning.

The thing about the Index futures is that they can turn much faster than the 3C chart of the market averages. As of this morning, the Index Futures' 15 min charts looked like this...

 ES 15 min is starting to lead negative now and making it clear as the in line status from last week was near perfect.

TF/Russell 2000 futures also making a clear 15 min negative divegrence, although the 15 min IWM charts have been very weak and never went positive, even the week ending April 2nd like all of the other averages.

And NASDAQ 100 Index futures are also sowing a larger relative negative and a local leading negative divergence that is starting to become quite clear on the 15 min chart.

I expect these have some more ground to cover in their divergences, but they have quickly moved to 15 min charts in the 3 when last week they were almost all still perfectly in line with price.

We already have the weakness clearly building in the averages and Leading Indicators.

Additionally, whether incidentally correlated or not, as you saw above there has been some level of correlation between the $USDX and the SPX, this short term $USD strength or bounce was forecast the same day as the market triangle breakout on April 2nd for the following week (last week).

Because of the overlapping forecasts the same day and the pretty close correlation, I though it was worth looking at the $USD again which has been building a slight negative divegrence through last week on 7-10 min type charts (futures) with Yen and Euro building confirming positives around the same area.

 Longer term daily $USD has gone from very strong positive daily (futures) leading divergence and confirmation to a negative divegrence as trade has broken the trendline which started to see price peel away to the upside which is often a red flag that a more serious change in character is coming. In this case it's not just $dollar trade specific, but carry trade which has huge implications.

This is a close up of the daily chart and a "W" price pattern, one of the first consolidations in the primary uptrend we've seen since the $USD strength started in earnest.

Note the negative divegrence in the area. This is not the kind of "W" base found at the bottom of a decline or pullback so I'm very leery of it being a base to bounce from and more suspecting it hits some resistance in a double top-type manner, although I wouldn't try to call the very specific, specifics of that as of yet.

 On a shorter term 60 min chart (vs the daily above), you can see the positive divegrence at a "W" shaped price pattern which is why I expected some near term strength before a larger move to the downside as posted April 2nd with the market forecast for last week. However even here you can already see a negative divegrence building in to the launch off the second low ("W"). I wouldn't call this a smoking gun yet, but it is in line with the market's broader process if in fact the two are correlated  via causation and not just chance.

 As seen last week on earlier and mid-term $USDX futures charts, like this 5 min, there's a pretty clear negative divegrence that has formed in to the $USD's strength from last week which was significant, as was the positive divegrence above on the 60 min chart to support that strength.

This 30 min chart wasn't negative last week, it was more the 10 and maybe 15 min charts, it is seeing migration or strengthening of the divergence as it turns the 30 min chart negative which is moving to the 60 min chart above.

To the left you can see the second bottom of the "W" bottom, but I'm suspecting that this acts more as a resistance area than a base/breakout the way things are moving now and considering that this "W" formed within an existing uptrend, not much of a pullback which is sending the $USD more laterally when looking at the bigger picture than its previous trend of up despite last week's strength.
As you can see on the daily chart from above...

 We've also been seeing building strength in two of the $US's most popular pair partners, the Euro and Yen which is pictured above on a 15 min chart showing a continuation of the Yen strength/positive divegrence (like the Euro) seen last week.

Again from a bigger picture view, this daily chart of the Yen is showing a 3C positive divegrence, but even more telling is the Yen's halt of a downtrend and move to a lateral trend which from the 3C signals looks like it is a base forming. This would be huge for the pair and carry trade/market.

A closer look at the 4 hour Yen chart shows the lateral price trend which is a significant change in character just from the preceding downtrend in the Yen, the positive divegrence which is leading in the same area is just additional evidence.

Ironically an advisor to Japan's Prime Minister, Shinzo Abe  (the architect of Abe-enomics) was out earlier this morning saying the $1.05 level in the $USD/JPY was appropriate after overnight $USD strength and $USD/JPY weakness, the comments had the effect which you saw in the A.M. Update which I find interesting given the divergences building on the charts last week, our forecast the week before and the long term charts above.

It seems to me $USD strength may not be as strong as some seem to feel, remember last week's very strong move was off a pullback/"W" area and the first significant primary trend interruption. I suspect this is all much more connected with the broad market than it may seem at first glance.