Daily Wrap

Today's market was much more interesting than yesterday's which was almost depressing, not because of the market action or lack of market action, but because I felt like I was losing my grip on the reality of the F_O_M_D or the F_E_D and for me that's like losing a grip on reality as this is all I do all day, every day.

I was glad to see that overnight both Goldman Sachs and CITI issued revisions to when they believe the first rate hike will be and their reasoning for it. As I said earlier, the F_O_M_C was a "Study in contrasts" or perhaps more appropriately a "Study in contradictions", which was best defined in last night's Daily Wrap:

 "Economic projections fell while rate hike probabilities increased"

Two ideas that are contradictory to each other, issued in the same F_O_M_C statement, thus I was happy this morning when I head that Goldman Sachs had put out a paper revising their target rate hike date from September to December while CITI's research department put out a similar paper, except they pulled their expectations forward from December to September. Both are well funded research divisions of well respected (or at least big) investment banks and both were moved enough by  yesterday's F_O_M_C to revise their outlook and both took away totally opposite interpretations of the F_O_M_C. Thus, my feeling of ambiguity, contradictory statements, facts, figures and projections, were not at all a short coming of my own, but simply evidence of a totally non-sensical F_O_M_C policy statement, interview and projections.

I guess it's not too surprising that yesterday's market action did not produce the typical F_E_D related Knee Jerk reaction which I have diligently warned of at every  F_O_M_C and every F_E_D Minutes release for the past 4 years or more.

Yesterday's non-knee jerk reaction from yesterday's intraday chart of the major averages...

2 of 5 of the major averages closed red, the other 3 wee far from spectacular, thus last night's commentary on the knee jerk, "a knee jerk reaction and as I said earlier, not the most impressive one I've seen by far. "

That's ok, while there's a larger concept at work from earlier in the week today we got something that looked a lot more like the emotionally , stock chasing driven Knee Jerk Reaction. In fact, Eric Hunsader, (1of about 7 people I follow on Twitter) of NANEX, which tracks EVERYTHING market related, like a real-time Stock Market Almanac/BS detector, tweeted out early this morning the following...

Which I want you to remember, as this is a concept that I've talked a lot about, I've forecast it days ahead and shown recent evidence of it in hindsight, in other words, proof of the concept's reliability.

I do find it somewhat interesting that despite some overnight strength in futures, the real strength didn't come in pre-market or overnight, but on the cash open where shares can be traded in size and volume unlike the thin overnight or pre-market sessions. In other words, if you are a large institution and need to move large positions, you wait for the cash market when're volume increases dramatically.

To give you some idea, just look at S&P futures volume at 9:30 or during the cash market...

 ES/SPX futures and volume which increases notably at the start of the cash market at 9:30 (green arrow).

Or when looking at after hours or pre-market trade in the equities such as SPY, note the same...

The light blue shaded areas are the extended hours, dark blue the regular hours, note volume. Where would you be transacting large positions without moving them against you? Thus is it any wonder that the bulk of the move was not overnight or premarket, but on the cash open.

The ES contract since the F_O_M_C yesterday and the obvious increase in movement at the cash open to the minute. Whether we define this as a knee jerk reaction or not is really not important, although it is a lot more like a knee jerk reaction as the name itself implies.

If you'll note, the market which deserves its props today, did almost nothing after the European close.

At the red trendline, the averages barely do anything as Europe closes except for the Greek deal rumor which was promptly shot down minutes after it came out,  but why do you think such a ridiculous rumor was floated in the first place? If you don't believe it happens, I'd direct you to this video by none other than CNBC's trustworthy and beloved Cramer, telling you in his best and most honest interview ever, just how it REALLY is in the market. This honestly is one of the best educational bits I've seen dealing with the true realities of the market, I use to start every new class with this video...

Seriously, anyone who has been even marginally following the Troika/Greek negotiations knows that there's no way the Troika is rolling over and giving in to Greece and even had the Finance Ministers done such a thing, it would never be passed through their respective parliaments, it was a bold face lie which we called out the moment it was heard today, Anonymous Source Says EU Will Extend Aid to Greece Without IMF " Denials should be forthcoming shortly as is the pattern..."

