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We'll be turning on the email delivery function for the new site as of tomorrow while the current system will also be sending out emails. I know this is a little bit of a pain in the behind, but we want to make sure you are receiving the emails from the new site without any problems while still giving you the real time content as usual. By Monday we should be transitioned completely to the new website and the new email delivery system. You should only receive duplicates tomorrow and they will be posted on the current system first with a C&P on the new website just after, so the most up to date information tomorrow will be the current website and current email delivery that you are use to.

By Monday we should be fully transitioned to the new website and you'll be receiving real time email updates via the new system.

As a reminder, here are the recent posts on the new website and the email delivery functions.

This is a reminder on how to set the email content delivery, as of now everyone is auto subscribed to all groups, you can go ahead and make any changes you'd like now (tomorrow or over the weekend or anytime after that)...NEW WEBSITE

Here's some additional information about the Email subscriptions, NEW WEBSITE

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Tomorrow is more or less a test. The email delivery from the new site will be slightly delayed as I will be primarily posting on the current site and copy and pasting the posts to the new site so emails from there will be slightly delayed only for that reason. So long as you are receiving emails from the new site and are able to log on with your username and password, we'll be transitioning to the new site on Monday.

Remember, tomorrow you'll be receiving duplicate email updates, so nothing is wrong, this is a test of the system and to allow you to adjust your settings and see that they are working fine,

Thanks again for your patience as we grow.

Daily Wrap

This morning's A.M.. UPDATE gave us an early preview of what happened to any kind of overnight price gains. Excerpts below...

 However we already see some weakness in Index futures from the overnight session in 3C such as this 1 min ES chart.

1 min NQ

1 min TF also showing 3C weakness in to the overnight session so I suspect the bounce or higher prices are already being aggressively sold in to, the same game plan we have, institutional money just has much larger positions and has a lot more selling/short selling to do."

As for Treasuries/Yields acting as  a leading indicator, for the time being they sure are.

 2 min TLT with a slight negative divergence end of day.

The 1 min chart shows it better, but right now it's price action in Treasuries that matter sending yields lower and that tends to draw equities toward yields like a magnet.

 30 year Yield Trend (red) vs the SPX (green), that answers any questions about yields still acting as a leading indicator.

Just because a lot of what I was trying to do today was say, "If there's a bounce, that's okay and maybe it opens up some trade entries, but don't forget what the big picture is all about as that's where the highest probability, longest/strongest trades area"

In that spirit, this is the bounce's cycle with stage 1 accumulation, stage 2 mark-up, stage 3 distribution/top with a head fake at the yellow box and stage 4 decline on a 5 min chart. Yields led the market early in the bounce to the upside, then diverged and led the market to the downside. The interesting thing is we knew this was going to be the outcome before the bounce even started, but that's not a guess, it's not a prediction, it's based on objective evidence.

However for the time, please remember the 1 min TLT chart's intraday negative divergence above.

Every form of risk asset was more or less sold off, equities, commodities , yields. All market averages are lower on the week. THIS IS EXACTLY WHAT WE EXPECTED LAST FRIDAY IN THE The Week Ahead POST:

I'm fine carrying some downside positions in to next week, including Trade Ideas from this week including FAZ (3x short Financials), SRTY (3x short Russell 2000), UVXY (32x long Short Term VIX futures), SQQQ (3x Short QQQ), QQQ 8/21 $112 Puts, BIS (2x short NASDAQ Bio-Techs).

The USD/JPY (edit) which as a carry cross has sponsored this week's bounce along with HYG, some VIX smack-downs, is clearly looking to make a downside reversal....While the USD/JPY looks to be in line as the momentum of the bounce in everything other than the NDX has turned lateral to down, the $USDX and Yen futures are pointing to a clear change next week. I've gone through 9 different timeframes for each futures so it's impossible for me to get them all out, but these are some examples of strong timeframes and divergences that should lead trade next week to the downside....As for Index futures, it looks to me they need about a half a day to finish up, although that's a pretty specific prediction, but the charts are clearly negative.

Thus there's excellent confirmation between FX, Equities, Treasuries and VIX futures. I suspect we have some time early in the week to add additional positions, but I'm also  very comfortable going in to the weekend already holding significant positions. If we can add additional positions Monday, I'd do so, I don't think anything is going to change these charts which are far beyond intraday.

