Daily Wrap: NOT Looking Good

While the strange looking overnight "management" of futures was captivating, essentially ensuring they didn't break down before the bare minimum sentiment changing mark of SPX > its 50-day dma was met, something nearly slipped under the radar in this day and age of economic data falling well short of expectations, yet we are told by the F_E_D that the weakness is transitory, that it needs to be doubly seasonally adjusted and other random excuses to hide the real reason the F_E_D needs to hike which I believe is because they see the next recession coming and at ZIRP they are effectively going to have to battle it with both arms tied behind their back unless they create some breathing room.

We had an exceptionally tight overnight range, flat really until Retail sales hit at 8:30, then it seemed like bad news was good news as ES futures lifted the market on less than half the average volume today.

Speaking to both ideas of something the F_E_D is more afraid of than what rate hikes will do to the economy and that something possibly being the next economic recession, I leave you with Bloomberg's take on Retail Sales this morning which came in at the worst level since the Lehman crisis.

Retail Sales

Released On 7/14/2015 8:30:00 AM For Jun, 2015 Prior Prior Revised Consensus Consensus Range Actual Retail Sales - M/M change 1.2 % 1.0 % 0.3 % 0.2 % to 0.6 % -0.3 % Retail Sales less autos - M/M change 1.0 % 0.8 % 0.6 % 0.1 % to 0.8 % -0.1 % Less Autos & Gas - M/M Change 0.7 % 0.5 % 0.6 % 0.2 % to 0.6 % -0.2 %