However I think this whole week and today's action goes back to our analysis early in the week...

Initially from Monday in a GLD update, this is the gist of the week's action , especially today's.

"The one thing I don't like is the increased market perception and fear, that tilts the ship too far one way and it's very lucrative for Wall Street to rock the boat in the other direction quickly, stopping out or triggering trades, it''s short term maneuvering that has little to do with the bigger picture, but it makes them money."

Tuesday I posted objective information dealing with market perception and "fear that tilts the ship too far in the other direction". Although the fear was palpable in the market Monday when I wrote the above, I only posted this "objective evidence" Tuesday (although it was a snap-shot from Monday) because I had seen it for the first time Tuesday in the Sentiment Flip-Flop post...

(*The following chart and commentary is from Tuesday's post linked just above and is an essential part of this week's market action)

"EXTREME FEAR just yesterday triggering the comments above also from yesterday, What does Wall Street do when the boat is leaning too far in one direction? They take advantage of it."

So the motivation and reason for such a move was there as of Monday, too many people on one side of the boat-bears, fearful and short making it an easy slam-dunk for some quick profits for Wall Street and allowing them to move and open positions in to the price movement.

There are quite a few posts I could get this forecast from, I've found 15 so far this week just looking for the original, this is from Tuesday morning's A.M. Update"

"I suspect the 150-day wasn't tested twice out of coincidence, I think Wall St. knows traders are watching that level as a last stand before the 200-day and I think a bounce off that level ala-last week and a slice down through it would likely catch a lot of stops.

Just to be clear, I do think we get a bounce, internals agreed with a 1-day oversold condition yesterday as well."


The take-away from the above posts/excerpts is that the 150-day moving average was hit twice setting up a support area and a very probable upside bounce. In the April 2nd forecast, not only was a decline to the 100-day moving average envisioned, but that it (as well as the 200-day below) would act as a temporary speed bump, we'd see short term support in the area before slicing through it and to the downside. This week's move is essentially that speed bump that was forecast as early as April 2nd and throughout this week.

Here's where the concept of a counter trend bounce comes in, especially today. As we saw with the $USDX's counter trend bounce, despite it being in a primary downtrend, counter trend bounces are some of the strongest you'll see in any type of market and the $USD's 7-day counter trend bounce was also the strongest 7-day move in the $USD in more than 7 years, despite it having been in a full on bull market, it was the bear trend's counter trend bounce that was the strongest.

I've told you why counter trend bounces are so strong in the past ,  they need to change sentiment and to do that they need to be convincing.

Now we could certainly make a case that it can't be counter trend because the market is not in a bear market, however I'd submit the following for your consideration...

 The move down since the May head fake breakout and failure may not have been large in percentage terms, but for traders watching the market as closely as most do, especially those with long positions, it was a long and painful 3 weeks with Monday morning's price action looking quite bad,  this was evidenced by the Fear and Greed indicator at extreme bearish sentiment Monday as seen above.

It's perception that moves the market, not reality or facts, figures, or valuation and perception was overwhelmingly bearish setting the stage for a counter trend bounce and as I said above, to be believable, to be enough to change sentiment so when the 150-day moving average that now looks like support is tested next time, rather than being at a bearish extreme, traders are more likely to see it as a buy the dip opportunity with stop-losses set at the 150-day SPX ma, allowing price to slice right through it and make the same traders who were wrong on Monday to be wrong again when price moves back to "perceived" support...

Most of all of the analysis from earlier in the week started with the perceived support created by the SPX tagging the 150-day moving average a second time. As I said Monday, this will get the bearish crowd bullish and buying the dip next time price is at these levels and with stops all lined up at the 150-day, it's more than likely that price slices right through the moving average. That was my position Monday/Tuesday, that's my position today.

If you look at the SPX chart as of yesterday's close, tell me if that bounce of 3-days would make you feel bullish or convinced? Better yet, if your short, does this move feel convincing and scary to you? If so, then it did its job as a counter trend rally/bounce, to be convincing.