Otherwise, I suspect (edit) with head fakes in, we are at the pivot to a downside move that eventually slices through the SPX 200 dma 

It turns out that Monday was the head fake move expected last Friday before the market turned down.

SPX daily chart with some strength Monday followed by the downtrend expected as of last Friday the rest of the week thus far.

The major averages today with Transports seeing their worst performance since January with the overall Dow Theory dislocation between the formerly high-flying Transports and the Dow Industrials being at a very red flag divergence.

Dow Industrials vs Dow Transports going from strong momentum in Transports to a decline in momentum to an outright decline and divergence with Industrials which has been a Dow theory red flag for nearly a century. The basic premise being, if the industrials make products, then the transports that ship them should look similar, but the are far from similar as the histogram above shows.

As for the closing charts today, tomorrow is an weekly options expiration which if we got a bounce, I suspected would be about either a gap fill if it happened earlier or as I mentioned a couple of days ago, we could still see a bounce from lower levels, more in line with an op-ex max pain pin.

 Remember the 1 min TLT chart I asked you to remember above with a negative intraday divergence.
The DIA ended the day with a positive divergence after earlier ugliness.

 However putting that divergence in perspective of the DIA's 1 min trend shows it not to be much to be excited about, or at least not to be looking for a long position with what we have right now.

The 60 min DIA chart which is far stronger and represents the highest probabilities is shown here with the 4 stages of the bounce, these are stages marked by price, not 3C divergence although 3C can help identify them.

 The SPY 3 min has a positive divergence since last week's negative that has remained pretty much in line to the downside.

 And the SPY 5 min chart which was mildly supportive of a bounce has fallen in line with the downtrend in price, actually leading it lower.

And the SPY 30 min big picture with the 4 different stages labelled just for reference.

 IWM 1 min positive divergence after this morning's non-confirmation and downside.

 Again to keep the big picture in perspective the 60 min IWM chart labelled with the 4 stages for reference . The previous negative divergence is what I believe to be the top in the IWM.

 QQQ 1 min positive in to the close, again only on a 1 min chart so if anything, this may be a push higher for Friday Options expiration, certainly nothing I would trade long, but perhaps an opportunity to add to positions.

 And the 60 min QQQ with the bounce cycle for reference leading negative.

 As sort of confirmation the VXX 1 min chart shows a 2 min negative divergence, remember these are 1 min divergences even in TLT, they are very weak, but can bounce the market, especially in to an op-ex pin or they can be used as support to hold the market in an area, they are not anything I would consider to be any kind of upside threat.

And the VXX 5 min chart just for some perspective in a strong leading positive divergence, I covered VIX futures in a separate post earlier today, you can see it here, Perspective: VXX / UVXY

Thus there looks to be a decent chance for some kind of bounce in to tomorrow's op-ex for a max pain pin, although typically Friday's open right around (and pin) the Thursday close.

I don't see much more than that.

In leading indicators...

 SPX:RUT Inversion, not as strong looking as yesterday, but still in better condition than it has been and in position to be mildly supportive of some market upside or at least a pin in place.

 Pro Sentiment has been moving to the downside which is no surprise as we have seen any price strength sold in to just like overnight futures.

 This is the longer term view of Pro Sentiment turning negative at the SPX May head fake highs and leading negative ever since except for a brief divergence at the base for the July 10th bounce,

 HYG was largely in line with the SPX today.

After confirming the downside, HYG has a small 3 min positive divergence in place and has been moving laterally rather than down, it's set to either support a bounce if it moves higher or give the market consolidation support in the area.

 Here's a slightly longer intraday view of HYG vs the SPX, note the more lateral trend.

 However don't expect much and don't expect anything that develops to hold. This is HYG's 5 min chart/trend leading negative through the bounce cycle.

 And here's the primary trend. About 2 weeks ago I said it would be moving toward making anew lower low and it's not far off. As the saying goes, "HY Credit leads, stocks follow", that doesn't bode well for the market .

 HY Credit making another lower low today in the latest  bounce cycle.

And longer term since the May SPX head fake.

As far as futures, I usually require that the 5 min charts be divergent in the direction of new trades, for instance leading negative which ensures I'm not chasing price lower and I'm not about to see a bounce in which I don't want to open a new short for timing reasons. Right now these are mostly in line so I'll be looking for a leading negative divergence otherwise, I'm more than content to let previous shorts set up over the last week or two, work.

