Remember the Chinese stock market that was seeing over a million new accounts created per week with unlikely traders such as,
Your local street corner cart banana sales man with his laptop & charting
Or...
Knitting nannies!
All because of the very American market, chase for Yields...
As new construction investments turned to ghost towns.
Well it was a fun ride while it lasted...
Tha Shanghai Composite Index down nearly 20% since June 12th (white arrow). CHINEXT -25%, Shenzhen -20%
While Greek stocks have their best week since 2008, for now anyway.
Meanwhile our beloved former momentum inducing Transports sector is hitting 8 month lows, glad you got in on transports as a core short?
Weekly chart of Transports / Dow-20 as the weekly performance brings them down to lows not seen since last October and for Dow theory fans...Count the last 7 candles (weekly) 6 of 7 weeks in the red.
I created this little indicator to show the relative performance difference between Dow Industrials (Dow-30) and Transports. As you can see Trannies use to be the momentum squeezing asset that everyone loved to chase , outperforming the Dow-30 to the far left, but something went wrong and now there's nothing resembling Dow Theory confirmation as we have now had 3 entry areas in to Transports short.
Meanwhile, just after coming off new highs, the NASDAQ puts in the worst weekly performance in 2 months.
NASDAQ Comp putting in the worst weekly performance in 8 weeks after just coming off new highs.
And it looks like our patience waiting for a biotech head fake move may have just paid off this week...
Our short entry this week via BIs(2x short NASDAQ Biotechs), Trade Idea: BIS (long) as they pull a breakout above a 3 month resistance zone with distribution on the breakout making it very likely a false breakout/head fake move. This may be some of our best entry/short timing in a long time for a trend/core short.
And our Futures analysis, suggesting a $USD move higher and Euro move lower, thus EUR/USD lower on intermediate timeframe charts (suggesting a near term, strong move, panned out despite some very short term charts showing some small divergences going the opposite direction which were wiped out as the Greeks threw up all over the most recent Trokia proposal this morning...
Daily $USD this week, best week in 5 weeks since our Counter trend bounce in the $USD which was the best 7-day move in more than 7 years!
And the Euro's decline this week (daily chart), meaning, as we expected and not looking good for Greece...
The EUR/USD downside this week as forecast.
And our June 18th closure of GLD $114 calls,
Closing GLD $114 Call, as the contracts were up 100% that day allowed us to get out right in time with a small gain...
Gold exit at the red arrow as this week was the worst week for GLD since March.
As forecast in last week's
The Week Ahead forecast,
"I have not put out the VXX long call/add-to call, one of the reasons is this SPY chart (1 min), if we close like this then the concept of 3C charts picking up where they left off kicks in and the most probable outcome would be some early week/Monday market strength"
The major averages on the week saw a gap up Monday morning and that was it for the week, the reversal process expected in the form of a Doji Star on Tuesday was perfectly in place as the reversal process (as most reversals are a process, not a "V" shaped event) took over and has sent us lower this week, however this is not the extent of the downside, it's just the transition from stage 3 top/reversal to stage 4 decline which is underway and I expect to carry on next week.
When looking at the week in futures...
The bounce started as expected on June 15th as the SPX tagged the 150-day moving average for the second time-stage 1 followed by the bounce to flip the script on overwhelmingly negative sentiment as of Monday with a bounce at mark-up "#2", followed by the reversal process talked about in Monday night's Daily Wrap in to Tuesday at #3 (yellow) and stage 4 decline at #4, note the 3C divergence through the process with another week of strong distribution. This is why I have little doubt we continue lower next week, likely breaking below the 150-day on our way to the next target area (200-day SPX) which may or may not offer support, we should know by the 3C charts before we get there.
For the month of June, other than small caps/R2K which likely benefitted from the rebalancing, all of the other averages are in the red.
R2K=yellow, everything else is red on the month.
However, I don't expect the Russell 2000 to hold up long as the rebalancing act which is now up, showed massive distribution in to its bounce just as we saw this week and last week.
Russell 2000 60 min Futures/3C with a large relative negative divergence (red arrow) and an even sharped/stronger distribution signal at price strength in the red box as 3C moves to new leading negative lows.
The closing 3C charts were no where near as strong as last Friday's in which an early week bounce looked most probable. In fact the only average that closed with a positive divergence was the QQQ, which isn't great confirmation, but may say something about AAPL specifically.
However if there is any bounce, which I'm starting to doubt more and more going through the charts, it would be short lived and I'd use it to enter positions or to sell in to.
In line with the Russell 2000 futures above, the IWM's 5 , 10, 15 min charts all show severe distribution through this move and a leading negative divergence at new 3C lows.
Despite all of the downside expected, there are a few assets that look like they may give us some long opportunities, GLD being one that is putting in work that looks like an upside reversal may be available for a trade next week. There are a few others I'm keeping an eye on (long), but most stuff looks really bad.
Gold calls sold as a steep leading negative divergence showed up on its gap up. However it looks like it's building a base with some accumulation so we'll be looking at GLD long again next week, especially if we get some $USD weakness.
What's really getting interesting are Leading Indicators and we call them that for a reason...
Our SPX:RUT Ratio Indicator (red) vs the SPX (green) didn't confirm intraday, another reason I'm leaning away from early strength next week like this week.
Our Professional sentiment indicators are not only in line on the downside like this near term intraday
The secondary confirmation Pro sentiment shows the same, even a bit worse.
As we look out a bit further, everything we see above shows distribution through the bounce off the 6/15 lows, pro sentiment included.
As well as our confirmation/secondary indication.
Looking at the big picture, remember the head fake move in the SPX expected (yellow), look how pro sentiment went negative at the area and has gotten nothing but worse with each passing week,
this week taking a swan dive straight down!
High Yield Corporate Credit which led equities has been negative at each high, but successively worse until the most recent reading leading near new lows for the chart.
A longer chart shows HYG falling out of bed at the May head fake/false breakout in the SPX and near a new leading low for the chart and the primary trend below which is already in its own bear market-remember Credit leads equities...
Shows when HY credit was leading stocks to the upside to the far left, then falling in line toward the middle, then entering a primary downtrend with a series of lower highs (orange) and lower lows (yellow) .
As I said this week, all indications (3C charts ) show HYG moving to a new lower low, it's not a matter of if and hardly a matter of when before equities catch down to Credit's reality.
Even worse recently as HY Credit is not used as a short term manipulation lever like HYG is, HY credit is falling apart at a pace I've never seen.
This is intraday the last couple of days...
This is over several weeks wit a sharp drop recently.
And the big picture going negative right at the SPX's head fake/failed breakout (yellow) and leading negative ever since, with an extreme move lower this last week or so.
Commodities often gain as the carry trade unwinds, which is what I suspect we are looking at.
In any case, hold on to your core shorts, I believe patience is about to pay off big, Greece deal or not.
Have a great weekend!
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