Highlights The second-quarter suddenly doesn't look very strong as retail sales for June, showing broad weakness, came in way below expectations, at minus 0.3 percent. Motor vehicles were part of the reason, excluding which sales came in at only minus 0.1 percent. But excluding both autos and gasoline, core sales fell 0.2 percent. The bounce back for gasoline prices has given gas station sales a lift the last couple of months, up 0.8 percent in June following May's 3.7 percent surge. And there's also two strong gains for the key general merchandise category which is up 0.7 percent and 1.4 percent the last two months. Electronic & appliance stores also show a solid gain, up 1.0 percent in June. But that's where the good news stops. Auto sales, though still at strong levels, fell 1.1 percent against an unusually strong May. Furniture sales fell 1.6 percent, apparel fell 1.5 percent, building materials fell 1.3 percent, and restaurants fell 0.2 percent. The fall in restaurant sales doesn't speak to the strong levels of consumer confidence that are being reported, readings that the Fed has been pointing to as a future indicator of strength for consumer spending. A look at year-on-year sales underscores the complete lack of consumer punch, at only plus 1.4 percent for total retail sales and only plus 2.7 percent for the core. This is a very disappointing report that will cut second-quarter GDP estimates and that will likely push back the outlook for the Fed's rate hike from September to December, at least for now." It's easy to say the market took bad news as good news, especially given Bloomberg's last paragraph about the F_E_D being forced to put rate hikes on hold, unless of course rate hikes are their way of creating elbow room to deal with the next recession. Either way, today's price action was not out of character with the base in place for this bounce as I have posted numerous times over the last 4-5 trading days. However with E-mini (SPX) futures at half their average volume, I'll tell you the same way I'd tell a close friend, I feel nothing but relief that I didn't get involved in sharp "V" bases like AAPL, AAPL Update, that I took the IWM calls off the table at a minor loss rather than what could be a large loss, Closing July 17th IWM $125 Calls and that I understand a bounce on volume like today's is reason for concern. Honestly if I had done different, while probabilities are not usually very high to see an extreme gap against a move like the one in AAPL on such a weak base, I think I'd have trouble going to bed without watching the computer all night. While the VIX Inversion buy signal from our custom indicator was/has been right on with 3C support at a base to support it, Remember there's no target or implied move, just a bounce/buy signal. Meanwhile, once again the VIX had to be whacked lower to support the market again for the second consecutive day,  this was true of the VIX and VXX for the second day in a row, however... Intraday the VXX showed late day strength vs its correlation with the SPX (SPX prices are inverted to show the normal correlation). So weak volume in the E-mini's, a managed overnight market and still the need to Whack-a-VIX to support the market with end of day improvement in VXX vs the SPX correlation. Meanwhile among other Leading Indicators, I showed you the High Yield Corp. Credit accumulation as early warning of a move to pull a lever of support for the market before the bounce got started and earlier today I mentioned something not sitting right suddenly after yesterday's HYG distribution.  This is HYG's trend vs the SPC on a 5 min chart over a period of months, you can see what happens to SPX bounces without HYG support and you can see what has happened in HYG over the last day or so as the SPX bounces. I pointed this out intraday earlier today, but this larger chart shows the true extent of the problem when relying on manipulative levers to ramp the market. Intraday HYG is supportive and leading the SPX in the white box, but after yesterday's HYG distribution, all of that changed today with HYG closing in the red. Last week I showed you the first positive divergence in our Pro sentiment indicators, the first since May indicating a bounce this week was likely, but...  The last couple of days have seen dramatic deterioration in those indicators such as our primary Pro Sentiment above and... Our secondary confirmation version. This is NOT normal behavior for leading indicators so early in to a bounce that "should" have more support and that "should" need less lever/manipulative support. As a reminder, the divergence in Pro sentiment indicators since the head fake move in May is not a small one as it appears on the intraday charts above... Pro sentiment vs the SPX since February with the head fake move in the SPX (yellow) in May, that's where the Leading Indicator went divergent and has only gotten worse since with a positive divergence last week that has already failed leaving the indicator sitting at a deep leading negative divergence. Yields which has been leading as a Leading Indicator... lost their leading edge yesterday and added to the negative dislocation today.  Commodities which had also been leading as a risk on indicator lost steam yesterday and compounded that today except our long in USO which gained in after hours tonight.  Also HY Credit with its first leading positive indication since the May head fake sent it lower has also turned on the SPX with its second day out of sync and lower (worsening). HY Credit since the SPX's head fake in May (yellow) and the bigger picture deep leading negative divergence. Suddenly it's not so hard to see how the SPX could slice right through its 200-day moving average as has been forecast the same way it did with the bounce off its 150 day moving average. Afternoon 3C action in the averages saw some pretty ugly signals on some pretty strong timeframes like intraday 45 min charts.  SPY leading negative intraday in to the afternoon on a 5 min chart!   Nearly the same thing happened in the Q's, also a 5 min chart intraday which is a very strong intraday move. As fr the 10-15 min charts, non confirmation just as the last bounce failed with a leading negative divgerence this one is well in to the same kind of divergence. As you know, I'm a believer in the reversal process a good 80% of the time rather than reversal events like AAPL's bottom from last week, I'm hoping we get that reversal process and the time to set up new positions for the downside pivot. I feel like I'm jumping the gun a bit in saying that on Tuesday with a bounce I expected to last through the week, at least bounce and reversal process started through this week, but I can't interpret leading indicators, HY Credit, this 3C deterioration and Index futures volume in a much better light and I don't have any reason to root for one side or the other, I wanted to see a bounce to re-establish positions like VXX long/calls, various shorts in to price strength and I still think we get that opportunity  but things are a lot uglier than they initially looked making me glad to have taken VXX put gains, taken that small IWM call loss and being ready to enter new positions at a moment's notice. This is exactly what I'd say to a friend (as many of you are). If the data changes, I'm more than willing to change with it, you do know what my forecast was for the week, I just can't get over the amount of widespread deterioration nearly everywhere we look in one form or another both days this week. As for USO, there was a knee jerk move lower on the Iranian deal before the open, as I said in the A.N. update, it will take a good 6 to 12 months before their oil supply hits the market so the knee jerk down was sort of foolish and it was retraced. Tonight we had the API inventory dat (tomorrow morning the EIA inventory data)... both Brent Crude futures (above) and WTI (USO) jumped on the API data as there was an inventory draw of 7.3 mn bbl.! That on consensus of a 1.2 mn bbl draw, so the USO calls that are already near a double digit gain (entered yesterday, Trade Idea: USO SPECULATIVE (Long) Bounce) should see a nicer move tomorrow, although we do have the EIA data released at 10:30 a.m. If you missed this trade and are interested, we still have the next set up that should be available for an even larger trend soon. If overnight futures look like I suspect they'll look, then I suspect we'll be busy adding short positions and new trades tomorrow, of course I'm only going on what I've seen the last 2-days, but I'm not seeing anything that looks normal for a bounce here, it looks like accelerated deterioration in a process that's normally pretty predictable. When the SPX's 200-day moving average is broken, I view that as the break of the market and would say watch out below. We've had a fairly predictable set of lower highs and lower lows right at the May head fake/false breakout, but a break od the 200-day changes sentiment and if you've never seen fear at work in a market, let me just say it's much stronger than greed. For now, that's the data the way it sits, I'll update you on any changes, but I'm to say the least, NOT IMPRESSED. Have a great night,  oh and the last thing I heard, the IMF may pull out of the Greek "Troika" bailout, the IMF puts the "T" in Troika.

