Market Tries to Support, We're In the Reversal Process

Well the idea that this bounce would take up most of this week including the reversal process once you figure in the Options Expiration of Friday, looks to be a pretty accurate forecast.

There are numerous signs among Leading Indicators that we are in the reversal process, remember "Process" because that's what it is although being we've had such a parabolic move, it would not be unusual to see a tighter (faster) than normal reversal process, still we don't want to rush in to anything and certainly don't want to chase anything.

 As Yellen made some "sooner than later" will allow the F_E_D to go slow with interest rate hikes, the market took a downturn, interestingly right at the same time or just after, HYG's (High Yield Corp. Credit) lever was pulled to help support the market and stem the intraday selling as you can see with HYG in light blue shooting up.

 This is the intraday HYG 3C chart with strong confirmation of the move to the upside, this was a lever pulled in support of the market because once again, the reversal process IS a process, not an event.

As for intraday breadth, our custom TICK indicator allows us to keep track of the trend. We see short term capitulation or a downside flameout at the first red arrow to the left and improvement in TICK on the bounce, but note to the far right the deterioration again as price flattens out, typical of a reversal process and starts to deteriorate within intraday breadth for the first time since the bounce started. Again, I think the timing of the IWM calls and UVXY being closed were both as good as you get with the information we have.

 Our custom SPX:RUT ratio indicator was supportive of the bounce and then started to underperform, today it's in outright divergence and this has been a very accurate indicator for us among our Leading Indicators.

 As you have already seen numerous times, this is the trend between the SPX and Pro Sentiment. This was the first positive divergence in the indicator since May (last week) and clearly it has fallen off and it seems pros have been more interested in selling in to price strength than chasing it which is why we called this a RISK OFF bounce well over a week ago before it began.

 Commodities as a risk asset are also sharply off vs the SPX indicative of a reversal process and...

Yields which have been one of my favorite leading indicators as they act like a magnet for the SPX have failed to the downside and are leading the SPX lower at this point. Remember these are LEADING Indicators, so they tend to lead.

A larger view of the entire process with the same 30 year yields...

While there's some support in the market intraday, I feel pretty comfortable that we are in the reversal process, this is where I'll be looking for new positions at the best entry/timing.