Daily Wrap

As crazy as today was and as close as it has been to our "What happens next?" Portion of the April 2nd forecast, if you kept up with the basic USD posts this week, then things probably make a little more sense. For the latest USD post, here's today's: $USD Update & Market Repercussions

At the market plans in advance. The construction of the triangles in the major averages has already been shown to be something that was Wall Street-made, not organic. The timing of this, "Last Hurrah" just before the F_O_M_C yesterday and the distribution into the entire month, falls way outside of the realm of coincidence.

Daily SPX since April 2nd and in to the F_O_M_C. 

This is not the kind of head fake move above the triangle I was looking for as you know. The NASDAQ 100 was much closer, however as I stated then and still believe now, it was due to market weakness.

On the other hand, today's Market Update with the following chart and commentary:

"Something at least like a small "W" base-be on the look-out for another head fake stop run below this morning's lows on the formation of a second low and wider base."

Was much more in line with the emotionally moving component of a head fake trade.

SPY breaks a.m. lows and runs stops. A much more convincing move as market weakness about the head fake move to come off more realistically than the attempted upside false breakout.

Speaking of which…

 While you may have heard the phrase " Head fake" until it made you sick, this was the forecast from April 2 as to the resolution of this move. While we had strong probabilities before the move even began and even stronger proof as the move was underway, it only counts when you see the actual result. Above the SPX 500 confirms a head fake move or false breakout.

The NASDAQ 100 confirms a head fake move or false breakout.

We knew this long in advance as I've shown the 60 minute and one day ES charts as well as numerous other indications/probabilities.

The month of April ended badly, Let's not forget that while it is not a quarter end, there is still month-end window-dressing, " The Art of Looking Smart". Apparently the market did not like what the F_E_D had to say yesterday and this morning's second best initial claims print in history, moving the April jobs report (next Friday, May 8th) toward a much better print leading toward a closer rate hike as employment and inflation part two of the main Data points the F_E_D is looking at before a rate hike. The third could be considered US dollar strength, which I have shown is waning.

For the month of April, the USD saw the worst performance in four years, in part due to EUR/USD strength (EUR +4.3%) , something else we forecast recently. The nine month winning streak in the USD was broken this month as it failed to make a higher high.  The USD April loss was-3.5%, the most in four years. Obviously if you have read my USD analysis, I believe the carry trade unwind is underway. I've already explained how this will have dire consequences for Bonds and equities.

One of the signs of a Carry trade unwind includes a bond selloff. The long end of treasuries lost 23 basis points in April. To give you a visual...

30 year Treasuries (red) vs the SPX (green) for the month of April. Remember those 3C signals late last year showing a lack of 3C confirmation for the long term uptrend in 30 year bonds? Here's the result, in line with what we would expect to see on a carry trade unwind.

To give you some idea of the deterioration in the market since the head fake move which we expected in advance to fail based on the long term probabilities of charts like this one day ES/SPX futures depiction of massive distribution....

 ES 1 day distribution

 The major averages in to today with the Russell and NASDAQ lagging.

 The major averages since the F_O_M_C policy statement...Again the Russell and NASDAQ lag...

 The major averages on the month of April with Transports lagging badly...

The averages YTD with the Dow going RED and TRANSPORTS RED.

The SPX and Russell 2000 are barely green for the year.

AAPL which was used in the April 2 forecast as a proxy for the broad market based on the triangle breakout, shows the failed head fake move, off -8% from recent highs and below its 50-day (which is often cause for a shakeout bounce as traders jump in short on the break) with a bearish Engulfing candle on Tuesday swallowing Monday's Evening Star reversal candle and on volume.

Transports poor breakout above their recent range. I was hoping for more. However this is a core short position which we have had at least two prior entries in (short).

Biotechs obliterated with nearly a 13% loss over the last five days on significant volume, another core short position.