GLD Trade Set-Up

We use to have quite a few gold trades, but recently it has been a jumbled mess. I've probably captured half a dozen charts once a week or so getting ready for a GLD post only to find something that was standing out like a sore thumb that argued against probabilities. Our goal is not to figure out what the most likely probability is, it's to find the highest probability/lowest risk trades.  This isn't a A or B exercise in which you have to choose long or short, there's a bis every 30 mins and if one asset is not giving you high probabilities you move to the next and if need be, sit on your hands until one is jumping off the page.

I wouldn't say gold is jumping off the chart right now, but the Index futures have shown a lot of improvement and I can envision a scenario in which gold sets up for a strong trade, that being said, as always, every expectation we have must be confirmed with objective data.

 Many of you may remember when we called a top in gold in 2011. We used multiple timeframes, numerous concepts, but called the top nearly perfectly at the red arrow. This daily 3C chart of GLD shows an uptrend that had near perfect confirmation and at this point the negative divergence at the 2012 top doesn't jump off the page, although it's there, most of the evidence was on shorter intraday charts like 60 min, etc. However to the far right you can see one of the first divergences that does stand out from the 3C/price trend confirmation.

 The multi-hour (6h) chart shows recent improvement in GLD, although the price structure itself doesn't look like a typical bottom and I believe that is because it's not, at least not yet.

 This 30 min chart doesn't have a great/standout divergence to the far right, but it is leading and there's a lower support level we are coming up on where improvement in both GLD and gold futures charts is starting to be seen.

If you haven't caught my drift already, I suspect there's a large double bottom starting to form in the area, the first bottom being off to the left.

In most cases with a double bottom, the second bottom will put in a head fake/shakeout deeper low which runs stops-the opposite of what Technical Analysis textbooks have taught for decades.

 This 15 min chart makes the local price action's divergence a bit more clear and understandable, but it will have to move to longer charts like the one above this and do so in a clean manner.

 This 5 min chart is leading positive and it looks good, but just a quick look at price action alone and you can see the reversal process isn't mature, it has started and it has the right divergence, but it looks to have more to go which is why I find it interesting that it appears to be about as far as VIX futures and probably the major market averages are from their pivots.

 The 3 min chart is showing recent improvement is what appears to be rotation between equities and gold as does the 1 min chart below.

GLD 1 min.

My guess is that GLD will be at or very close to an upside pivot near the end of the week as equities move closer to a downside picot. This is my guess which includes a double bottom which we are essentially at, a small head fake/stop run would complete that aspect. I don't want to put trade ideas out there on best guesses , so I'm telling you what I expect to see which is a double bottom and likely stop run below the $109.65 level. If we can get that kind of a move with confirmation of accumulation of stops that are hit, I'd feel a lot better about a long gold position and the wild chop would start to make a lot more sense with a considerable base which I'd estimate to be worth approx. a move to $124 + or so.

