Daily Wrap

Good evening. First off, thank you for all of the supportive emails. I'm sorry I didn't get to respond to each one individually, but while we were sitting in pre-op waiting for anesthesia, I read to her all of the emails of support, best wishes, prayers, humor and it really took her mind off of the surgery and lightened her spirit (as the last several surgeries have gone horribly wrong for her) so thank you for that, it means the world to me.

Interestingly, There were several indications pointing to market relative strength today including yesterdays three C divergences as well as the overnight positive divergence in index futures. Also the treasury yields into the last hour of yesterday has pointed out last night in the Daily Wrap, very specifically the last hour after the bond market closed which can be seen in today's, Leading Indicators & Market Update. And of course yesterday's internals as represented by the Daily Wrap from last night:

"The dominant price / volume relationship came in at Dow 14 stocks, NDX 51,  R2K 952, SPX 218. This is a dominant price/volume relationship which came in at Close Down/Volume Up. 

This relationship is a short term oversold condition, not the kind of oversold that is represented by indicators such as RSI, but much more accurate based on market breadth. 

The most common bias is for a next day close higher, in line with our 3C short term indications."

The V-shaped recovery this morning, Showed exactly the kind of intraday breadth flame out we look for in terms of a bullish candlestick on significant volume.

SPY 60 min chart and exactly what I urged you to look for, a bullish candlestick like this hammer on significant volume representing short term capitulation. The very "V" shaped recovery did not give me a lot of confidence.

As for the averages intraday…

 The Russell 2000(yellow) led and the NASDAQ 100 (Blue) lagged, certainly Apple was no help.

This is exactly the kind of breakout move we were looking for in the April 2nd forecast using Apple as an example specifically. Note today's large bearish engulfing candle on significant volume after yesterday's Evening Star reversal candle on significant volume.

From today's, Leading Indicators & Market Update: the VIX smack-down had little to do with Iran unless there was a leak that was front run, otherwise this is a typical VIX smackdown to support the market, it seems quite strange to see protection being sold in front of tomorrow's uncertain F_O_M_C.

From the Leading Indicators & Market Update post this afternoon:

"Interestingly, it looks like this move had VERY LITTLE TO DO WITH IRAN. First of all we had indications in 3C, yields, internals, etc. 

At #1 is the VIX's reaction to news that Iran had captured a US flagged ship. However at #2, almost 45 minutes before it was made clear it wasn't a US ship, someone was already slamming the VIX (common to see when they are trying to ramp the market). At #3 we find out the ship was not US."

As suggested earlier in the day, it seemed like someone wanted the market rather neutral going into tomorrow's F_O_M_C, and protection or not… it did the trick.

SPY (green) vs. Spot-VIX (red).

Nearly all of the averages closed with a bullish hammer reversal candle on a daily basis, with the NASDAQ being the only one at has made an appropriate Head fake move(e,optionally moving-causing a short squeeze Friday)...

This is quite an interesting candle to close with on a daily basis in the SPX considering tomorrow's F_O_M_C. Even though my decision to remain patient on trade ideas was based on other indications, this would have given me pause as well, not to contradict my late day post clearing up the damage that has been done to the market, A Visual.

Yet, it remains very difficult to make a near term bullish case for very long with a chart like AAPL's today 

I was hoping for better performance today from NASDAQ biotechs and transports, but I'm glad we waited and I'm not so sure we missed any opportunities.

TWTR was high on my watchlist for a short entry, you can probably see why on this 30 minutes chart

 Something is very wrong on a chart this long with a divergence this stark. However, someone knew something well in advance as Selerity scoured the Internet and released a series of, Ironically, Twitter posts with their leaked earnings. This is the result just one bar later...