One other thing to consider , considering how bearish sentiment was Monday, tomorrow is quad witching, today's move may very well be part of causing a number of contracts to expire worthless on the biggest contract expiration day of the year which only happens 4 times.


Moving to sector performance, as far as the talking heads' chant, "Financials benefit", looking at the S&P sectors on the week, it hardly seems like Financials are the beneficiary...

Only Energy and Industrials have performed worse on the week.

As for Leading Indicators, there's evidence of manipulation via HYG for the 3rd day, watch how closely the market follows HYG, HY Credit, am institutional risk asset and the first lever the market usually pulls to ramp the market or give it support, but the bigger picture is something quite different. If you are wondering how they get the market to ramp on nothing ut horrible Greek news like the ECB's comments near the close that Greek Banks may not open on Monday, just watch the intraday HYG/SPX chart.

 Our Pro sentiment indicator again, like the rest of the week refuses to move higher with the SPX, rather it is moving lower indicating what I'd expect, smart money is selling in to the move, this is what I suspected would happen as support was created Monday at the SPX 150-ma as you see above in posts/excerpts.

 Our secondary/confirmation indicator shows the same, in fact it closed lower on the day, not at all tracking the SPX.

5 year yields diverged to the downside or remain diverged to the downside, remember as a leading indicator they tend to act like a magnet for the SPX. To the left you can see where they led the market higher then lower and now are displaced lower again.

Commodities have the same relationship, also displaced lower with a leading relationship as they made higher highs as the SPX was still making lower lows, leading it to the upside, then moving lower as the SPX hit highs, leading it to the downside. Again they are displaced lower/negative.

 HYG longer term is in a primary downtrend, this is the highest probability or path of least resistance as equities tend to follow credit.

 HYG intraday is nearly perfectly in line with the SPX, do you think that's coincidence? This is the 3rd day, perhaps the last though...

Although the near term/intraday HYG charts have been leading the algos, the 3C chart (1 min) which showed a minor positive divergence at Monday's low is leading negative at a new leading 3C low.

 High Yield credit which is not manipulated like HY corp. Credit is showing another leading negative divergence with the SPX, as it has all week, smart money is not buying this week's bout of risk on, rather selling it.

Here's a closer look, HY Credit closed below yesterday's close today.

As for internals...

There was a Dominant Price/Volume Relationship which was solidly Close Up / Volume Up, this is the strongest of the 4 relationships, but oddly the relationship often sees a next day red close sort of like an overbought effect.

Along the lines of an overbought condition, 8 of 9 S&P sectors closed green with only Energy closing red, but barely-0.06%.

Of the 238 Morningstar groups, a whopping 225 closed green, that's about as close as you get to a 1-day overbought condition.

However I would not discount the Quad Witching Expiration tomorrow, typically the max-pain pin is right at Thursday's close until about 2 p.m. and we have stock index futures, stock index options, stock options and single stock futures all expiring tomorrow. Given Monday's sentiment extreme, it wouldn't be surprising for them to have flipped the boat that was leaning (metaphorically) way too far to one side (bearish).

As far as I'm concerned, Wednesday's trade Plan is still the best option with the least risk, Market Update and Initial Trade Plan:

"Everyone is going to be reacting emotionally and moving all around, chasing the market if history is any judge. I think we are best served to stay patient, let the uncontrollable part we have no idea-the F_O_M_C- pass and the knee jerk start if it will be there. Then lets see what's under the hood and let the trade come to us rather than chasing emotional games, again if history is any judge."

With Greece out there, the market could go any way any morning based on something someone said or did, I'd much rather let the trade come to us and have leading indicators and charts with the trade rather than against it.

Speaking of which, the QQQ put position opened today, Trade Idea: SPECULATIVE QQQ
 & Trade Idea: QQQ Put Position Fill-Out was opened in a decent spot. The average cost is $1.52 with a close of $1.41, there are numerous other positions I'm looking at, IBB was posted today and looks very interesting, I'll post it as a Trade Idea when entered, I expect this will be a full size equity short via BIS long. Transports "might" give us enough upside for an entry, but I'd want to see them at least above $153.50 (IYT).