Commodities on the week, also look like there is a carry trade unwind (as they tend to gain during a $USD carry trade unwind).

Commodities in Brown versus the SPX in green, both are risk assets, but seeing commodities up like this is very reminiscent of a carry trade unwind.

Interestingly, given our near-term forecast for a bounce, treasuries which were weak earlier ended today nearly unchanged.

10 year Treasuries (not yields) vs the SPX ending today nearly unchanged after morning weakness.

As you know, because I am anticipating a bounce and because we got the type of head fake/ stop run move I would expect today, I closed the UVXY long position, looking to enter at a better price.

 I didn't like how VIX futures were acting in today as we got the stop run in the major averages. VIX futures 1 min intraday.

The UVXY position which was only a little over a day old gained nearly 5%.

I also opened a spec. Put position in VXX (May 15th / $23 Put), Trade Idea: Extremely Speculative (Options/Puts) VXX.

As for the stop run itself, exactly what I tell you to look for...

 IWM 60 min running from morning support with a bullish candle on high volume.

 SPY 60 min

 QQQ 60 min

 DIA 30 min

And TICK couldn't look better if I do it myself with a clear break above the trend .

The $USD analysis/counter trend bounce, really is one of the best indications we have for a short term bounce.

There are a few short term leading indicators that are pointing toward bounce, but not many. As I said before most of this analysis relies on a USD countertrend bounce.

 HYG showed some late days support versus the SPX.

 As did HY credit

 While not overwhelming signal, VXX did show a relative weakness toward the end of the day versus the SPX.

 And short-term yields are leading

As far as the large-scale leading indicator signals I want to see for a serious primary trend move down...

 Our SPX:RUT ratio which was leading into the April move has completely falling apart.

And spot VIX is sitting right at the breakout point for its triangle's apex and the yellow 50 day moving average

As for internals today, I knew what the Dominant Price/Volume relationship was going to be before noon time. You may recall yesterday's which suggested additional downside today, but sector performance was moving toward a short-term or one day oversold condition.

Today was a definitive short term or one day oversold condition.

The Dominant P/V Relationship was Close Down/Volume Up, the most likely of the 4 possibilities to produce a bounce or next day close green (even though tomorrow is an op-ex day). There were 70 NASDAQ 100 stocks at Close Down/Volume Up, 1332 Russell 2000 and 264 SPX500, that's a DOMINANT relationship.

In addition, all 9 of 9 S&P sectors closed red with Energy leading at -0.31% and Health Care lagging again at -1.40%.

Incredibly, only 13 of 238 Morningstar groups closed in the green.

THIS IS A DEFINITIVE SHORT TERM OVERSOLD BREADTH CONDITION, WAY MORE RELIABLE THAN INDICATORS TRYING TO DETERMINE THE SAME.

That means these readings are also supportive of a near term bounce.

In addition, less than half of the Dow-30 stocks are above their 50-day moving average, only 700 of the Russell 2000 are above their 50-day, only 200 of the S&P 500 are above their 50 day and 70 NASDAQ 100 stocks are below their 50-day!

THIS MARKET LOOKS READY TO BOUNCE, BUT LOOKS HORRIBLE 

To give you an additional perspective of how bad the worm has turned, the average that should lead all risk on moves, the Russell 2000's chart looks like this...

That's pure distribution in to the area of the April rally, the stage 3 top and head fake move.

I don't see how we can possibly call this anything other than stage 4 decline, bounce or not.

In multiple timeframes, I'd say we have 2 different trends converging on stage 4...

Forgive my poor drawing, but I think you'll get it (Igloo/Chimney Stage 3 top and head fake move-the best price based indication of a reversal's timing).

As for futures tonight, again, the $USD is one of the key aspects to a bounce (and now internals / breadth from today denoting a seriously 1-day oversold condition).