Futures Indications

I just went through my 80+ futures charts in multiple timeframes and there weren't any huge surprises, but I'll try to deal with each in its own post.

The market bounce that was more or less expected to take up this week (that doesn't mean bounce through the entire week, but can be inclusive of the topping /reversal process), looks about right.

 Looking at the SPY 10m min chart's base area for a bounce alone shows an area that's large enough to support a bounce well beyond 2 days. That's not to say there aren't some troublesome looking charts that can turn quickly and need to be watched carefully, but I'm not so concerned about an immediate "V" shaped downside reversal. The SPX broke above its 50-day which it could not do yesterday, that was the bare minimum that this bounce had to achieve and has.

Again the bigger picture in context with the same asset and timeframe...

SPY 10 min chart has seen steady, solid deterioration which is why it has made a pair of lower highs and lower lows and threatens to break the 200-day moving average on the next pivot to the downside.

VIX Futures look interesting, they look more like a barometer of where we are in the bounce process, which would be fairly early, but they are already at work on their own base for a downside pivot. I would not say that they are there yet and as such the UVXY short will be left open , now at a near 29% gain with no leverage (no options).

 UVXY/VXX 3 min leading positive, but the reversal process is probably the best indication, which looks to be about 1/2 way through.

 5 min UVXY/VXX charts leading positive

And the bigger picture with the large accumulation area to the left , the pullback negative divergence in red and a leading positive divergence at a second bottom or large "W" base. The bottom reversal process is almost always about twice as tight as the top, but the main feature is both lows coming together as one bigger base for VXX/UVXY which move opposite the market.

VIX futures are positive out to their 15 min charts.

USO / Oil also looks interesting, positive from 5 min to 60 min charts in oil futures.

 USO 2 min leading positive

The earlier Iranian news sending USO lower has been put in to perspective, meaning 6-12 months before Iranian oil hits the market.

 3 min USO

10 min USO..I'm still sticking with yesterday's position unless USO pullback in to increased accumulation, beyond that I'd prefer keep the position speculative and as a set up for the next trade.

USO 30 min leading positive and looking very close to an upside bounce.

Gold was the final asset showing some interesting signals. My early theory is that it needs a bit more of a pullback, perhaps it links up to a pivot with the market (market bounce ends, gold bounce begins), either way, gold futures are positive in numerous timeframes and it's time to take a serious look at them again.

Finally TLT and specifically 30 year Treasury futures are showing some interesting divergence in futures from that are with a closer look as I'll post.

the market itself isn't doing anything not expected last Friday, in fact it didn't put in a pullback earlier in the week which would have only made the bounce stronger, but it did see the SPX surpass the 50-day today which was the bare minimum.

For now, market related positions should be more management, for example when to close UVXY and start opening market shorts.

I'm going to check end of day trade and Leading Indicators if I get a chance to get to both before the close as well as update Gold.

Sentiment Shifting

I have mentioned many times that some of the strongest bounces/rallies you'll see will be during a bear market/downtrend, there's a reason for this and that's all about psychology. Technical Analysis tend to take the humanity out of the market and whether machine or trader, they are both driven by human emotions such as the programmer of the machine.

I have talked a lot this year about why counter tend bounces in a downtrend NEED to be impressive and they usually are very impressive. There's a logistical reason for that. Yesterday I said the SPX-50 day moving average needed to be broken on the upside before we''ll get that change in sentiment and the market will entice longs who have been on the sidelines to feel like they are missing the train and stat chasing higher prices, this is what the pros need logistically because of position sizes. Today as the SPX breaks above the 50-day, the Dow over the psychological $18k level and the NASDAQ already above the Psychological $5k level, it seems sentiment is shifting as such a bounce is designed to do, it's not about oversold right now or anything like that.

This is a sentiment report with some example posts from the StockTwits, I imagine them like the Minions.