As for futures, even though I always put probabilities on a pin near Thursday's close, they have deteriorated since the close, perhaps Greece is a special factor that needs more consideration, I'll be checking in on them later to see if the post 4 pm close deterioration keeps up...

 ES 1 min the red arrow is 4 pm

NQ at a new leading low

And Russell futures at another new leading low.

I'll check them before turning in, if there's something really out of place that looks like it will effect the open , I'll update them tonight.

Otherwise my gut says that we likely see risk off after 2 pm tomorrow and likely a gap down Monday, although it's too early for the Week Ahead forecast, a Greek bank run a looks more and more probable considering the outflows this week alone.

Have a great night.

CONTEXT Model-1 More Day

Yesterday we looked at Capital Context's ES model, again the definition of the model's construction is as follows from CC themselves:

"The world has become an increasingly inter-connected place to trade. Whether due to central bank liquidity or the shortening of business cycles, asset-classes tend to behave in highly correlated ways most of the time. The CONTEXT framework attempts to distill the world’s ‘risk’ asset-classes (interest-rates and curves, credit risk, FX carry, commodities, and precious metals) into a single-measure that can be judged against the US equity market in order to comprehend potential mis-pricings (or technical flows and liquidity impacts). Institutional and algorithmic clients tend to use CONTEXT as a confirmation tool for positioning against (or with) a trend. CONTEXT provides a 24-hour-a-day real-time indicator of the world’s risk appetite and whether US equities are over- or under-pricing that risk."

In short, if equities or more specifically S&P E-mini futures are moving up or down, institutional assets should be moving up or down with them as that's where the real money is in the market, otherwise the move is suspect and as you'll see in tonight's Daily Wrap (unless you've kept track of the posts through the week, then you already know), if institutional money who is much better informed than we can ever hope to be is not participating, there's a problem with the move whether it be up or down. Without institutional support, the market can't hold anything.

This particular CONTEXT/ ES Model is delayed so it was as of 3:30 today, perhaps I'll update it later...

As of 3:30 the CONTEXT model of ES/SPX Futures vs ES itself shows a differential of nearly 60 ES points, about 2/3rds higher than yesterday; meaning Institutional risk asset movement that is highly correlated to equities is NOT buying this move, in fact just about every indication suggests they are selling it, b which  was the theme earlier in the week once the support had been put in place with the second tag of the SPX's 150-day moving average.

For the equity market or specifically S&P futures to be on par with what institutional/smart money is doing, the S&P FUTURES need to fall by about -60 points.

IBB follow up

IBB/NDX Biotechs is what I'd call a screaming head fake set-up, it's all the same concept, the same concept from the April 2nd forecast that envisioned a break above the major averages' resistance in the form of triangles, some of which weren't even fully developed yet, but the clear resistance zone was, which is why I had said a couple of weeks before that there would be no downside move of any significance until there was first a head fake move above that resistance area.

The concepts and reasons behind the concepts which I'd estimate we see 80% of the time just before a reversal and in any asset as well as any timeframe from intraday to several days to a weekly chart. These two posts are always linked near the top right of the members' site:

* Understanding the Head-Fake Move Part 1

* Understanding the Head-Fake Move Part 2

For our purposes I'll add go in to some of the concepts and reasons. the more noticeable the resistance , support or other technical level such as a moving average or a common price pattern, the more likely you'll see a head fake move before a reversal (whether a reversal up or down, it doesn't matter). Also the more popular the asset, the more likely the head fake move. Beyond that, the reasoning for their existence is a bit longer to explain than is appropriate in this post, but it has everything to do with the size of institutional positions and entering and exiting them at the best prices for smart money without attracting attention to the trade and without driving the trade against themselves because of the size of their positions (basic supply/demand dynamics). Ironically it is Technical traders themselves and their predictability and adherence to 100 year old concepts in some cases, that created head fakes.

