High Yield Corp. Credit as a Lever & an Opportunity...

This is intraday and falls in to the intraday "Noise" category I mentioned in the last post. In other words, ANY price strength is an opportunity to set up a position somewhere in some asset that we haven't already hit or may want to hit again. The highest probability resolution charts as seen in the last post and the path of least resistance is down for the market, but nothing moves straight down (as I have mentioned many times in the past, there are just about as many green days as red days in a full-on bear market, just the red days are significantly stronger-this is the noise that we can use as an opportunity).

I'm not seeing a lot that would suggest any kind of tradable, respectable intraday bounce, but I am seeing this which I want you to view in context by looking at all of the charts. In my opinion, the first lever of market manipulation that Wall St. reaches for is High Yield Corp. Credit, you saw how the market tracked it nearly tick for tick since the bounce off the June 15th lows. It is the price movement in HYG that the market tracks as a sort of short term manipulation, not the HYG divergence, that's for our eye only.

 This is HYG at the reversal process highs that the Week Ahead forecast from last Friday suggested we'';d see after initial early week strength (Monday), we'd see the reversal process and a move to the downside which most of the averages are well in to stage 4 decline from the 15th's cycle.

However intraday HYG is seeing a 1 min (weakest timeframe, but also most sensitive) positive divergence. Keep the trend in mind as this divergence has to be put in to context, meaning it's not anything that threatens our near term forecast for additional downside and what I believe will be the next significant move that slices through the SPX's 150-day moving average.

 A much closer intraday (zoomed in) look at the same divergence in HYG is seen here from about 11 a.m. or so onwards. Remember this is not what the market tracks, this is for our eyes only, it's the underlying trade that suggests someone is trying to work out how to pull this lever to create some intraday upside which again is useful for position entries (short) in to intraday price strength, but is not a threat to anything near term in the forecast.

I'd watch the NYSE intraday TICK Index and see if it breaks above the down-sloping channel, which would be (typically) early warning of such an intraday move. Perhaps one last hurrah before the 2 p.m. or afternoon session/close?

 NYSE 1 min intraday TICK.

As a reminder of where HYG is, remember it's in a primary downtrend and Credit tends to lead equities, the saying, "Credit leads, stocks follow". HYG is close, as shown last night, to making a new primary trend lower low which is in a series of lower highs and lower lows on the daily chart already, so it's in trouble and leading the market lower beyond this intraday chart's small divergence.

The 15 min chart which puts the HYG lever used for manipulating price higher off the June 15th lows which were the second tag of the SPX's 150-day moving average, the same day the Fear and Greed Index was massively bearish which I said represented too many people on one side of the boat, Wall St. would flip it over and change sentiment with a bounce, but don't expect it to hold. 

The chart shows us downside price/trend 3C confirmation at the green arrows to the left, then a leading negative divergence/distribution at the red box as price moved laterally and then broke following the 3C divergence lower which ran in to the June 15th lows at the SPX's 150-day support for the second time. There's a small positive divergence, the lever to help ramp the market and you have seen how closely the SPX follows HYG over this period until the reversal process and distribution at the red arrow to the far right sending HYG lower and the market as it no longer supported the Arbitrage that altos follow.

At the yellow hash mark, 3C has hit a new leading negative low so this is the path of least resistance for HYG bigger picture beyond the very small 1 min positive above (intraday).

Even worse, the 60 min HYG chart. There's less detail here, but a much stronger underlying trend. You can see where 3C went leading negative as HYG was flat, leading to downside. So once again, beyond a possible intraday bounce or attempt, this is nothing to be concerned over, it's a gift if it works to allow us additional entries (selling any price strength).

Keep an eye on that TICK index. There's nothing to say this 1 min divergence won't be run over, especially if Greek headlines start hitting again and the closer we move to the close.