Market Update

Well the earlier 1 min charts have given way as they seemed they would, here's what we are basically looking at right now.

 The IWM was one of the averages earlier showing a slight leading positive divergence as it headed to fill the gap, that has disappeared and it is now in line or price trend confirmation.

 The IWM 5

 QQQ was one of the charts going negative or in the very early stages of doing so at the last update, it went even more negative and is now in a leading negative divergence, however there is a slight relative positive inside that leading negative, it may be nothing or it may cause a little intraday bump.

 The QQQ 5 min QQQ is looking really bad here.

 The SPY was the average that was exactly in line this morning, it remains so as it and 3C make a lower low.

I'd like to see this 5 min chart make a new leading low, within this already very ugly leading negative divergence.

Looking for a position in VXX / UVXY

Here's what I'm looking at in VXX /UVXY (both are VIX short term futures and move opposite the market, UVXY is leveraged).

 VXX 1 min negative on the open, but the current position is leading positive, I'm thinking we may get some more shop, but whatever we get, I'm looking for this chart to strengthen more and start to migrate through the longer timeframes until the 5 min chart below.

This 5 min chart has a minor relative negative divergence that has basically held VXX in a consolidation pattern, I want to see this chart start to lead positive, that's when I'll feel comfortable entering additional positions in either VXX or UVXY.

BIDU Position

I opened BIDU Aug 125 Puts in the options model portfolio and added to the BIDU core short in the Equities model portfolio. The options position is speculative size, the total BIDU core short position is 2/3rd of a normal size position now. I'd like to add the rest to the core equity short if we get some more upside later.

Adding BIDU Put

I'm not sure what month or strike yet...

The charts...

 This is the bear trap we expected in BIDU and at least part of the counter-trend move up.

 BIDU 1 min leading negative on early strength

 BIDU 2 min leading negative divergence

 BIDU 3 min leading negative

 BIDU 5 min leading negative divergence


BIDU 15 leading negative.

BIDU may in the future add to the counter trend move higher, but for now, probabilities are looking strong for a move down.

ES Update

We may be done with the gap backing and filling

ES intraday, note there was no positive divergence on the gap fill move at the lows.

Risk Asset Update

I usually don't look at these indicators this early, but I wanted to get a baseline for later.

 Commodities are definitely not in line with the SPX this a.m. as they fall off


 Although commodities have been warning longer than just today as a risk asset.

 High Yield Credit is also not moving with the market in early action

 HY Credit also had been warning over the last week

 Yields also are not moving with even the SPX

 They also were leading the warning over the last week or so.

 The Euro which is usually well correlated with the SPX is not in sync either this morning.

 There's also been a longer term dislocation over the last week, despite the Draghi effect.

 HY Corp credit is lagging momentum wise as well this a.m.

 HY Corp. credit was one of the last to dislocate, but it did yesterday.

 As for Industry group momentum in the big 3, Energy is falling off this a.m.

 Financials are also losing momentum

 Tech is the one leader as we see in the NASDAQ 100, but that was starting to look suspicious.

As for sector rotation, most risk asset industries are off this a.m., even the safe haven industries are off, only Tech and Discretionary are showing any reasonable momentum early on.

Intraday Update

So far everything in the averages is about in line, some a little ahead like the IWM, some starting to fall behind like the QQQ or right in confirmation like the SPY.

I'm hoping to get some decent divergences and maybe a shot at some UVXY or VXX calls.

 DIA is a little leading positive on the intraday 1 min as it heads for a gap fill.

 As is the IWM at a gap fill

 The QQQ has early signs of turning intraday (1 min) negative as the gap is filled and then some.

The SPY is nearly perfectly in line or trend confirmation.

Quick SPY Update- 3C Lesson

You've heard me say it many times about 3C charts, "When in doubt, go to the longer term charts" as they have less noise, more trend and the longer the chart, the more important the signal.

Here's what I have been showing pretty much all week (and last week) except the first chart which is this morning.

 SPY 1 min was negative here as you can see before the drop today, however we did see ES run up overnight.

 SPY 5 min-this is the timeframe where things start to get more serious for trends and signals

SPY 15 min has always been a key timeframe-here it is leading negative.

