Market Update - USD/JPY & IWM

First off USD/JPY is losing support already which was to be expected as signals at the a.m. update were in the 1 min range.

However first last night I was talking about the increased chances of an Igloo top/Chimney head fake. I said last night the following...

"The August cycle's Igloo/Chimney top and the sharp "V" bottom, I have suspected we'd see symmetry in the top with a shaper downside reversal, likely a big gap down day, but the concept has been right about 80% of the time, even though this "V" bottom was one of the times in the 20% in which the reversal was more an event than process.

The IWM looks to be the most at risk for such a move because of its base."

And the support zone being so clear...

The psychology is simple, "Keep the bulls enaged", that's hard to do when price is sliding which is pronbably the reason why these head fake moves or Igloo tops with a chimney, chimney being the head fake move , make such excellent timing indications as the bulls are once again engaged, doubts about rounding or sliding price thrown to the wind, thus the need for a fast transition to stage 4 decline  and thus the reason these moved tend to make such good timing markers.

Also discussed in last night's post was symmetry, the market )(except for the IWM) took off on a rare "V" bottom rather than a wider base, there's often symmetry in tops/bottoms, this is why I was up in the air about a head fake concept that has proven itself to be about 80% while the bottom was one of the few times in the 20%. Head fake moves tend to be larger, more convincing, but for a market I'm not even convinced has the same 80% probability because of bottom/top symmetry, ,it's a coin toss on the concept, not the direction of resolution of the market though.

Perhaps the USD/JPY is giving us part of the answer.

There's a sharp leading negative divergence in the pair...

 USD/JPY intraday which has been market support with a sharp leading negative.

Just like this morning, confirmation was from the $USDX and Yen currency futures.

 The $USD has seen rapid deterioration intraday and the other side of the pair...


 The Yen is seeing a positive building.

 The TICK Index continues to trend lower and deteriorate with larger volatility building in recently/

While the 3C intraday charts of 30 year Treasuries suggesting an upside move have seen yields turn down and the SPX with them above (yields red/SPX green).

TLT / (/ZB) 30 year Treasuries

TLT is actually 20+ year treasury bond fund, but it worked beautifully yesterday as a proxy for 30 year rates being the bond market was closed.

Here's what TLT is looking like now, there was an obvious set of divergences and the current one is suggesting TLT is going to see higher prices and thus far today's move is was as expected in the A.M. Update, short term intraday. The larger implications for the market again are not good.

 This 2 min TLT chart from yesterday confirms the yields hints we were getting yesterday were right on at leat on the open as they have a positive divegrence at yesterday's lows sending TLT gapping higher this morning in to a small negative divegrence and a current leading positive divegrence that is building now.

A 1 min chart has more detail for intraday trade...

 This is the gap up and almost immediate intraday negative in TLT, remember yields move opposite bonds/TLT and with the market.

Again there's a positive intraday divegrence building as seen above.

30 year Treasury futures are giving the same signal intraday...

 Leading positive in to the a.m. decline.

 The stronger 3 min TLT shows yesterday's positive and today's building positive migrating to longer timeframes telling us it;s building/getting stronger.


The big picture implications for the market are not good as the 60 min TLT chart is leading positive, TLT up, Rates down and the market following yields.

We see the exact same in 30 year futures on a 60 min chart as well

This is during a flat-ish range, a typical y accumulation area, this is a large and strong divegrence, it makes sense with the flight to protection in VIX futures (60 min) as this would be a flight to safety trade.

Market Update / Leading Indicators...

For a 3rd consecutive day, VIX and VIX short term futures are outperforming the SPX correlation, this clearly implies there's a strong bid under VIX futures, normally I might say it's hedging, but it's hard to believe that when the VIX futures themselves are nearly off the chart as you'll see below, and SKEW's recent moves look like it's upside ROC is about to change to the much more volatile (Tail Risk).

 VIX trending up and clearly outperforming the correlation with SPX (green with inverted price so you can see the normal 1:1 correlation).

 VIX short term futures also outperforming, you can see yesterday's late day (last minute) slam of VIX to get the Dow and SPX green (+0.007% and +0.07% respectively), seems pretty desperate.

 While VIX futures (I'm losing the left side history, but there was a negative divegrence in to VIX futures highs mid October at market lows) are putting in an even larger divegrence at a new leading high, this does not look like hedging.

There also seems to have been a more desperate move to accumulate VIX Futures since last Friday through this week, not just from the above, but from the 30 min chart below.