The short term charts aren't saying much, I suspect this is because today's parabolic end of the day move needs a bit of a reversal process. Tomorrow is also an op-ex Friday, not sure where the max-pain pin will be, but the last two hours of the day give us some of the best 3C information. You may recall April 2nd was a Thursday with the market closed for Good Friday, it was the last 2 hours of data that brought home out forecast for the month of April and everything that has happened right according to our forecast, so I look forward to that tomorrow. Otherwise, the signals near term on very short intraday charts aren't there (as in 1 min), they are mostly in line.

ES 1 min in line, no edge, no signals.

 However there are some VERY interesting charts just after that which are right in line with our near term expectations. Since the longer term trend charts have not changed and I think we have seen the entire month of April as well as all of 2015 confirm our expectations, there's no need to cover all of that again. However, starting around the 5 min chart (which may mean our near term expectations start tomorrow as we have the overnight for the charts to develop further, or at worst, perhaps in to early next week Monday)...

Index Futures:

ES 5 doesn't look very interesting either, more or less in line, but remember which index I suspected would see the best relative performance in to an oversold bounce...

 TF 5 min looks VERY different.

ES 10 min with the dominant feature being distribution, but a near term positive divergence, not a trend changer, but exactly what we need for position entries.

The NQ/NASDAQ Futures 10 min shows the same.

As does TF/Russell 2000 10 min.

ES/SPX futures 15 min chart has not budged, there's no hint of a positive divergence so we know what comes next once we get the signal, a return to today's trend (stage 4 decline).

As for VIX futures, a few charts are standing out, remember our position opened today (VIX Puts) for a short term trade, that's why I wanted the leverage...

 The intraday 1 min VIX futures (Don't forget what the 30 min VIX futures look like, that is the path of highest probabilities on a larger trend (multiple timeframe analysis) and as I said when closing UVXY at a gain today, "We'll be looking to re-enter, see this morning's post...Market Builds a Wider Base-Still Holding UVXY (Long) and the afternoon Taking UVXY long off the table

VIX Futures 5 min is interesting given our near term expectations...

As for Oil and Gold, they have something to do with our currency analysis which I have posted probably a half dozen times this week, but for a quick look...

Crude Oil Futures...

 CL/Brent Crude Futures 5 min negative

CL 10 min negative

CL 15 min negative.

Not bad timing considering the USO charts which I'll update tomorrow again...

This 3 min USO chart is a very good chart for timing once larger divergences are in place, note the price/trend confirmation at the green arrow and the negative divergence at the red arrow.

As to the larger divergences in place...

Despite my longer term affinity for USO long, this 60 min chart needs no explanation. Look how 3C confirmed prices near perfectly and what has happened recently.

As for Gold which was hammered...

The 5 min is showing a positive (accumulation) in to today's decline. I'll update Gold/GDX specifically tomorrow.

Now currencies as they are really what a lot of our near term, long term and primary trend analysis are based on. If you haven't seen any of the $USD posts this week, I'd check out at least one, perhaps today's, the consequences of the current signals have wide and intense ramifications... $USD Update & Market Repercussions

 $USDX 7 min positive divergence...

 $USDX 10 min positive and you have already seen (or check the post linked above) the 15 and 30 min $USD charts.

Interestingly for a bounce/risk on move...

 The Yen 5 min 3C chart gone negative

The Yen 10 min chart also showing distribution...

And the 15 min chart showing distribution.

Near term what does a stronger $USD and weaker Yen translate in to? USD/JPY Up, supporting market risk on. Just don't forget about the daily charts of both and the post linked above, these charts are near irrelevant compared to those.

Also of interest, when the EURO loses ground, the USD gains (EUR/USD), so I looked at the Euro as well...

Euro futures seeing a 3C negative divergence, this is a 10 min chart, but there were numerous charts like this around the timeframe.

Remember the "Beauty of the market", when it all comes together like an elegant ballet? On a short term basis, this is it. On a longer term basis, that's in place too.

Have a great night, it's a very exciting time to be in the market.