Daily Wrap

The 30-secpnd soundbite for today's move would likely be the rumor of a German compromise toward a Greek deal, even though Chancellor Merkel is at odds with Finance Minister Schaeuble (Smeagol) with a decent part of her party ready to side with the German Finance minister and vote down any Greek "3rd bailout", calling the Greeks "Not serious". I'd have to agree when you are trying to get billions of dollars and you submit a 3 page proposal. In any case, later in the morning after the SPX-100-day moving average short squeeze, there were rumors that there might be a deal the Germans would agree to, however as you'll see this was AFTEr the initial short squeeze and the market essentially did nothing the rest of the day.

 The SPX today with the Greek rumor at the white arrow , well after the fact as the market saw an earlier short squeeze above the SPX 100-day m.a. and then the denial of the rumor at the red arrow,  it has absolutely nothing to do with today's price action, the 100-day moving average had EVERYTHING to do with it.

Since the April 2nd forecast for a breakout above well formed triangles in the market averages that would fail (head fake moves/false breakouts) , we've had almost 3 trading weeks of declines or drifting lower until the 100-day (yellow) was broken to the downside with intraday resistance tested and failed yesterday, creating a clear area for short stops and long entries on a break above, the exact same thing we have been looking for all week.

This morning's excitement...

 Which saw Transports underperform the other major average by nearly half...

Had nothing to do with Greek rumors and everything to do with a clear short squeeze with 3 weeks of ugly market action and a break of an important technical level. Technical traders are really not that hard to figure out.

The SPX saw its best 1-day performance in a month as it moved above the 100-day and 50-day moving averages on fairly light volume which is common for a short squeeze.

As you saw numerous times today, the charts were seeing distribution in to price strength which is what we expected to see once the move got under way ("W" bottom or not-this looks to be the move on a much less stable "V" shaped base).

You may recall the HYG 3C charts were showing short term chart accumulation in front of this move which is one of the first levers they reach for when trying to ramp or manipulate the market higher. Interestingly, HYG didn't performa all that well today, it almost looks like once they got the move off the ground and through the 100-day m.a., there may have been some selling of HYG.

 HYG 1 min vs SPX (green) today lagging the SPX rather than leading it.

On an intermediate term scale as a Leading Indicator, this HYG/SPX divergence is screaming "Trouble", we've already covered that before, What High Yield credit is Screaming 

And on a primary trend, HYG was confirming the SPX at the green arrow through part of 2014, but started making lower highs and lower lows on a primary trend basis. As you might know, I am expecting HY Credit to make a new lower low as well as the market. As they say, "Credit leads, stocks follow", which is an ugly prospect for equities considering.

 The 3C positive divergence in to HYG in recent days gives us early warning as it shows up well before any price move in HY Credit which is the actual lever, not the 3C divergence, that's just early warning of what's to come , how and why, which means the market is fairly weak if they need HYG and HYG wasn't even very excited.

Taking a closer look at the same 5 min HYG chart intraday, it seems to be seeing clear 3C distribution in to the day today meaning it's not likely to stick around long which is fine because I didn't expect this move in the market to last too long, I hoped long enough to get some new shorts off and I would still expect a reversal process and probably some kind of pin in to Friday's monthly options expiration being the last 3 weeks have been trending down.

There are other forms of HY credit that are not used for manipulation as they just aren;t effective, but they do give us a glance inside the world of HY credit without any outside influences.

 Here HY Credit sells off in to the SPX's move today and especially in to the close which is the most important time of day for analysis in my opinion.

On a larger scale, HY credit has been falling apart since the head fake move in May failed (above the SPX's large ascending triangle).

My custom SPX:RUT Ratio shows some near term support the last day or so and falls off in to the close as well today (yellow). In other words, looking beyond the PP gain, there's trouble under the thing veneer.

While we're still on Leading Indicators, our Pro Sentiment Indicators aren't buying the move either...

 Pro Sentiment (blue) vs the SPX (green) refused to move higher with the market today.

Here's the same on a 1 min intraday chart, absolutely no support, no interest which makes me wonder if this move might end sooner than expected.

The long term Leading Indicator trend is also not in good shape. It's when the long term strategic trend meets the short term tactical trend that we see action and in this case, trouble.

Our second version used for confirmation shows the same thing,  no interest at all in the SPX's/market's move today.

And since the head fake move in May above the SPX's resistance (ascending triangle), things have been downhill , you can see why we call it a leading indicator. Perhaps in a couple of days, it will be even more clear given today's refusal to move higher at all.

Interestingly tonight, Internals are showing a massive 1-day overbought condition. The Dominant Price/Volume Relationship has 23 Dow-30 stocks, 50 NDX 100, 1120 Russell 2000 and 268 SPX-500 stocks, the relationship is the same for all 4 and it is Close Up / Volume Up, which is the most bullish of the 4 possible relationships, HOWEVER... ironically this often creates a 1-0day overbought condition and the next day sees a red close.

Adding to that 1-day overbought condition were 9 of 9 S&P sectors in the green with Tech leading at +1.56% and Utilities lagging at +.50%.

Of the 238 Morningstar groups we track, a massive 230 closed green.

This is a massive 1-day overbought breadth condition and I wouldn't be surprised to see a close lower / red tomorrow, that is what we usually see.

As for longer term breadth conditions, they are failing fast. I won't post too many, but enough that you get the picture.

 In green, the Percentage of All NYSE Stocks Trading Above Their 40-Day Moving Average. It's not the huge decline from well over 80$ in a normal bull market to less than half that, it's really the recent action since the head fake move in May that is most interesting to me at the yellow arrow.

 The  Percentage of All NYSE Stocks Trading Above Their 200-Day Moving Average. Again, this isn't about how far off "normal" has fallen, you've seen that many times, it's how far and fast recent breadth has fallen off in areas where it should be making new all time highs.

And The McClellan Summation Index, with a very interesting divergence not only well below ZERO, but again, look at the 2015 trend and the current direction the indicator is pointed.

I showed a lot of 3C charts today so I suspect you have a pretty good grasp on where we are at least until tomorrow's cash market, basically right on the edge of the "gas in the tank" charts at 5 min...

I rust this 3 min SPY 3C chart needs no explanation...

The action in to the afternoon is telling, leading indicators are telling the same story.

As for Futures so far tonight...

Lets just say they're not looking good and I don't regret opening that speculative VXX call position, Trade Idea: VXX VERY SPECULATIVE...

 ES 1 min has been bad all day, but it has just gotten worse since the close.

And the 3 min TF/Russell 2000 futures, NO CONFIRMATION at all.

As I said earlier, we'll let the market tell us when it's time and where we might find the best opportunities. It doesn't seem to me there's going to be much of a bounce lasting long enough to allow beaten down assets like our long term core short, Transports, to bounce enough to get a low risk/higher priced entry, but I think we can turn over a few stones in addition to some more conventional assets.

Have a great night