Yesterday I mentioned FAS long as a quick trade , it's a t a little profit and I think I'll close it here.
I'll be taking a closer look at FAZ, although not making a move quite yet.
7 years ago
Thursday, January 10, 2013
Leading Indicators-Credit
OK, finally some movement in the one are of leading indicators that we have been waiting for just like the 15 min ES charts that finally went negative.
High Yield Corporate Credit which has been right at previous all time highs in short interest, still hasn't made any negative move to the downside which is something we should see before a meaningful reversal to the downside.
Junk Credit (Also a risk asset) also hasn't turned.
However, High Yield has turned down, since 12 pm as the SPX has been correcting on a leg higher, HY credit is moving to lows seen several days ago, so finally some movement there.
The Euro and the SPX are moving together since the 11:15 bottom, this still leaves the EUR/USD in a very parabolic bounce and I don't trust these, you may want to keep an eye on the pair as an early warning indication.
Intraday Yields are starting to diverge negatively, remember they were and still are in a larger negative divergence with the SPX even though they did move higher today in what looked like early support of the SPX.
Commodities are flat, even though the $USD has been dropping pretty much all day-commodities normally would be headed higher with a falling $USD.
So we don't have a smoking gun here, but we do have some changes we've been expecting and waiting for, finally starting to take shape.
High Yield Corporate Credit which has been right at previous all time highs in short interest, still hasn't made any negative move to the downside which is something we should see before a meaningful reversal to the downside.
Junk Credit (Also a risk asset) also hasn't turned.
However, High Yield has turned down, since 12 pm as the SPX has been correcting on a leg higher, HY credit is moving to lows seen several days ago, so finally some movement there.
The Euro and the SPX are moving together since the 11:15 bottom, this still leaves the EUR/USD in a very parabolic bounce and I don't trust these, you may want to keep an eye on the pair as an early warning indication.
Intraday Yields are starting to diverge negatively, remember they were and still are in a larger negative divergence with the SPX even though they did move higher today in what looked like early support of the SPX.
Commodities are flat, even though the $USD has been dropping pretty much all day-commodities normally would be headed higher with a falling $USD.
So we don't have a smoking gun here, but we do have some changes we've been expecting and waiting for, finally starting to take shape.
Quick Update
At this point most of the averages are looking pretty negative on a lot of timeframes which is what I wanted to see today, although I'd rather price stayed up longer.
Both VXX and UVXY are seeing positive intraday divergences so I suspect we are getting at least an intraday pullback -as I said the averages are already and have been negative.
Both VXX and UVXY are seeing positive intraday divergences so I suspect we are getting at least an intraday pullback -as I said the averages are already and have been negative.
AAPL Update
If there's one trade that seems to work with AAPL on just about any time frame you chose, it's fading a gap up. AAPL has been selling gaps up as soon as they start since (well the first I remember was 4/24 earnings). Back then we had signals that Tech and AAPL were going to come in to rotation, I believe AAPL reported that night and gapped up the next day, the 3C chart is so clear it's unmistakeable and so was price action after, the moment it opened there was distribution.
Well the same thing today on this morning's gap up. However as far as the short term AAPL long trade (it was considered short term and that's the reason it was an options trade rather than an equity trade), here's the update-it's been touch and go, but it looks to be shaping up.
Even on an intraday 2 min chart an daily gap up there's distribution right on the open, since the 2 min chart has shown some improvement, I'd like to see 3C move to a new high like the blue arrow I drew in.
A little bit ago the 3 min chart and 5 looked excellent, since the 3 min has pulled back a bit, it's still in a leading positive position, but again it would be nice to see this resolve to a clear leading positive divergence with a new high like the blue arrow I drew in.
The 5 min chart also shows the opening distribution and a leading positive divergence that is pretty clean. Remember though, this was always meant to be a short-term trade, the longer charts....
3 min chart leading positive...
5 min also leading positive, both went positive at the day's lows.
Well the same thing today on this morning's gap up. However as far as the short term AAPL long trade (it was considered short term and that's the reason it was an options trade rather than an equity trade), here's the update-it's been touch and go, but it looks to be shaping up.
Like this 30 min are arguing for more downside. Note again even on this longer timeframe, the gap is distributed almost immediately.
There is still a matter of a longer term trend on a 15 min chart, it would be trend 3 if anything, but if it builds over the next month or so, it could be an impressive trade.
As for the closely correlated QQQ today...
However don't forget the bigger picture, this 15 min chart makes it pretty clear, I always suspected "Trend 1", the fast, sharp move higher would be a segue in to trend 2 (down) as trend 1 would serve as the head fake move and from the looks of the leading negative divergence during trend #1's consolidation, it seems to be right on track with expectations.
URRE Update
For those who are long URRE, it's made a decent move that has put it back in the green at double digit gains, but I'd seriously be thinking about a trailing stop. If we get a pullback that shows accumulation in to it, then it may be worth a look as a buy again, the character is finally shifting.
As for trailing stops, I prefer the Trend Channel...
