I did mention Leading Indicators which have had small, short term bounce indications which I believe would be meant for more than just a single day, but I wouldn't go so far as to say too much more than that which is consistent with what we have been seeing and thinking.
Tomorrow is the F_O_M_C policy statement at 2 pm, there was talk of a July rate hike before there was talk of a September rate hike, the bottom line is we simply don't know. As usual though what we do know is the F_E_D has been an apologist for the economy and has set up a broad spectrum of arbitrary and ambigouos conditions in which they can hike which makes almost all qualitative guidance worth about zero. They are going to hike when they want to hike which is why the caveats have been built in over the last year. From a fundamental economic standpoint, it would seem a rate hike is the last thing the economy needs, but the F_E_D is boxed in at ZIRP and they are obviously more afraid of being boxed in than what damage a rate hike or series of rate hikes may do to the economy. They have been VERY clear in guidance that it's coming, when is anyone's guess, but it seems "sooner than later" has been the theme from F_E_D speakers.
As ALWAYS, BEWARE THE F_E_D KNEE JERK REACTION... that crazy parabolic move in price (up or down) that is almost always wrong and almost always retraced. That's emotional investing and that's what you really want to be careful with.
As I said in the last post, Broad Market Update it seems there's still gas in the tank and I don't think Leading Indicators are contradictory to that statement.
While HYG's divergence that activated the support asset is still intact and has "Gas in the tank", it did see some intraday decay like the rest of the major averages. Distribution and accumulation are not events, they are a process which is why reversals are a process.
HY Credit was slightly supportive yesterday which is much more than it has been generally since the SPX's head fake in May in which HY Credit has only went positive once and that was right before the July 10th bounce. This is a very slight divergence at the "W" base from the last 2 days and just slightly out of line/deterioration vs the SPX intraday today.
Really this is the bounce we were looking for. Any counter trend bounce is going to be stronger than you think, in fact some of the strongest bounces and rallies I've ever seen n any market because they have to be convincing and because they have extra fuel via things like short squeezes in which today saw the largest short squeeze in nearly 6 months after 5 days down in the SPX.
Yesterday's closing candles were near perfect for a signal for today's bounce as was posted intraday yesterday and in the Daily Wrap last night. Today's closing candles are in line with more gas in the tank...
And the IWM with the same type candle yesterday at last ditch local support and a large hammer today which is pretty much a 2-day reversal candle pair inviting more gains tomorrow.
The one thing that gets me is the concept of 3C charts picking up where they left off the next trading day (cash market) as the averages all closed something like the SPY below...
Although this is a weaker 1 min chart, it's the fastest to respond and as we have seen numerous times, the market tends to pick up the next trading day (even over a 3-day weekend) where this divergence left off which is negative. All of the other averages have the same 1 min charts, that is to say negative, but that doesn't mean a whole;e lot on a day like today in which overnight gains were pretty much retraced at the open and then we moved higher.
However what also gets me, although makes sense in front of an unknown risk event like the F_O_M_C are the VXX charts and the way they behaved today and closed...
As for the 5 min chart, this is a MUCH bigger leading positive divergence that hasn't fired to the upside yet, which is why I chose to leave my UVXY longs open even though we expected them to take some head today as posted yesterday, VXX /UVXY Update
Interestingly the SPY (and other averages intraday 3C charts look exactly like Index futures , except Index futures NEVER went positive in to the 5 min timeframes as noted earlier today).
And TF/Russell 200 futures
I don't see the same divergences in $USD and Yen futures that we did coming in to the overnight session in which we expected them to lead Index futures to the upside, they're just not there, but that's not strange ass the divergences suggesting a USD/JPY boost were all shorter term anyway. I'm just trying to figure out what the support is for the averages while they still have some "Gas in the tank" charts.
Furthermore it's not even like the Index futures put in the typical 5 min positive divergence even for a short term bounce so there's nothing there more than confirmation at BEST! At worst, well.. our bigger picture expectations of the market slicing through support (SPX down through its 200-day) and market sentiment taking a true and definitive turn for the much, much worse. Well, I'll let the market worry about how it will get through the overnight session and stick to the objective evidence which is we expected a bounce, we have a bounce, there's still room for more upside, but it's being sold in to fairly heavily so I don't expect it to last too much longer.
Other than trying to go in to a trance and force the future, that's what I have for you based on objective evidence. Of course the F_O_M_C days can always be a bit volatile so maybe that with some more short squeeze can pull it off, but a short squeeze is not at all the same thing as market support or institutional sponsorship.
The big picture reminds the same despite the short term noise...
SPX daily chart with the 200-day moving average...
Have a great night.
And by the way, it looks like we have the email server situation sorted out for the new site, so I may ask you to bare with me for 1 more test day with duplicate emails just to make sure everything is running fine before we make the transition, I'll let you know in advance.
No comments:
Post a Comment