 This is the daily chart of IBB with a nice up-trend in to 2015 before it puts in one of those changes of character that is "seemingly" bullish, a break above the long term channel,  then almost immediately the price gains end, the change of character led to a change in trend that went from strongly up, to dead flat.

However in this dead flat trend which IBB hasn't broken higher since March and that failed at that, it also created a clean, clear, very obvious area of resistance with the last 3 trading weeks not seeing more than 0.11% movement up until yesterday, a very clear resistance range and a very popular asset.

It would seem IBB's trend to the upside has ended, as there has been no further gains since March 19th, it's kind of a red flag for the group.

However it's a perfect head fake set-up because technical traders who have been following IBB and waiting for a new high, expecting it to return to last year's trend have their buy orders set right above the clear resistance level, a breakout to the upside triggers them, at the same time triggering demand which can be used to sell in to. If a large Wall Street firm wanted to sell IBB anytime over the last 3 months in any size, they'd send prices crashing which isn''t good for an exit or good for a new short entry.

 Here comes today, a perfect break above the trendily,a convincing break for technical traders, one they'll buy, one they'll chase giving larger institutional money the demand they need to either sell or sell short into, both transactions come across the tape as sales.

Note the trajectory of the 6 hour 3C chart, it's not good, but we could have guessed it wouldn't have been good moving forward the moment IBB broke above the long term up trend channel, the change in character.

 Intraday IBB has not confirmed the upside at all.

The 2x leveraged long, BIB shows a small head fake at the yellow line, a stop run just before its reversal to the upside, this is why these head fake moves are such fantastic price-based timing indications, you can see it for yourself on the 16th, a break of support and a gap up the next day as the shares stopped out on the break of support were accumulated for that little move higher, then sold. IBB has been in near perfect confirmation since at the green arrows, not much going on as there's not much room to do anything without setting the laws of supply and demand in motion until today and it looks pretty clear on this longer intraday chart and IBB, a different asset, that it was being sold in to which makes perfect sense because they sure weren't buying it and pushing it higher the last 3 months.

 This is BIS, the 2x inverse or short of IBB on a slightly longer 3 min chart with confirmation as it sees a head fake move below support, a stop run which allows a lot of shares to be picked up on the cheap as stops below support are hit, the 3C chart for the day again confirms with a positive divergence suggesting the stopped out shares in the biotech short were accumulated.

This 10 min IBB chart is interesting, it's about as far as I can go on an intraday/1-day move, but it has a small positive divergence at the white arrow with a head fake move at the same area and then in line trade with one more small accumulation area with the same head fake/stop run right at the second white arrow to the right. Today's move though on a stronger 10 min chart has no confirmation, but worse, it's a negative divergence after so much time of price confirmation in the timeframe.

I suspect it will look worse tomorrow in longer timeframes and Monday and so on.

I'll likely get involved soon.

Trade Set-Up: IBB NASDAQ Biotech Index (short)

I'm going through my watch list as fast as I can and one just jumped right our, IBB, the NASDAQ Biotech ETF, the leveraged long is BIB and the 2x leveraged short, the trade I'd be interested in going long is BIS.

Take a look, I'll have some charts out in just a few minutes.

I do prefer the BIS long (2x short IBB) equity position over options as a trending trade or core short position, remember though BIS is a 2x inverse or short the Biotech Index, if you wanted to short the Biotechs with 2x leverage, you'd buy BIS.

VXX / VIX Futures

VIX short term futures (VXX) and VIX  have been outperforming the market all week, they've held a bid under them that has skewed the normal correlation (opposite) there market. I was showing this to you in the usual fashion by inverting the price of the SPX so you can see the relative performance difference, but it's so obvious now it can be seen on a normal chart in which the two trade opposite (inverse) each other.

The VIX futures are showing improvement today and I've been monitoring it all day, the only real issue I have with them at this point is the reversal process so they aren't moving off a tight "V" and the timing charts.

