Daily Wrap

Where to start today? Well I guess we could start with the IMF terms and conditions handed to a defeated Greek government who thought they had lost big when finally giving in to a Troika extension of the bailut terms they set out to defeat to only be further pushed to the brink when the IMF said, "All of your proposals such as corporate tax rate hikes are bunk, they are unenforceable, they won't return you to growth, CUT THE PENSIONS" which is the 3rd rail of politics in Greece, you don't mess with the pensions. One Greek lawmaker said receiving the IMF's new terms was like touching fire, it's that much of an unthinkable monstrosity. So wouldn't it be something if after nearly 5 months of intransigence, being called amateurs, time wasters, and worse, the Greeks finally rolled over just to be pushed even further right in to default with nothing but a recession and over $30 billion in outflows from their banking sector (which is for all intents and purposes now owned by the ECB) to show for it?

If you want a first hand look at the underbelly of the beast, just look at Icahn's or as some of you call him, "I-Con" tactics. Wait for a NFLX 7:1 split and at all time highs dump everything on unsuspecting dupes, better known as the "greater fools". Icahn sold at the all time highs, the dupes bought at the all time highs. Even day trading Chinese grandmothers seem to be more sophisticated investors that this "Buy the Dip/The F_E_D has our back" crowd. Then Icahn pumps AAPL, which I'd guess was part of the record large cap selling last week as recorded by Bank of America Client types. Apparently Icahn would like to pump AAPL and do the same. Seriously, the guy is smart enough to know that when the market goes down, they take all the ladies with them.

Speaking of which, for whatever reason it seems the F_E_D was not happy with the reaction to voting member Jerome's comments yesterday that her foresaw 2 interest rate hikes this year, putting the first at September so it seems the F_E_D came out today and let the market know that it's not waiting around for the market to accept reality. It doesn't want anyone tp get hurt (lol), but it has given the market ample notice.

Which Icahn sort of echoed in his "The HY Credit market is in a bubble and stocks too" tweets today.

If HY Credit market is a bubble, then what do we call stocks? HY credit in blue, already in a primary down trend and the SPX in green. Remember the Wall St. maxim, "Credit leads, stocks follow".

And on that front, remember last week HY Corp. credit was used as a lever to ramp the market as it usually is short term just so Institutions and hedge funds could sell $4.1 million in equities last week to set some new records in sales?

 Last week the SPX followed HY Corp. Credit tick for tick at the green areas, today it was pretty close as both turned down.

However the one High Yield Credit asset that's not used for short term manipulation and reacts quickly to short term, real risk on and off moves looks like this...

 HY Credit SOLD HARD Today.

And since our forecasted May head fake breakout/failed breakout in the SPY (yellow), HY Credit has been in nothing but a downtrend with the most recent market bounce off last Monday's sentiment extreme lows seeing noting but selling. As we saw all last week, Pros were not buying this move and yesterday we got the hard evidence of it from BofA/ML.

Intraday...

 You can see why I love Transports short as they were the worst performer.

In fact, once again for the Dow theory enthusiasts,

Here's the trend of the massive non-confirmation between industrials and transports.

Since last week, and remember in our The Week Ahead forecast we expected early week/Monday strength, which would fade to weakness...

As of Friday's close, the only upside was Monday's gap up, then the reversal process that I was looking for Monday night in to Tuesday and now most of the averages are below or near Friday's cash close.

This was laid out pretty extensively in yesterday's futures updates and especially at the end of last night's Daily Wrap which ended like this...

"I never use to trust the 1 min charts to hold up until the morning, so in that spirit  I'm going back to 5 min charts which have shown recent weakness as posted earlier today in,  Quick Index Futures Update and Index Futures Update with examples.

And Russell 2000 futures looking worse."

Which all led to some ugly trade today and what I'd say is the turning of the reversal process from the early week strength and the entire run since last Monday's lows...

The reversal process in yellow and the leading negative divergence from last Monday's run through this week's reversal process back to the downside.

Speaking of back to the downside, yesterday's parabolic move up in oil/USO, was settled today as was expected via yesterday's, USO Reacting to $USD and Perhaps the API / EIA Set-up

Despite the 8th consecutive week of draws, yesterday's move was a head fake with no support, I had hoped it might go the way of the last 2 weeks of API pump and EIA dump so we could enter or add to the USO short and put positions already in place. For now, I'll take a convincing break of the $20 range in USO, which will put out positions at a nice gain and start to unlock the next trade which should be much bigger and longer on a primary uptrend.

Once again today there was no Dominant Price/Volume Relationship, like yesterday. I don't see anything of particular interest sticking out beyond what was covered yesterday in the decline of the charts in Index futures which was fairly timely, Index Futures Update.

With the exception of the late day intraday divergence that I believe will pop early tomorrow, this the late day IWM calls for a quick trade, most everything looks to be going the way the charts suggested in the futures post from yesterday linked above.

 Short term charts like ES above are in line, although the averages/cash market are showing an intraday positive divergence/normal corrective bounce.

However beyond that and hopefully the chance to get in to some additional VXX at decent prices and excellent divergences, I don't see much that tells me this is not the pivot I mentioned last night...

You may recall last night I showed the actionable pivot areas on an SPX chart...

Short, swing long, short. Outside of these areas, the risk increases and the profit probabilities decrease.

 The 5 min NASDAQ Futures leading negative so I'm not worried about a short term bounce / intraday bounce.

TF/Russell 2000 15 min 3C futures with an even deeper leading negative divergence than yesterday. In other words, I believe we've reached that actionable pivot with the least risk and the highest probabilities, as I said in the A.M. Update this morning,

"So now we hunt..."