The X-over Screen with the 10 and 22 bar averages with RSI and our custom indicator also looks good, you might choose either the 10 or 22 bar on a 60 min chart as a potential stop, perhaps a phased exit with a partial at the 10 bar and the rest at the 22, although I feel pretty certain there will be some sort of pullback or consolidation.
I'll probably just close the position here because of time, time I don't have to watch it intraday.
Quick Update
The averages are starting to see more defined differences in relative performance of underlying trade.
The 1 min 3C chart for the most part don't look great, not even really that good, but charts that are a bit more important like the 3 min is starting to shape up in the QQQ, the IWM is where there's poor relative performance, perhaps the two minute chart shapes up, but overall not impressive.
The SPY 2 and 3 min charts are moving in the right direction, but they aren't all that strong, the QQQ 3 min looks better at this point. Finally the DIA looks bad on the 1 min, it's just starting to lead on the 2 min and we'll have to see if that can migrate out to the 3 min chart. I'd say we still have some upside intraday at least ahead of us, but I was looking for 3C weakness on this move and we have it.
The 1 min 3C chart for the most part don't look great, not even really that good, but charts that are a bit more important like the 3 min is starting to shape up in the QQQ, the IWM is where there's poor relative performance, perhaps the two minute chart shapes up, but overall not impressive.
The SPY 2 and 3 min charts are moving in the right direction, but they aren't all that strong, the QQQ 3 min looks better at this point. Finally the DIA looks bad on the 1 min, it's just starting to lead on the 2 min and we'll have to see if that can migrate out to the 3 min chart. I'd say we still have some upside intraday at least ahead of us, but I was looking for 3C weakness on this move and we have it.
Leading and Other Indications
Here are some other indications that point to a few different thing going on, I'm not sure I understand all of them just yet, but I'm pretty sure we will. There's also data here as these charts were captured before the market averages of the last post, that showed Leading Indicators holding up just as the market was moving down intraday, suggesting it was a shakeout move (which makes sense this early in the day).
A 5 min positive divergence in the Euro / FXE, it's slightly negative on the execution this morning.
This is a 15 min chart of the Euro vs the SPX (green) showing support in the currency just before the pop of trend 1 and then it went negative as the market has been lateral the last week. Today there's almost some type of currency arbitrage move to revert to the SPX, which doesn't make a lot of sense, it may just have been support for this morning's move above last Friday's highs.
This was before the last update as the market was just starting to come down, but the EUR/USD was not following it and staying in more positive or supportive territory.
The same was true of the $AUD.
And here's the 15 min chart of the $AUD with initial downside on the pop higher in the SPX and slowly it has been creeping back up toward reversion to the mean.
Even Yields this morning were supportive as the market came down.
Yields longer term are in a negative posture (negative for the market), but today even they seemed to support this move in the SPX.
Credit was the most telling signal for me as it didn't budge as the market moved lower, I suspect credit will fall apart just before a move in the market to the downside.
Commodities intraday are following the $USD correlation perfectly as they should, moving higher on a lower $USD (green).
Longer term 15 min chart shows commodities as a risk asset in a large negative divergence with the SPX, this is why I have been skeptical of this move and have suspected the moves higher in the SPX would be sold in to and that's what we have seen so far.
It's usually not good when a risk asset, whether HY credit or commodities don't follow risk-on in equities, the last commodity negative divergence to the far left was much smaller and led the market lower.
And commodities intraday held up as the SPX moved lower.
The general theme is even though risk assets that in many cases are negatively divergent when looking at the bigger picture, are positive or more supportive today and held up even in the face of market downdraft, this was expected yesterday as I thought traders would be whiplashed around, thin about it, a higher high in the SPX and the buyers that brings in and then it moves down to almost unchanged, that must have shaken things up a bit and the other averages were worse.
The green arrow is the EUR/USD for the week, the blue arrow is a very parabolic move in the pair, I never trust these vertical moves as they tend to end badly with a similar drop, but for now it is supportive of the market. This move looks like it was planned ahead of time and it seems like there's more of an arbitrage trade playing out this morning in several assets. So far the move is holding up, but I don't think it will for too much longer.
The Euro-FXE
A closer intraday look also shows the same, I think this will likely reverse all at once and most likely create a lot of downside pressure on the market, this may be the mechanism behind a fast intraday reversal.
The VXX 3 min intraday chart is actually positive on the move lower in the VXX as volatility is correlated to the market, but underlying action is independent.
The longer term VXX 15 min chart shows what seems to be quite clear foreknowledge of what's going to happen in the market before it does, just like this important timeframe went negative at the very highs (market lows) just before the market popped higher and the VIX lower. Now we have leading positive divergences in the 10-15 min charts, but notable is today's specific move higher in to lower prices on a 15 min chart.
It's usually not good when a risk asset, whether HY credit or commodities don't follow risk-on in equities, the last commodity negative divergence to the far left was much smaller and led the market lower.