TWTR as of 3:07 pm when the tweets were posted. Twitter had a Q1 loss of $.25. Income adjusted EPS was $.07 versus $.04 cents consensus. However Q1 revenues came in at $435.9 million versus consensus of $456.2 million. In addition they guided lower, remember the market is all about perception. It doesn't matter what you did it matters what the market thinks you will do moving forward. Q2 was guided lower, between $470 million to $485 million versus the estimate of $538.1 million. Also full year guidance for revenues was lowered to $2.170 billion to $2.270 billion which was previously $2.3 billion to $2.35 billion versus consensus at $2.37 billion.

The closing result…

TWTR Daily chart.

As for leading indicators... 30 year treasury yields ended up 9 basis points on the day.

Just like I showed you in last nights, Daily Wrap in which yields lifted the last hour of the day suggesting a bounce today in addition to the other indications, once again today we saw the same thing which gives some more short term authority to those closing daily hammer candlesticks.

 5 year yields showing recent market supportive activity as of yesterday into today's "V" reversal.

 This was shown most clearly in 30 year yields yesterday during the last hour of trade, in the white box. Additionally extra support was added at this morning's "V" reversal and look at the close, 30 year yield leading. I think it was good that we were patient today and took the signals as they came, not as we would have them be.

 This just shows the extent VIX (VXX) futures we're slammed versus the SPX (relative performance).

 And spot VIX..

However the 30 minute VIX futures still hold a large leading positive divergence so it seems whatever we are in store for in the near-term, someone with deep pockets is looking in different direction...down.

 Our SPX:RUT Ratio which was also supportive of the market yesterday and into this morning's lows.

 However we should not get lost in the lines, here is the larger picture including the positive activity into April 2 and the negative activity since April 2 and especially this week..

And as mentioned earlier today the institutional risk asset, high-yield credit was not buying it.

It seems to me there is still some short-term upside as none of the averages other than the NASDAQ have made a solid head fake move. The charts above which would suggest the same and selling into any price strength which is clearly been the theme throughout April in multiple indicators.

Internals tonight we're somewhat mixed although the dominant price/volume relationship carried for the five major averages excluding the Dow. The NASDAQ with 42 stocks, the Russell 2000 with 814 and the SPX with 177 all came in at Close up/ Volume down. This is the most bearish of the four relationships and is one we have seen with increasing frequency over the last two weeks indicating a weakening market.

As for futures tonight, more than anything it was the index futures they gave me pause today. While Russell 2000, NASDAQ and SPX futures in the five-minute Time frame are all positive...

 ES 5 min

NQ 5 min

TF 5 min

These were all in response to the growing positive divergence from yesterday an forecasted balance for today represented by numerous indicators including leading indicators and internals and 3C. In a way, they are in the past, but they need to turn negative before I feel comfortable with a true pivot.

The most current one minute index futures right now are negative like ES above. They may once again gain strength with this negative divergence overnight as they did with yesterday's positive divergence and that may answer our question near-term. However with the daily candles looking the way they do I would not be surprised to see some early market price strength.

Wow we have caught F_O_M_C leaks at least twice in the past on the day of the policy statement, it is rare, But I will be looking for it. The market will be looking for how convince the F_E_D is that this weakness in the economy is temporary as well as inflationary expectations. Most think that this is not going to be a very exciting meeting, I disagree.

Although I have no specific knowledge or evidence pointing to anything regarding the F_O_M_C, as always I warn, "Beware the F_E_D knee jerk reaction" as it is almost always wrong.

I'll check futures again before turning in and let you know if I see anything of interest.

Our $USD forecast has moved exactly as expected from the April 2 post. I was going to put that out tonight, but decided to wait for the F_E_D as it will knee-jerk. However all indications point to our forecast of the USD making a lower low despite the occasional countertrend bounce which I believe we may be on the verge of. When I post the USD analysis (likely tomorrow) I will also cover the implications of the carry trade. Have a great night and I'll see you in the morning. 

A Visual

I didn't want my last post, Quick Market Update to come off sounding more uncertain than the market really is. I'd say that the near term uncertainty is on the level of something like today's move itself and not much beyond that, but the market is dynamic and until I see high probability, low risk, solid entries/trades based on objective information, it's my job to give you what I know and not to try to force anything, just be transparent about the market and you can use that in your analysis or disregard it.