Futures also shows the probability of 30 year Treasuries coming down very short term which is the same thing I asked you to remember about the TLT charts as that would send yields higher and act as market support.

Nothing has changed about Yen futures which look like they could pullback for a stronger base, in the process of doing that, USD/JPY would give short term support for the market, but other than some random signals here and there, the strongest signals are in the longer timeframes for USD/JPY and market downside. We'll see if they improve tomorrow morning.

Overall I'd say the same trade plan remains in effect, let shorts we opened in anticipation of this week's move down and beyond, work. If we get a bounce that makes sense and offers a discount and lower risk, we'll take advantage of that, but right now beyond the very short term and weak signals above, the clear , strongest trend is for the bounce from July 10th to continue in its stage 4 decline, eventually breaking the SPX's 200-day moving average and at that point, all bets are off as sentiment among retail remains very high.

Have a great night!

Perspective: VXX / UVXY

This is really 2 posts in one. The first is to give you some perspective, beyond that for more detailed intraday or very short term probabilities such as the potential bounce to either fill the gap or to move the market toward the max-pain op-ex pin for tomorrow's expiration, I'm going to need to go through the typical ritual of the 100 Futures charts and check leading indicators.

However, in my view, unless you're a day trading junkie, there's a very clear trade and its the same one that we called out BEFORE the bounce started around July 10th when it was called a Risk Off Bounce.

As a real quick and dirty way of showing some perspective via SPY charts, I've put a few timeframes in.

 SPY intraday found a toehold from that pretty ugly downside. I suspect in the coming days and weeks we are going to see some much uglier versions of this morning on a lot larger scales.

There was some increased volume on a downside pullback, we would usually call this an intraday flameout, but it's the wrong place for it, if anywhere it would have been at the lows of the day. Tick was pretty mellow at that moment so it looks to be more SPY specific.

 The 2 min chart is holding about the same as the 1 min above, but the 3 min where we had a base area , albeit very weak, forming, it looks like  that was lost as 3C makes a new lower low.

 The 5 min chart as you may recall from earlier today went from a short term, weak positive within a longer term strong negative, or in other words, a weak bounce within a stronger downtrend. This moved to a new lower lows as well, so as I said earlier, damage was done today to the short term bounce probabilities.

As far as the bounce cycle from 7/10. this SPY 30 min chart is VERY clear about the divergence at the different stages (1 = accumulation; 2=Mark up; 3=Top/Distribution; yellow is out head fake; 4= decline.

This is a very strong 3C chart at 30 mins, not much noise, mostly trend and it's clearly leading negative way worse than price so far.

Perhaps an even better way to look at this with some perspective is the Vxx / UVXY VIX Short term Futures. 

If this isn't about as clear as you get as to what the trade is here, which we have already set up for, I don't know what is.

 VXX 1 min intraday with a positive divergence at the opening gap lower confirming the lack of confirmation in the averages that gapped up this morning, Otherwise a slight negative as the market found a toe-hold on the earlier decline and a slight positive at "A", but within a short term leading negative divergence.

In other words,the short term charts are still a mess.

 The 2 min XIV which trades opposite VXX and with the market or you could say the SPY for the most part. It shows the lack of confirmation on the open and a negative divgerence there with the toe-hold on the morning decline. Other than that, short term there's not a lot to see.

 VXX 3 min leading positive divergence, but also note the shape of price action in the area, a rounding bottom with flat support.

 This is the XIV 5 min chart showing the bounce cycle, a clear positive at the base for the bounce started around 7/10, then a strong leading negative divergence which I tried not to draw over so you can see it's clarity and what I consider a beautiful chart. By this time, I'm pretty well clued in as to what the trade is here.

 The inverse of XIV or VXX short term VIX futures, again a strong leading positive 5 min divergence confirming the XIV 5 min chart above as they trade opposite each other.

And a beautiful 15 min, very strong VXX leading positive divergence. The last VXX bounce's divergence can be seen to the left in white. Look at the difference in size and shape of the current divergence.

The UVXY long positions have been left open, I would consider adding a call if we were to get a head fake move below VXX support in the area, but otherwise, I just want to hold the position and let it work which shouldn't be long the way this is leading and the way price action has played out (shape).

For more intensive short term projections, I need to go through the Index futures and leading indicators. I do want to add additional short positions, but I don't want to chase them so I'd like to see if there's any thing we are missing in futures and Leading Indicators.