Otherwise, they should be making for an interesting position and I've kept not only July 17th VXX calls in place, but the UVXY (2x long VXX) ETF/Equity long in place as well,, as this week really has;'t been a concern for me with the time on the option contracts. I would have closed the positions early Tuesday and re-opened them shortly if the market had pulled back as I was hoping for, but really wasn't that concerned if I missed that opportunity.

 VIX Futures intraday

 This is the intraday VXX chart, the area in red is when I posted the charts of the VXX going negative short term and the market averages positive short term in anticipation of a knee jerk reaction,  today is much more like a normal F_O_M_C knee jerk reaction than yesterday. The post was, Market Update and Initial Trade Plan and beyond the signals posted pre-F_O_M_C, here's a reminder of the "Trade Plan" aspect of the post...

"Everyone is going to be reacting emotionally and moving all around, chasing the market if history is any judge. I think we are best served to stay patient, let the uncontrollable part we have no idea-the F_O_M_C- pass and the knee jerk start, if it will be there. Then lets see what's under the hood and let the trade come to us rather than chasing emotional games, again if history is any judge."

XIV, the inverse of VXX is showing a confirming leading negative divergence, this one moves with the market rather than opposite the market like VXX so the negative divergence is confirmation of VXX's positive above.

 I like the way the divergence is moving through VXX/UVXY timeframes and I'd be tempted to add to the position , however I don't trust sharp "V", I trust them just a little bit more than a parabolic move like today's market action, these parabolic moves tend to end just as impressively as they started.

This is the VXX 5 min chart, still leading positive with no damage done. Note the sharp "V" if VXX were to reverse to the upside right here, it doesn't need much to widen that area out if you look at the last low on the 11th. By that time, I'd also expect 3C to be making a new leading positive high (see the orange arrow), that's when I think timing ;looks good for VXX long or UVXY for an add-to or new position.

 Just as confirmation, XIV, the inverse of VXX on the same timeframe with an equal divergence, just leading negative.

 As for the relative performance, just draw some trendiness from last week, compare where the SPX (green) is relative to the trendily, VXX should be an equally opposite amount lower,  it's not. Protection remains bid

EUR/USD & Market Sentiment-Flipping the Boat

From Tuesday's post, Sentiment Flip-Flop with the following excerpts and charts...

"As I said just yesterday in seeing the market ready to shake-out the newly bearish traders,

"The one thing I don't like is the increased market perception and fear, that tilts the ship too far one way and it's very lucrative for Wall Street to rock the boat in the other direction quickly, stopping out or triggering trades, it''s short term maneuvering that has little to do with the bigger picture, but it makes them money."

This is the Fear/Greed Index form YESTERDAY, the 15th...

EXTREME FEAR just yesterday triggering the comments above also from yesterday, And What does Wall Street do when the boat is leaning too far in one direction? They take advantage of it.

The daily SPX chart with the failed head fake move in May and the recent support created at the SPX 150-ma which was already getting attention.  As I said yesterday, "Now all of the stops will be at the 150-sma".

Fast forward to right now...

Sentiment has certainly been shifted and all of those newly bearish traders' / shorts from early in thee week are shaken out, as well as the newly bullish BTD crowd chasing prices higher right in time for a Greek Rumor that would end all problems , but was completely irrational and unsourced. Note the longer upper wick on today's SPX daily candle.

This is the set-up I was referring to Tuesday because of the sentiment imbalance.

this may not be the best segue to the EUR/USD charts, remember I expected a mild $USD bounce and EUR/USD pullback. I am not expecting a lot from the $USD, in fact big picture I'm expecting it to make a primary trend lower low. It has not behaved as the charts imply over the last 24 hours, but that's obviously part of the F_O_M_C and now the second event of the week is having its say, the Greek drama.

There has been significant improvement in the $USD and notable deterioration in the Euro, especially since the EuroGroup meeting ended today with no favorable results other than a rumor to ramp stocks so someone can sell positions, but that seemed to be the entire plan since the 150-day SPX moving average was solidified in traders' minds as support when sentiment was extremely bearish, not so right now. Remember they'll always tip the boat when it's loaded too far on one side, it's easy money.