"A "potential level" is now cultivating to become a primary-term uptrend $SPY"

"$SPX daily MCAD bullish crossover on the daily."

" bias is to continue to hold... add in newer/higher cash areas..."

"perfect bull bar after being up lot plus vol surge so may pullback here which likely would be bought $SPY $SPX $ES_F"

We would not have heard comments like this last week so the move is doing what it's designed to do. In the end the basic concept is that the pro traders are able to offload large positions to dumb money at excellent prices leaving dumb money holding the bag and/or it allows them to open large short positions in to dumb money demand for higher prices. This is why the 50-day SPX break higher was so important, otherwise it was a mediocre move that didn't set off alerts and trading systems.

A lot of the time your own emotions are one of the best inverse barometers. If you feel scared to short in to a bounce/higher prices, knowing what most of you now know, then the market has done its job.

IWM Call Follow Up

The IWM Call position (July 17th-this Friday) with a $125 strike looked like a lost cause for a while, down well over -50%, but the charts lining up for a bounce is what kept me in the position. I have no problem stopping out of an asset, I just believe that if you have a good, objective reason to be in the position, well the fact is we get paid to take risks. This is where knowing yourself and having objective evidence comes in and becomes a gray area. There's a difference between holding a losing position because you have strong objective evidence that probabilities are that it will either be a winning position or it will be at a significantly lower loss and simply not wanting to be wrong and hoping it comes back. Hope is not a strategy, it's not objective evidence, but it is one of the biggest impediments to proper risk management.

I'm also not from the school that says you stop out at a 7% loss no matter what. If I don't have strong objective evidence, then yes, it's time to stop out, but if I do, well lets just say I try not to have position sizes that will get me in to deep trouble should things go against me. I believe in position sizing, I believe in building a position rather than just jumping in all at once, even though there are times for that as well-take yesterday's USO position, Trade Idea: USO SPECULATIVE (Long) Bounce and the follow up, USO Charts Follow Up. While opened as a speculative position, I'm not against adding to it if the conditions are right, if not I'm happy to leave it where it is. This is something each trader needs to work through for themselves. bI once wrote an article on my free site, it's pretty dated, but I think relevant, Zen and the art of investing.

The title is kind of tongue in cheek as at the time I wrote it, there were books everywhere from Zen and the art of motorcycle repair to Zen and the art of cooking, but the basics of the article are truthful, in my opinion trading is one of the most spiritual exercises you can be involved in. Spiritual development no matter what religion or lack of it is a choice in life, getting to know yourself and understanding your strengths and weaknesses in trading is a matter of life and death in the market. Given enough time, there's no system that I've seen that can replace understanding yourself and it's a never-ending quest in the market as the market will uncover every weakness or flaw that you have.

In any case, you can draw your own conclussions about the article if you so chose. My point is simply that the market is like a living, breathing beast and it's dynamic, it has its good moods and its bad moods, it's predictability and unpredictability and to deal with all of that, you need to understand all the same about yourself. I don't think (in my personal opinion), that the market and stops can all be summed up to the 7% rule, the market is too dynamic, but then there's the truthfulness of your objective data and separating that from cognitive biases.

In any case, the IWM July 17 $125 calls are coming very close to expiration so the theta is becoming more of an issue.

Here's the P/L...

At a cost of $1.68 and a fill of $1.48, the former (over 50+%) loss in this position has been widely down to -12% which is a lot better than a 50+% loss or more.

Because this is an options position, there are a lot of variables that go in to its pricing/value, this week not the least of which is time decay so while I still think this cycle is not over, I don't feel as confident that it moves enough to overcome the time decay that's working against it and honestly I'd rather just be done with it and get ready to deploy those assets in a new position. Had we bounced last week as was expected, the position would have worked well.

 This is the IWM 10 min chart and while it's largely in line, looking at the previous positive divergence to the far left and how much it moved vs. the last positive divergence, I don't have the same confidence at this point that the options position would have given me a much better exit.