For now, the longer charts seem to have won.

Don't forget yesterday's longer charts in the Euro and $USD...

 $USD 15 min positive divergence

Euro 15 min negative divergence.

So far, both were right on.

Some of what Draghi SAID (not did)

On the Economy:

• DRAGHI SAYS UNDERLYING PACE OF MONETARY EXPANSION IS SUBDUED
• ECB'S DRAGHI SAYS INFLATION EXPECTATIONS ARE FIRMLY ANCHORED (hinting that easing is possible)
• DRAGHI SAYS INFLATION SHOULD DECLINE FURTHER TO BELOW 2% IN '13 (Hinting that easing is more possible next year)
• DRAGHI SAYS EURO-REGION GROWTH REMAINS WEAK (hinting that he thinks we're all clueless)
• DRAGHI SAYS HEIGHTENED UNCERTAINTY WEIGHING ON EURO SENTIMENT (see above)

On Policy:

• DRAGHI SAYS EXCEPTIONALLY HIGH RISK PREMIUM IN SEVERAL NATIONS (Italy and Spain)
• DRAGHI SAYS RISK PREMIUM NEED TO BE ADDRESSED (Probably by a bailout at this point)
• DRAGHI SAYS EURO IS IRREVERSIBLE (More hyperbole or more of last week's "talk")
• DRAGHI SAYS HIGH YIELDS ARE UNACCEPTABLE (Yet they are there for a reason)
• DRAGHI SAYS POLICY MAKERS NEED TO PUSH AHEAD WITH CONSOLIDATION (They just don't agree how)

DRAGHI SAYS GOVERNMENTS MUST STAND READY TO ACTIVATE EFSF (Must be talking to Germany)

DRAGHI SAYS ECB MAY TAKE FURTHER NON-STANDARD MEASURES (Promises of future promises)

And the comment that shows Draghi may not be ready to spit in Germany's face quite yet...

Draghi says even if we were ready to act now, would not have grounds to do so

As for European Equity markets...

Can you guess which two markets are in pink and red? If you said Spain and Italy... Ding, ding, ding-you're the winner.

Wow, it would be cool to have a Bloomberg terminal.

Overnight and in to the open

Interestingly, after the F_E_D essentially did nothing yesterday except change the order of some wording for the most part, those in the media who presume to hold the mantle of "Unofficial F_E_D mouthpiece", took to writing about how the F_O_M_C sent strong signals yesterday, these same people or person in particular were quite vocal in hinting we'd see QE3 yesterday.

European trade started with Spanish and Italian benchmark 10 year yields declining on hopes that Draghi would reactivate the SMP bond buying program today. As for the rates decision...

2 August 2012 - Monetary policy decisions

"At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.75%, 1.50% and 0.00% respectively.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today."

UNCHANGED...

What everyone was really waiting for...

As the Draghi press conference started, the Euro rallied, bonds rallied, optimism was everywhere until the market realized that Draghi punted by promising future promises instead of acting as he had so strongly hinted the ECB would today. As the WSJ said last week, ECB expectations of the SMP reactivation are baked in to the market, if Draghi fails to deliver....

Everything turned 180 degrees and the longer, more important chart of the $USD with 3C showing it very bullish and the Euro looking very bearish all of the sudden was realized as the $USD ripped higher, the Euro lower. Essentially Draghi just delayed. He did say the ECB, "May" act in coming weeks as well as repeating much of what was already said, but proof is in the pudding.

Here's the pudding:

 ES as Draghi punts pre-market...

 The Euro/USD again, falling as Draghi punts

A closer look of what hopes dashed looks like with the Euro plummeting. 


I'm not sure much else matters right now, as I had said about the 3C charts, "When in doubt, go to the longer charts with less noise, they were negative". I said the Risk Asset layout would probably give us our biggest clue, it deteriorated all week. Is this because there was a leak? I don't think so. The Bond markets are much bigger and more well informed than the stock markets and last week and this week the bond markets weren't buying what Draghi was selling, I think the underlying action in the stock markets was a reflection of that.


Updates coming... For now though, it appears we are going to get our short term trend expectation, take a look at the SPY daily today...


We are looking for a move somewhere around the red area below the bear flag...

More as it comes in...