However the main concept here or for me is to align my positions with the highest probability direction which I have, you should be able to figure them out pretty easily from the charts above. I'm not so worried about short term noise, even an impressive bounce which may be off the table. An op-ex pin looks more probable. The basics of this thought process are, whatever is going to happen, theI want to have trades aligned with the path of least resistance. We can chase intraday moves and I'm not saying there's anything wrong with short term trading, but there's a difference between high probability/low risk short term trades and we have taken quite a few 1-day option trades and then there's what we have above. To me it's almost self-destructive behavior to chase bounces or perceived bounces in the area and while it sounds like something no one in their right mind would do, there are a lot of adrenaline junkies in the market that are looking for a rush, I'm looking for long term sustainable gains.

I hope this has helped a bit with perspective, although after everything you've seen this year, none of this should be news.

Back in a bit after I go through futures/leading indicators, although I'll be keeping an eye on current market action as well.

Support

The USD/JPY is still having a hard time, mostly on the $USD front, but the earlier Yen Futures we saw with a very slight beginning of a negative divergence has picked up a bit and HYG is not selling off so it looks like the typical, "Once Wall St. decides on a cycle, they stick with it", which is a bit surprising in this scenario if the uncertainty of Turkey/Syria is on the table, but there's a lot of money in those options expiring worthless.

 Yen Futures intraday with a worse negative divgerence. They start to slide with the $USD holding in place or even rising and the USD/JPY supports the market.

 $USDX is line right now.

 And a growing USD/JPY positive divergence, remember this is a 1 min intraday chart, that's it!

In addition, I've been watching HY Credit as it was activated yesterday as a lever of support.

 There's an additional positive on the 1 min intraday and it's holding green on the day.

The 2 min chart kind of pulls it together. Not a raging divergence, but enough for some support, especially if it starts moving to the upside.

Bounce More Likely-Some Support Mechanisms in Place

Market Update

The last couple of quick posts, the market has been trying to grab something as it has been sliding. There's a lot of weakness in the market and as I said yesterday and the day before, an ever shrinking door for market participants to exit from do to liquidity factors, so sharp moves like what we just witnessed are one of the reasons that I don't consider this a long traceable market, it's in one of those rare stages you only see as the market is about to rollover in which you can wake up to  a massive gap down that takes out weeks of trade or in this case,

nearly the entire Dow's bounce cycle from 7/10 and a long term , important trend line.

As for support in getting a toe hold,

USD/JPY is struggling, but the $USD still has some gas in the tank.

$USD 1 min still positive.

The Yen intraday is closer to in line, but has a slight divergence that if it gets worse, it will support USD/JPY upside and thus the market.

Yen Futures 1 min could turn to a negative and that would help push USD/JPY higher and support the market.

As for more direct charts of the averages...

  SPY 1 min is finding a toehold and should try to bounce off the area.

However that was some serious selling. Remember the TICK earlier in a very tame range?

On that downside move we hit -1357, which is an extreme, the kind of extreme that tells us there has been some serious damage.

 However remember the 5 min chart I showed earlier today with the interpretation ? It has now taken on a new meaning as it is now leading negative. The 4 stages of the bounce's cycle are numbered with the Head Fake at "HF" in yellow. This is generally our best positioning, at the head fake, it is the best entry and lowest risk which is why all short positions are open and have remained so as we are in stage 4 decline. That doesn't mean there can't or won't be bounces, but this cycle is a fairly reliable way to look at the market whether on a swing move like this, intraday or a weekly chart. The point being, you saw this same chart earlier today it has seen significant deterioration on a 5 min timeframe when the fastest 1 min charts wouldn't confirm earlier (the gap up in QQQ).

 The Q's are also finding a toe hold here, this is the non confirmation of the gap from this morning mentioned above. As of the A.M. update, premarket Index futures were showing distribution from overnight gains so not surprising.

 QQQ 3 min timing chart, note how it gives us excellent timing right at the QQQ head fake, this is where we added QQQ puts.

 And the QQQ 15 min chart with my version of Stoch. in decline.

 The 1 min IWM also gaining traction here,

 However since the top in the IWM we've had pretty strong downside confirmation.

And as a further reminder to respect the bigger picture, the Custom TICK...

I have been pointing out the deterioration in market breadth, now it's quite easy to see vs the SPY.