The general theme is even though risk assets that in many cases are negatively divergent when looking at the bigger picture, are positive or more supportive today and held up even in the face of market downdraft, this was expected yesterday as I thought traders would be whiplashed around, thin about it, a higher high in the SPX and the buyers that brings in and then it moves down to almost unchanged, that must have shaken things up a bit and the other averages were worse.
Quick Market Update
I'm going to go with, "Price is deceiving". There are a number of other oddities I'll cover in a deeper update, but for now I want to get this information out.
The Price weakness seems very much in line with the last update, but there are some things that have changed, at least for the near term or intraday trade. Remember yesterday I said I thought traders would be whipsawed all around and out of positions.
This move down looks like an early ploy. In the next update, you'll see more confirming information as to perhaps why or at least that it's a short term manipulation.
The averages...
NQ has a bigger picture relative negative divergence, but on this move down, 3C hasn't moved lower, so intraday it's still in positive position-intraday. The overall signal on the day is still weakness, but I don't think this move is a solid move down, I think it's a shakeout.
The same is true of ES.
The IWM is in trouble , but near term this morning...
We have a positive intraday divergence in to this decline.
The QQQ 5 min is also in trouble as we expected and wanted to see, but this a.m.
it too has an intraday positive divergence.
The SPY hasn't reached confirmation which would be 3C above the orange trendline, but in to the move down, there's an intraday positive divergence.
Here's today's TICK data, strong on the first 2 minutes of the open and then mediocre at vert best , but we have an improving TICK in to the decline.
So I don't think the market is ready to break yet, but it is shaking traders about.
The Price weakness seems very much in line with the last update, but there are some things that have changed, at least for the near term or intraday trade. Remember yesterday I said I thought traders would be whipsawed all around and out of positions.
This move down looks like an early ploy. In the next update, you'll see more confirming information as to perhaps why or at least that it's a short term manipulation.
The averages...
Here's today's TICK data, strong on the first 2 minutes of the open and then mediocre at vert best , but we have an improving TICK in to the decline.
So I don't think the market is ready to break yet, but it is shaking traders about.
Opening Indications
As you know, we've been looking for the SPX/SPY specifically to break above last Friday's intraday high, the other averages were welcome, but the SPX was the most important. As of yesterday the underlying trade in the QQQ and IWM was much weaker than that of the SPY and DIA and we are seeing that this morning in relative performance.
The idea was to see this push to new highs for this leg of the move, but on weak underlying tone/trade, I didn't expect it to be so weak right off the bat. The only average to have confirmed is the IWM and that's because it fell back to 3C rather than 3C moving to it. The SPY is the strongest, but I say that on a relative basis, it has not confirmed although it's trying.
The TICK data this morning is horrible for the SPX making a higher high, it started on the open for the first two minutes at nearly +1500 (which is good) and then + 1200, but has spent the rest of the morning under +750 which is VERY mediocre and in this environment, downright weak which is what we wanted to see, I just didn't figure it would be this weak this fast. Because of this, it makes the possibility of a downside reversal intraday (as I have suspected) much greater, but we are still in a.m. trade and I've learned not to make too many assumptions based on a.m. trade, but that is what we have so far.
I'll be bringing you more in a few minutes, there are other assets I'm checking on now.
The idea was to see this push to new highs for this leg of the move, but on weak underlying tone/trade, I didn't expect it to be so weak right off the bat. The only average to have confirmed is the IWM and that's because it fell back to 3C rather than 3C moving to it. The SPY is the strongest, but I say that on a relative basis, it has not confirmed although it's trying.
The TICK data this morning is horrible for the SPX making a higher high, it started on the open for the first two minutes at nearly +1500 (which is good) and then + 1200, but has spent the rest of the morning under +750 which is VERY mediocre and in this environment, downright weak which is what we wanted to see, I just didn't figure it would be this weak this fast. Because of this, it makes the possibility of a downside reversal intraday (as I have suspected) much greater, but we are still in a.m. trade and I've learned not to make too many assumptions based on a.m. trade, but that is what we have so far.
I'll be bringing you more in a few minutes, there are other assets I'm checking on now.
Finally Getting There
I'm not sure if the overnight action can be attributed to any single event, perhaps the Chinese Trade data which was good, but not that good, the ECB didn't change rates and US Initial Claims miss for the 4th consecutive week. In any case, ES is about 10 points higher than the 4pm level from yesterday.
There was quite a move in 3C and ES right about the same time around 9 pm last night.
EUR/USD is higher, but that's because the $USD is lower against every pair I've seen as of 8:30 when Initial Claims came out, this is supportive of the market though.
EUR/USD seems to gain on the ECB leaving rates unchanged for the Euro-Zone and again on US Initial Claims.
As of now, we are set for a gap up ABPVE the level we have been looking for in the SPX- FINALLY!
EUR/USD is higher, but that's because the $USD is lower against every pair I've seen as of 8:30 when Initial Claims came out, this is supportive of the market though.
As of now, we are set for a gap up ABPVE the level we have been looking for in the SPX- FINALLY!
