Market Update

I just realized I haven't shown you intraday charts, so you have no idea what I'm looking at when
I say, "The Q's are fighting"...

First I think we can look at today's move, the action in the 3C charts and safely conclude we have a head fake move today, which with the HYG information may in fact be our timing signal.

It's hard to watch every asset, I've seen them try to kick start AAPL which would be most helpful for the Q's, I've seen the normal levers, but the arbitrage is so deeply red now it's silly and right now they are just moving to the currencies and lifting those, the problem or interesting aspect is while the $USD falls and the risk currencies rise, the Yen is rising too, so I'm wondering how much the Yen negates. This is not a market having an easy time right now.


Lets start with the Q's...

 QQQ 1 min intraday leading negative, when 3k was lost you saw the positive intraday divergence come out.

2 min QQQ is really not showing anything positive so there's not that much willingness to take on risk. Remember how the market got here, I'll prove it to you after market, it wasn't demand, it was HYG.

DIA 1 min leading negative-not fighting like the Q's

 DIA 2 min is worse.

The IWM 1 min is showing some fight.

2 min is pretty far gone, this confirms the head fake on today;s move, a good day to enter shorts/puts on price strength and underlying weakness.

SPY 1 min is leading negative and not fighting.

2 min is similar.

To prove there's no demand for risk, look at the TICK today, even with this big move, the TICK has only been over 1000 a handful of times, 1000 should be the mean on a day like today with +1500, but there aren't that many stocks advancing compared to the move, again proof of HYG's involvement.

You can see the back and forth in TICK at the EOD, right now it's showing a bit more strength, but this is a market struggling severely, I don't know what it will be able to do if it loses HYG.

HYG and Levers

There's some lever pulling now, the most important thing though remains HYG which has lost nearly all gains on the day.

You can see the lever pulling, but the SPY arb is so negative it just keeps making new negative lows.

 TLT's 5 min chart with good, sturdy accumulation on the day, still in the red box around price the lower TLT is an arbitrage signal-stocks are a buy for algos.

 VXX also looks good on underlying action today, but it's just below yesterday's close.

HYG is now just 0.03% in the green, this is exactly what I saw coming yesterday and exactly what I wanted to see, did HYG get sold early like other risk assets meaning the hedgies are all in for themselves as they always are, but fear has broken the herd mentality apart. So far today, HYG confirms this.

The intraday 3C 1 min chart is perfectly on cue for the moves in HYG.

 In context of the trend, I'd still like to see it go negative before feeling strongly about this test being a success.

2 min chart intraday with distribution at the highs and in line on the downtrend.

 Migration has started on the 3 min chart, but it is still in a positive position, this is why I'm still cautious, but I don't think you  can argue HYG was sold pretty aggressively.

The 10 min chart shows HYG was never under any serious accumulation, it was just to move the market as I said yesterday, it will head lower.

The Fight is Still Over NDX 3k

It's kind of a bare-knuckle brawl, not only did the NASDAQ lose significant gains, but lost 3k, right now it seems that's where the battle is.

 NDX losing 3k sent volume soaring in the red.

The intraday chart shows again, selling of strength where they (if the herd was working together) could have got a follow through day, but they see gains and want to reduce exposure ASAP.

The 1 min shows a fight to hold the Q'd NDX, I don't know if it's a fight to regain 3k or just to stay green on the day, as I said earlier, a loss of today's gains won't go over well.

 QQQ breaking under the NDX 3k level, volume was serious on the second break.

 The TICK looked like an effort was being made, but that faded, we'll see if a new one emerges, I'd think keeping at least a green close is a must if they don't want big trouble.

NQW shows the same fight as well, it's very obvious in the NASDAQ whereas other averages are more resigned to distribution.

I see the TICK just made a move higher. If you have AAPL puts, I'd take profits now, it looks like they're trying to pull AAPL in to the fight, it is 20% of the NDX.

If I had USO Puts, I'd Consider Taking Profits

I opened a longer term SCO long position to play the longer term trend, but if I had gone with USO puts, I'd be taking a look at taking profits in to the downside momentum as the $USD is kind of flat right now. There are also some volume issues and unless USO is getting ready to break hard, I'd expect they are signaling a short term correction.

I'm leaving SCO in place, I chose it to ride out a longer term trend and corrections.

Don't Forget the Simple Tools

The NYSE TICK (intraday) can tell you a lot...

TICK in green, SPY in white. I used the declining TICK to tell me probabilities, at least as far as the TICK were concerned were for a lower SPY. This is just one chart, but you put the pieces together like a detective and it's a very simple tool with good prediction qualities. For instance the pop above the channel right now should be watched to see if it is only a momentary move or starts a new trend.