 The intraday $USD showing improvement today and starting to make its way higher. This may not bode well for GLD in the very near term, especially with today's gap, the reason I closed the second set of GLD calls this morning.

 The intraday Euro Futures with a notable intraday divergence and price decline as the EuroGroup meeting concluded.

The 5 min $USD still has a positive and ...

The 5 min Euro Futures still has a clear negative. Now that the $USD's reaction to the F_E_D and Goldman Sach's overnight analysis has run its course, FX traders seem to be keying in on Greece and the Euro once again, it's the more immediate threat.

I'm not sure this is a trade I'd like to be involved in, but it should have repercussions for certain assets that move opposite the $USD like oil and gold and historically, equities. Just a heads up to keep this in mind as well.

Another Denial of Sorts

The scheduled EuroGroup meeting (having taken place and ended) for today has produced the following SOURCED comments:

Dombrovskis: "No deal" on his Twitter account

In addition, Greek sources are saying they won't be blackmailed and that "some" people (read Troika) are seeking to incite capital flight", obviously as a negotiating tactic to put Greece deeper in the corner.

I think we can safely assume from the Merkel denial and the Dombrovskis Tweet as well as growing Greek animosity just after the end of the meeting, that the earlier unsourced rumor was someone gaming the market to exit their positions ahead of what has now been pretty thoroughly called the "Greek Lehman weekend"

Trade Idea: QQQ Put Position Fill-Out

I think the market is being gamed here for the exact same reasons mentioned earlier today in the A.M. Update.

One of the first places I looked on the initial rumor was TICK, although it saw volatility, it didn't break the trend...

What better way to sell in to the highs on a possible Greek Lehman weekend than to put out a story, unsourced that creates demand to sell in to, the same reason in the A.M. Update.

I feel adding to the QQQ put position,Trade Idea: SPECULATIVE QQQ is a difficult decision, it still feels like a speculative move, but I have to go with what was expected with the 150 day support put in place, the sentiment changing rally and this BS news story.

I'll be filling out the QQQ put position.

First Denial, That Didn't Take Long-Angela Merkel

None other than the Chancellor of Germany, probably the only friend the Greeks have left on the Troika side, denies any knowledge of the rumors,

When asked:

• *MERKEL ASKED ABOUT REPORTS OF NEW OFFER TO GREECE
• *MERKEL SAYS ONLY KNOWS OF OFFER FROM GREEK CREDITORS

First denial and a sourced one pretty high up

Anonymous Source Says EU Will Extend Aid to Greece Without IMF

This just broke, of course it's the typical anonymous source and frankly hard to believe. Via Die Ziet,

Forgive the Google Translation... Denials should be forthcoming shortly as is the pattern...

"In Greek debt dispute, a dramatic turn offing. The creditors of Greece want to preserve the threatened bankruptcy of the country at the last minute with an ultimate offer from bankruptcy.

According to information from TIME and TIME ONLINE is to be extended until the end of the current rescue program. In this program, ten billion euros are left, which should be actually used for the recapitalization of banks. This money will now be used to settle the Greek debt to the European Central Bank (ECB) and the International Monetary Fund (IMF) in the coming months.

The ECB participates in the financing, by will allow the Greek government to spend additional short-dated government bonds for two billion euros.These bonds would buy Greek banks and can deposit as security for fresh money from the ECB. So far, the central bank, however, had always resisted.

According to reports, both ECB Chairman Mario Draghi and the leaders of the major euro area countries are involved in the project. In return it is expected of Greece to implement agreed at a crisis meeting at the chancellery two weeks before reform requirements.

The IMF would no longer take part in the financing for the time being, because he no longer sees fulfilled the conditions for it - this is likely to come mainly in Germany with skepticism. Following the extension of a third aid program to be adopted. This would include a low- to mid-double-digit billions. The IMF will also participate to it only if the Europeans agree to a debt restructuring for Greece."

I'm trying to get a clearer source, but it's breaking and unsourced...

