As I said yesterday, the $USD has a positive divergence and the Euro a negative divergence suggesting the EUR/USD moves lower. In the absence of any Greek trouble, I'd assume there's a pretty decent leak pointing to a rate hike tomorrow, a June Rate Hike would be most surprising for the majority as consensus is around September. However Greece is a factor and now this weekend is being called the Lehman moment for Greece. As I mentioned before, Lehman alone was bad enough, it was everything that was unexpected like the complete lock up of the financial system and interbank lending because no one knew who had what exposure to subprime, thus the entire interbank overnight lending structure froze and before you knew it companies like GE were less than a week away from not being able tomato payroll, I doubt most would expect GE to be one of the immediate possible casualties of a financial crisis that mostly effected banks. In the Greek case, this not only effects banks, hedge funds, the ECB, IMF, European governments and independent central banks, it's the default of a nation.
Thus the Euro could be reflecting that situation and since the $USD pretty much moves opposite the $EUR, its divergence could be reflecting the Hellenistic drama coming to a head. IF you really want something to twist your mind, imagine a rate hike and Greek default the same week explaining both signals!
In any case, the overnight futures did come down to yesterday's intraday lows as was mentioned in last night's Daily Wrap:
"As for futures, it's a bit early, but the ES intraday chart doesn't look good here.
That's EXACTLY what happened. Of course the internals were strongly pointing to a 1-day oversold condition in the market yesterday and a green close today, also from last night's, Daily Wrap:
"As for internals...
All but the Dow had a Dominant Price/Volume Relationship, it was Close Down/Volume Up, a 1-day oversold condition with 50 NASDAQ 10 stocks, 972 Russell 2000 stocks, 217 S&P 500 stocks...
In this case, this is a 1-day oversold condition and makes sense given the SPX's support at the 150-moving average and "hammer-like" price closing candle...
Of the S&P sectors, only 1 of 9 closed green, again a 1-day oversold breadth condition...
Of the Morningstar groups, only 23 of 238 closed green, AGAIN A MASSIVE 1-DAY OVERSOLD condition. I see no reason the market shouldn't correct from here"
And then there was the "roof " on the bounce, again from last night and yesterday, it is the VXX 5, 10 and 15 min leading charts.
Today's price action makes PERFECT sense given the internals yesterday as they were massive 1-day oversold which almost always results in a green close the following day. I was hoping that the overnight tag of yesterday's intraday lows would also occur in the cash market, but so far not to be.
What is interesting about today (which we saw hints of yesterday, Leading Indicators Continue to Fall Off a Cliff and late last week), is the following:
And we see the same which started late Monday afternoon and has carried through all of today, PROTECTION IS MASSIVELY BID DESPITE THE OVERSOLD BOUNCE OFF LOCAL AND MEANINGFUL SPX (150-day sma) SUPPORT.
In addition, Pro sentiment again refuses to chase risk/the market just as yesterday, just as the trend since May.
I'll admit there are some crazy signals here and there that are tough to make sense of, but this is the easiest to understand, Pros are not willing to chase the market higher here, instead they seem to be selling it.
Interestingly as the first lever the market often turns to for help on the upside, HYG-High Yield Corp. Credit has maintained a deep leading negative divergence vs the SPX.
However to get off today's oversold bounce (this is based on breadth and not indicators and usually a 1-day oversold condition) it seems HYG was used, although to a limited capacity.
HYG leading negative vs. SPX yesterday and while lagging, still helping out today.
As a long time Leading indicator that seems to be working again recently, Yields also are interesting.
30 year Yields led the SPX higher as it was leading at thee white area while the SPX was still making a lower low. HYG led to the downside a good day before the SPX followed to the downside, which is what a Leading Indicator should do.
There was reversion to the mean at the small green arrow (short term any way) and today, 30 year yields are not participating, not leading the market higher, but rather leading lower.
Commodities which were also a fantastic leading indicator until QE distorted them and inflation in commodities caused the F_E_D to react to stamp out inflation in them several years ago, but recently with no F_E_D intervention other than rates, commodities seem to be working again recently like Yields as a leading indicator, in fact confirming yields nearly perfectly.
Again commodities (brown) vs the SPX (green) lead the market to the upside by at least a day (white), then lead to the downside by almost 2 days, then revert to the short term mean (green) and again today like yields refuse to confirm and are in a leading negative position.
Then High Yield Credit (not the same as HY corp. Credit), which will often move with the market on a very short term basis on a day such as this, has been leading the market to the downside since the May head fake move or failed breakout above the SPX triangle.
A closer look at today reveals HY credit making lower highs and lows since yesterday.
Leading Indicators / Pro assets that retail rarely trades are not buying in to today's 1-day oversold bounce expected from internals last night. That tells us quite a bit, despite a lot of near term charts that could have double meanings or be reflecting one situation or the other.
And one average that I would have hoped would have bounced today, WILL NOT confirm either and remains in the red, Dow Theory's Transports vs Industrials...
Green=Dow-30 Industrials and Blue=Dow-20 Transports, the red histogram shows relative performance between the two.
Until I get clearer intraday signals, these charts are telling us CLEARLY, that smart money is not following the market even for a quick buck in some of the more humble assets that could follow such as HY Credit.
Protection is significantly bid today as seen above (the first few charts of VIX/VXX vs SPX) and if that wasn't enough...
There are interesting 3C charts such as Financials, one of the groups most say should be outperforming and thriving i n this environment...
XLF isn't only not thriving recently, but not today either which is one of the reasons for the very recent, Trade Idea: XLF Trend (short).
But even more telling in my opinion, the rock charts that aren't moving.
I knew VXX was likely to see downside today based on internals alone, but even intraday 3C charts, but it's the strong charts like this 10 min (between the 5 and 15 that are very strong) that not only is positive and leading positive, but looks like it put in its head fake move as well.
Or HYG, anything beyond an intraday oversold bounce should have seen HYG accumulation first.
Much more likely is the HYG trend which is already in a primary downtrend and headed for a new lower low (There are 3 lower highs and lower lows on a primary trend basis- HYG is in a bear market and moving toward its 4th lower low on a primary trend with 3C confirmation all the way).
THERE ARE SOME SHORT TERM CHARTS I DON'T COMPLETELY UNDERSTAND OR HAVEN'T FINISHED THEIR SIGNALS, BUT THIS IS WHY WE AREN'T LAZY AND WE LOOK AT AS MANY PIECES OF THE PUZZLE AS WE CAN.
I'LL LEAVE YOU TO DRAW YOUR OWN CONCLUSIONS ABOUT WHAT YOU SEE ABOVE.
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