Currencies

I'm a little surprised that currencies aren't performing better considering some single currency futures have decent looking chart, however I wonder if it would even matter, the market was able to move up earlier with the risk currencies falling, who's to say the market doesn't fall with risk currencies moving up? The reason? A lot of correlations are in limbo or changing, the carry trade for example is morphing from being very important to not as important, the swings are too big with 200:1 leverage, I suspect much of the nasty downside we have seen in certain currencies has been the carry being closed en masse.

In any case, each bit of new information tells us something new about what's important, what has changed and what is becoming important as well a what is becoming irrelevant.

Market Update

I thought I'd lead with this because this was my very last warning in my very last post, from none other than Bill Gross of the Largest Bond Fund in the world, PIMCO...

As for HYG, I want to be VERY careful, HYG has done EXACTLY what I suspected, which is to sell any bit of strength in a risk asset that should be moving with the market, it is severely dislocated over the last couple of days, but as I said yesterday, the short term accumulation in HYG would lead the market higher, this is not correlation, this is outright planning and manipulation, yet sellers seem to be ruining the party as I expected.

I need to be careful not to assume my theory was correct based on the initial results, there's enough accumulation in HYG to  send it and the market higher, there's not enough to repair the massive damage done the last 2-3 days so cautiously optimistic we are on the right track.

 HYG is now nearly back at the lows it was accumulated from, my theory was HYG would be sold early or earlier than the accumulation period suggested, I said this yesterday and so far today that has happened, but I'm not doing any victory laps on that line of thought until I see a definitive break.

 TLT's direction has allowed the market to hold-off the upper VWAP where they'd like to sell, but to hold higher where distribution has been evident, the thing is TLT is accumulating enough ammo that it can change direction whenever it wants and totally change the arbitrage correlation to very market negative.

The exact same is true of the VXX.

Now I have a lot of other assets to look at quickly.

A Lot of BIG Cracks on Volume-AAPL Leading

We always have to watch for a capitulation move on big cracks like this, but AAPL is looking a lot like AAPL when it cracked from $700+ and the market is not far behind. So far no signs of AAPL making a capitulation move.

Quick Leading Indicators Update

As far as reversals from the past due to Leading Indicator dislocations or divergences (Leading Indicators are mostly risk assets that in a healthy market move with the SPX), I'd say we'd have solid reversal signals on about 1/10th the size and time of what we currently have, which tells us this is not a typical correction coming and we are in a very extreme market.

HYG-High Yield Credit thus far has seen selling earlier than it should have which is what I was looking for, but Junk Credit (which is HY because of the risk) is performing even worse and it has no correlation or use for the market in the way of a lever, it typically trades like HYG-almost exactly, it looks worse today and HY credit is falling again today, much worse than what we saw yesterday near the close.

FX I already mentioned, I'm a bit surprised the Euro and AUD didn't hold up better, but that's in the back pocket if volatility is needed and I'm surprised the Yen hasn't started a new leg higher, the $USD did today.

Yields which I call, "A Magnet for Stock prices" were positive yesterday and should have helped the market, short term the market moved right to them today just like a magnet, however the longer term is where the problem is at and we are obviously getting in to the area where the longer term reckoning can pop up at nearly any moment with the Hedge Fund herd split.

Here's an example of the longer term due to F_E_D intervention, but remember as I have been saying since September and the WSJ has been told to leak now, the F_E_D will unwind that accommodation and reversion to the mean in Yields will be worse than it is pictured below...actually I can't say that because no one has any idea how the F_E_D will treat rates on normalization of policy, 17 consecutive 25 basis point hikes like last time or a bigger move up front?

 Short term SPX reversion to the mean with Yeilds-which are high because they move opposite treasuries and we know what has been going on with them the last weeks and month.

Longer term reversion to the mean-the SPX has a long way to go.

Commodities are underperforming a bit as would be expected with dollar strength, yet the market remains resilient, that can easily be explained in the 3 levers or a look TLT, HYG and VXX intraday which we'll look at in more detail as HYG is really important right now to us.

As for CONTEXT, it looks much different then it did on the open Sunday night.

AAPL

I would love to add to the AAPL Equity Short that is started, it's pretty small for an equity short in a position that I'd like to be at full size, but the flat trade in AAPL still gives me hope it will make an upside move in to distribution and beyond that, I don't consider entering here to be a low risk/high probability entry as long as that range from today persists, it still holds the probability of that move I was hoping to see earlier today.

Volatility in the market should remain high, as I said before, Wall St. doesn't make these areas easy, they don't want anyone tailing them. Imagine we are oranges in a tree, Wall St. is the pimply-faced kid trying to shake every last one off the tree.