QQQ Getting Closer to Churning Flameout

In the last update I said to look for the opposite of a downside reversal which is a capitulation event, and rather a increasing volume churning event with little to no positive price movement, usually accompanied by a bearish reversal candle.

The Q's are getting close to that point, at which time I may bring the earlier QQQ Put speculative position, Trade Idea: SPECULATIVE QQQ, up to full size as well as a  number of other opportunities.

Here's what we are looking at so far as the a.m. trade/games burn off...

 QQQ 15 min larger volume on a candle that's not moving, I'd like to see a larger version of this, but this is an indication of bearish churning...

 On a 30 min chart the candlesticks have gone from momentum to loss of momentum and a flat area with the second to last candle with a Doji Star loss of momentum and longer upper wick representing higher prices being rejected, also a sign of churning.

Meanwhile the NYSE TICK did break +1000 briefly...

But now its trending down and at a very slow =/- 250 area.

VXX is looking better and more interesting and some other groups are looking interesting, such as Financials underperformance.

Remember the SPX 150 day moving average set up, that's where the stops will be and sentiment has most definitely shifted from extremely bearish to bullish. Too many people on one side of the boat will do it everytime...

Market Update

The Greek news keeps getting worse and worse. I suspect the Troika was willing to consider lowering interest on Greek Debt, giving Tsipras a little face-saving maneuvering room by saying he extracted some concessions, but as mentioned earlier, it's the Memorandum of Understanding (MoU), that Greece/Syriza pledged to destroy and all conditions of the MoU would have to be fulfilled for Greece to get this debt write down which is mostly via interest payments/rates, not actual principle write-down.

Whether brinksmanship or not, Greece has put the "onus" of the default on creditors, but they don't seem to be biting. The most succinct response to this from the Trokia is,

"“Things will not be so lengthy,” said one official in Brussels. “The ball, ministers will conclude, is very firmly in the Greek camp. I honestly believe this will be pretty short.”

"Pretty Short" is sounding a lot like the Lehman weekend everyone was talking about  earlier this week.

In any case, I wanted to get a few charts out there.

One of the most interesting this morning is the TICK chart, with a move like this morning's I'd expect to see at +1500, maybe even +1750 or even +2000

Instead of some strong extreme , it barely crossed +1000 and has been under that most of the rest of the morning. As a reminder the TICK is all NYSE stocks advancing minus declining per bar, a strong reading would be +1250 and that would be seen on a mediocre move of +.50%, a move like this morning with so few stocks advancing vs. declining is outright one of the stranger things I've seen this week.

I took a quick look at some leading indicators, although I usually don't like using them this early in the day, but they were interesting...

The SPX:RUT ratio failed to confirm-you may have seen this failing to confirm yesterday after the F_O_M_C as well.

The Pro Sentiment indicators, such as the larger version going south at the SPX's head fake move in May has kept going south, but interestingly this morning, really made no attempt at all to follow risk markets. Here's a closer look...

The SPX this morning to the far right and our Pro sentiment indicator not playing along at all.

 The secondary confirmation version of the pro sentiment indicator was showing the same thing.

High Yield Credit which in this case will often make small moves with the market while maintaining larger divergences, also had no interest in chasing risk higher, HY credit is what you might consider an institutional risk asset like one might consider a momentum stock for retail.

And that 3C non-confirmation from earlier that I mentioned, it's not even the larger divergence across the chart, but more specifically today with a leading negative divergence and a sharp one.

 VXX which I showed yesterday with several other assets putting in an intraday negative 1 min divergence just before the F_O_M_C is also leading, but positive this morning.

The day is still very early. I suspect if I were to add to the QQQ put position that is at speculative size  one of the things I might be looking for and consider would be a churning event. That means notably higher volume on a bearish candlestick in an of the averages, or better all of them, the candlestick would have to be intraday, anywhere from 1 min (less likely) to -15 or 30 mins, a long upper wick or something like that.

The market would essentially be stuck in place and churning on large volume, then I'd be considering an add-to on the half position size QQQ puts and/or additional positions.