As a visual of the charts so you have some idea and I didn't give you the wrong impression...

 SPY 60 min since the April 2nd positive divergence and now a deep leading negative divergence.

 QQQ 30 min through the same time frame and a leading negative divergence/distribution in to higher prices and the b/o head fake area.

IWM 15 min with the same trend.

*These are the most important charts, the highest probability as they represent the largest flow of funds.

 QQQ 5 min leading negative in a stronger way at its breakout/head fake area, this is how we confirm a suspected head fake move, look for confirmation or a divergence.

 IWM 3 min doing the same as the trend develops

The SPY 2 min chart above is negative intraday as is its 3 min and 5 min, all similar to this.

However the "steering" timeframe of 1 min which represents the nearest term trade, but also the weakest, looks like this...

 That's not a negative divegrence and thus as a timing indication, although very weak and causing me little to no worry, is telling me the "ballet" has not aligned which is what I also saw in futures, although those may clear up overnight.

The Q's have a VERY different look, very ugly, but I have to consider futures as well...

 QQQ 1 min trend since the head fake breakout, you can't ask for better head fake confirmation or a false breakout.

What this means in practical terms for trade ideas...I love NFLX short, I consider it a core short position, I would take it here as a trend trade/core short, but I'm looking specifically for an options/Put position entry.

The long term daily chart shows the multiple stages of a cycle/trend from left to right showing a stage 3 top, then stage 4 decline, capitulation at "C" followed by a new stage 1 base and rounding bottom, then stage 2 mark-up in to a HUGE stage 3 top (Broadening Top) with a head fake move sitting just above, a near perfect equity short entry for a trend trade.

The charts agree...

 2 hour shows the accumulation before last earnings I suspected were to bail out market makers who had losses from a large previous gap down as they held inventory at the higher levels, thus the rally on horrible earnings as it was already put in to place well before earnings. Then our short at the exact top on Feb. 26th at #3, the next gap up earnings at 4 and a worsening leading negative divegrence with NO confirmation at all.

The 60 min chart confirming the same.

The 30 min chart confirming the same.

And the 5 min chart with clear details confirming the same, these are the highest probability/strongest signals, all negative.

However for an options trade, timing is key...

This 1 min intraday chart of NFLX is not giving me a strong signal to enter that put position, it's not giving much of a signal at all, thus I'd be making a decision based on opinion as far as timing rather than objective evidence.

Quick Market Update

I don't see near term action doing anything other than giving up today's gains.

There's a possibility of building support at this morning's intraday low, but as of now I HAVE NO EVIDENCE WHATSOEVER TO POINT TO THAT as the charts (intraday) are still negative, it's not like they are showing positive divergences in to lower prices intraday suggesting a base, but we also aren't in the area.

I suspect this has more to do with keeping the market fairly neutral "looking" ahead of the F_O_M_C tomorrow afternoon for whatever reason.

Remember, while not common, we have caught at least 2 F_O_M_C leaks in the past on the same day with very strong, unusual 3C signals that gave away the leak hours before hand.

The larger picture charts are all negative and show the highest probability is for all of this to end on the downside and that's not even including my next post.

However right now index futures are still mixed through the 7-15 min timeframes and they should all line up nice and neatly with the watchlist stocks when the market is ready, I can't imagine we are far from it in terms of the April run.

Our trades are entered on objective evidence and STRONG probabilities, we have a lot of strong strategic probabilities, it's the short term tactical entry that I'm waiting for and so far, it has been the right thing to do.

More to follow.

Oh and mom came out of surgery fine so far, haven't seen her yet, I understand it will be painful. Thank you for all the well wishes and emails!