 This is the intraday IWM showing yesterday's late day 3C improvement in the IWM (not the same for all of the averages) and remember the VIX smacking to ramp the market as well. This isn't a screaming negative divergence , but if 3C were to turn down from here which it certainly can, things could get ugly quick for an options position with a few days left on it.

 This is the 1 min Russell 2000 futures from overnight, recall the flat trend through most of the night since last night's Daily Wrap as if someone was supporting the market through the overnight session, which wouldn't be surprising given Yellen's testimony in front of Congress the next 2-days. Still, the intraday chart wasn't inspiring a lot of confidence.

 I think the biggest hurdle to overcome with the average trader is the notion that the market is random, just drifting around reacting to each event as it unfolds. We have seen for years that cycles are set up in advance like this one with a base and accumulation and a bounce off that base. It's pretty rare that Wall St. abandons a cycle they have set up.

While I'm not saying there's a widespread conspiracy, the charts show us the same thing over and over. If I can tell what the market is likely to do from an HYG 3C chart or an FX chart, how much more so do you think the pros that trade only in a specific asset can tell when something is changing. Along the lines of the conspiracy theories, remember about 2 months ago when all the Bloomberg terminals went down and the market was in havoc? Trader after trader who certainly had back-up access to other quotes weren't so concerned with the Bloomberg terminals being down because of quotes, they were most concerned and worried about the "CHAT" feature that allows them to talk with other Bloomberg terminal users, one trader went so far as to say it felt like the middle ages in which they had to pick up a telephone to call their "chat" buddies. 

Why do you think that feature is so important to the pros that it caused havoc in the market the day the terminals all went black.

As I was saying, showing traders that the market is not random and that its moves are not based on this morning's economic data is one of the more difficult tasks, but one of the most useful. Cycles are set up in advance, they usually follow a specific 4 stage pattern and Wall St. rarely abandons them.

It's the CNBC 30 second soundbite of why the market did what it did today that dumbs down the market and makes it seems like a reactive protozoan just drifting through time/space reacting to whatever it bumps in to. This is because the market is far too complicated and crooked for anyone to properly explain it in  the typical media 30-second soundbite, so things are dumbed down so people feel like they have some measure of control over the market rather than the market dominating them.

 The R2K futures 7 min chart is starting to move to a relative negative divergence, this is a weaker form than a leading divergence, but usually transitions in to the stronger leading form.

 The TF 10 min chart is showing the same thing. This is not an impending break to the downside, but from here, things can happen very quickly should they decide to.

And perhaps most bothersome is the 15 min R2K futures with a leading negative  divergence from the overnight session, NASDAQ futures look the same.


Again, not the smoking gun I'd be working quickly to put out new short entries, but not the best signal either as it puts us in more of a transitional area in which things can change quickly.

Closing July 17th IWM $125 Calls

Too close for comfort, the time decay is an issue as well. I'd rather take a little loss here than a complete one.

Quick Market Update

The overnight price action in futures was quite interesting, a really flat market that as I said this morning looked like a managed attempt to keep it from doing anything on the downside they may not want quite yet being the SPX had not broken above the 50-day moving average which is a bare minimum in the market's current position for a counter trend bounce. The Dow 30 had not closed above the psychological $18k level, and several other things traders will watch and key off. Plus we have Yellen in front of Congress the next 2-days.

People seem to think Greece matters here or that one of the worst Retail Sales prints this morning since the entire Lehman fiasco should send the market lower, not higher, this just isn't the way the market operates anymore. We could see the bounce coming last week, well before we knew anything about the Greek outcome as that was not a sure thing (as sure as it gets) until after 6 a.m. yesterday when it was almost scuttled. The market surely didn't know what this morning's retail sales print would be, not that it doesn't matter and that the market won't discount it, but a bounce scenario was set up last week and Wall St. very rarely walks away from a set-up which they put together (as I mentioned, they have their reasons-remember RISK OFF bounce?).

In any case, we still have a decent amount of gas in the tank as you can see by this 10 min SPY chart.

 SPY 10 min bounce base positive divergence.

However keep this in context of the larger picture on the same timeframe.

10 min SPY chart's trend, a clear counter trend bounce after several lower highs and lower lows have been made and the last ditch support of the 200-dma has been hit. Remember your last bounce forecast off the SPX 150-ma and the slice right down through it as it concluded. The bounce off the 200-day shouldn't be any different and this isn't this week's forecast, this is the forecast made for the market on April 2nd as to what to expect moving forward.

S&P-500 after the May head fake/false breakout forecast April 2nd with a move lower, first below the triangle's apex, then below the 50-day (yellow), finding support at the 150-day (pink) and bouncing and then slicing right through the 150-day, with next support at the dark blue 200-day with a bounce off that which should end the same way as the bounce off the 150-day, except when a 200-day moving average is broken in a major market average, psychology changes rapidly and fear grows exponentially.

As you can see yesterday the bounce failed at the yellow 50-day moving average, that's a minimum to take out when trying to change psychology and get traders buying so pros have demand to sell in to.

As far as keeping the market in the green rather than collapsing as Yellen is in front of Congress the next 2-days fielding a lot of questions about rate hikes and why would she be considering hiking rates this year with the market in free-fall which it likely would be once it takes out the 200-day, I'm sure that probably has something to do with the timing of the current bounce which is counter trend and is still at a level in which we have a second primary trend lower high along with a second lower low.

Intraday breadth hasn't been extreme, but has been on the positive side, at least until very recently.

TICK is not hitting extreme prints, mostly in the -300 to +1000 range, definitely more positive than negative, but no insane +1500 or higher prints and it looks like it may start to break below the channel.

3C charts look generally better intraday today vs yesterday, more in line than the solid distribution of yesterday. However once again, keeping things in context and not getting wrapped up in intraday trade, especially during a counter trend bounce helps keep your eye on the ball.

The QQQ's 10 min 3C chart since the May head fake area in most averages and the trajectory of 3C with bounces and counter trend bounces eventually falling back in line with the 3C trend.

So far today things are a bit more boring than yesterday which was really off to an ugly start, however one item of note I picked up on is the first lever of market manipulation, High Yield Corporate Credit. As I have said in the past, it's not the 3C divergence in HYG that supports the market, only we see that as early warning something is up or coming, it's HYG's price itself that fools altos in to thinking institutional money is in risk on mode. Today HYG's price is slipping which is just a preliminary indication, but one that's going to happen and this may be the start of that leading indication.

 HYG was accumulated well over a week ago which is why I expected some bounce last week which was strangely derailed last Tuesday as if smart money knew something that we didn't, it appears it was Greece at that point in time. In any case, it has clearly been enlisted to help support/manipulate the market higher for this bounce.

Once again, keep this chart in perspective, the exact same timeframe in context looks like this...

 HYG 10 min, note the 3C trajectory and what happens at each bounce, you don't even have to look at the specific divergences.

Here's the same chart without all of my scribble, I'm sure you can see the trend clearly for yourself.

In any case, as I said, it's HYG's price that moves the market, not the divergences, but we did see distribution there yesterday...

 As you can see above in to a flat range where we most often see divergences whether positive or negative, it seems to have more to do with stable fills like the concept of filling orders for institutional clients at VWAP.

The net result is a lower HYG today, the red line is yesterday's close.

This is just part of the process in a counter trend bounce, but it's one of the more interesting things I've seen today

And just so you know how much HY Credit is used to manipulate the market...

 SPY in green vs. HYG in red at our current bounce with HYG in line, then leading and recently in the yellow box having some trouble which is significant as a ramping lever. As a long term Leading Indicator, well... this is sort of much bigger picture...

SPY in green and HYG in red with HYG leading the market to the far left, in line with the market at the green "=" and leading the market again at the red "-".

So while seemingly small and meaningless today, it's not.