Near Term Direction

After having gone through most of my watchlist assets, the thing I'm missing is that "beautiful ballet" of the market I described in this weekend's posts, Important Market Update Part 1: The Forecast and Important Market Update Part 2: The Forecast Plays Out & The Beauty of the Market. Granted, it's a very rare moment and one that can occur in a virtual flash in terms of the market, but despite market bounce strength today and the failure of that as expected on such a tight "W", I'm not seeing the watchlist assets/trade-set-ups all coming together.

You can see how we forecast the bounce yesterday and below you can see the weakness developing in to today...

 TICK intraday has been stronger on the whole, but is starting to deteriorate a bit now which fits with the intraday 3C charts as seen below and from recent posts...

IWM 1 min leading negative

 QQQ 1 min leading negative

QQQ 30 min triangle and breakout with a negative divegrence at what we expected to be a head fake, so far good confirmation of exactly that.

SPY 60 min and breakout from the triangle, once again good confirmation of the triangle breakout being a head fake move as there's 3C distribution in to it on a strong 60 min chart (note the accumulation area, the exact same area I have been showing over and over.

In addition, the intraday Index futures charts have been going negative just like the averages, foreshadowing the market/price action intraday.

However, remember what 1 of the 3 final conditions was, the 7, 10 and 15 min Index futures charts all negative. They are all over the place in those timeframes, some positive which was from yesterday, a continuation of strength for today's "V" shape reversal, some negative, some in line, but not that ballet that is unmistakable, which is why I have not been throwing trade ideas out there today.

I'll continue to monitor the situation and update you as soon as I know more. The overall trend as seen on the 30/60 min charts above are right in line with expectations, the forecast and what we expect next (a larger leg down), however right now, it seems maybe they're trying to keep the market as close to neutral until the F_O_M_C.

Leading Indicators & Market Update

Interestingly, not only did 3C forecast a near term bounce yesterday, but the Dominant Price/Volume Relationship from yesterday's Daily Wrap...

"The dominant price / volume relationship came in at Dow 14 stocks, NDX 51,  R2K 952, SPX 218. This is a dominant price/volume relationship which came in at Close Down/Volume Up. 

This relationship is a short term oversold condition, not the kind of oversold that is represented by indicators such as RSI, but much more accurate based on market breadth. 

The most common bias is for a next day close higher, in line with our 3C short term indications."

In addition, Yields were also leading toward the close which I demonstrated using TLT as the bond market closes at 3 p.m., again from the Daily Wrap

 This is yesterday's TLT chart posted (inverted in red) vs the SPX. Note the leading positive position of yields in to the close yesterday.

Yields today are supportive, remember they tend to attract equities like a magnet , but also remember this is only intraday, the longer term posted the last several nights shows an extremely negative situation.

 5 year yields intraday in perfect correlation with the SPX.

This is 5 year yields leading the market lower in to the highs and then  a "SLIGHT" positive indication for near term market support (the bounce we forecasted yesterday-very short term) which is off this morning's "V" bottom.

Interestingly, it looks like this move had VERY LITTLE TO DO WITH IRAN. First of all we had indications in 3C, yields, internals, etc. 

At #1 is the VIX's reaction to news that Iran had captured a US flagged ship. However at #2, almost 45 minutes before it was made clear it wasn't a US ship, someone was already slamming the VIX (common to see when they are trying to ramp the market). At #3 we find out the ship was not US.

Our custom SPX:RUT Ratio was also positive as of yesterday afternoon and then more in to this morning's "V" lows and in line since, of course the long term outlook of this indicator is very negative for the market.

It's just interesting how many little levers and indications pointed to this bounce off yesterday's ugliness.

 It's not all strawberries though. Our Leading Indicator Pro Sentiment is NOT buying the move today which is in line with my assumption this is a weak, "V" based move that won't hold much for long, a fitting move at this moment in the process since the April 2nd forecast.

HY Credit is also NOT buying the move.

As to the averages... intraday weakness is setting in which should have been expected off a "V" base.

 SPY 2 min

QQQ 1 min

QQQ 3 min

IWM 1 min

IWM 5 min.

I have some watchlists to go through.