This looks like someone has incentive to get moving on getting a position finished up.

 near term you can see HYG's  desperate pump in to yesterday's close giving the SPY Arbitrage about a $.60 cent SPY leverage which was the difference between a red and green close. HYG has fallen out today, but the most important signals for HYG (High Yield Corporate Credit) are on longer charts.

As per the October cycle...

 HYG in blue vs SPX in green, that's trouble. HYG led the August cycle to the far left in white by about 7 days if you recall right from the lows and also led it to the downside and stage 4 decline to a new lower SPX low. This dislocation is sharped than the August cycle's.

However the really important HYG chart is the one below, especially looking at the SPX as a Broadening Top...

HYG 60 min through 2013 in line and 2014 making primary trend lower lows and lower highs. I haven't seen an occasion where HY Credit and Equities tangle and HY Credit doesn't come out on top as the leader, perhaps that's why the saying "Credit leads, stocks follow" is so common.

Intraday earlier in the A.M. Update I had posted,

"My initial take is that there are enough positive divergences in the Index futures to at least try for a gap fill and the yen looks as if it could pullback, bouncing the USD/JPY which is sitting above the 115 level."

It turns out the A.M pre-market Indications were right on, but also right on 1 min charts, intraday in meaning, not strong trending charts.

The USD/JPY is supporting SPX Futures as can be seen below...

 USD/JPY(candlesticks)  pushing higher just after the US cash open and ES (purple) getting some support from the move.

The charts in premarket that suggested this was the most likely outcome in to the open were the $USDX and Yen currency futures themselves on 1 min charts.

 The Yen took a dive just after the US open as the negative intraday 3C chart suggested and the $USDX...

Advanced just after the cash open.

However as also posted in the A.M. Update, there's a roof on this move at the 7 min chart where $USDX is in line on a larger downside trend and the Yen is leading positive.

The other support is coming from the 30 year yield as it gapped lower as our best guess using TLT inverted yesterday (as the bond market was closed) implied.

30 year rates (red) vs SPX (green) intraday today. The 5 and 10 year yields are much less exuberant and not leading like the 30 year's reversal  around the European close.

This makes the 30 year bond futures and TLT a key asset today in intraday trade, I'll update those on their own as fast moving charts tend to be stales by the time these larger posts get out.

TICK DATA REMAINS VERY STALE AGAIN TODAY IN AN EVEN TIGHTER RANGE OF +750/-250. 

NOT MUCH MOVING ANYWHERE.

BABA Follow Up

Monday 11/10 we covered BABA in Alibaba (BABA) saying that BABA was very strong, but a pullback was expected near term, yesterday a follow up post was put out, BABA Follow Up as BABA had its 2nd biggest day down,  at -3.87%, it certainly looked like our near term pullback thesis had started.

I had posted in yesterday's BABA Follow Up ,

"I used a 30 bar moving average on a 60 min chart to define the trend and a break of that moving average should lead to a deeper pullback. I'd suspect somewhere around the 50-bar 60 min chart (blue) moving average which is around $110."

And yesterday's support...

 Right at the 60 min 30-bar moving average, but also...

Chennai

Right at the top of the Channel on the Channel Buster move. It's going to be very hard for BABA to resist the failed breakout of a Buster's downside momentum usually taking it to the lower channel or below the lower channel before having the ability to right itself.

This plays right in to our hands as I had also posted yesterday,

"After a break of the Trend Channel there can be some sideways volatility, for any counter trend short trade I'd like to see some volatile lateral chop as it would give us a clear picture as to whether BABA is worth a counter trend short swing trade."

So really, so far, so good for several potential trades.

This morning here's what BABA is looking like.

 Officially the Trend Channel has not been broken yet on a closing basis. However as I previously said, it will be hard for BABA to resist the gravitational pull of a Channel Buster, a concept that has worked over and over again.

 This the inrtraday 1 min chart, note the negative in to Monday's close and the Tuesday gap down with a positive divegrence in to this morning that is just starting to turn down.

 The 2 min chart is a carbon copy of the divergences on the 1 min chart.

If the 1 and 2 min current divergences keep up, we should see BABA range in a consolidation which will be excellent for determining whether a swing trade short (on a pullback) is a safe trade.

 The pullback itself looks pretty probable, not only the Channel Buster, but charts like this 3 min that are leading negative at the Channel Buster highs or...

Larger 10 min chart trends like this.

Lets hope we get a couple of good trades, maybe a swing short followed by a pullback long...

Early Indications

So far this morning the pre-market opening indications were right and for the right reasons, the divergences kicked in and moved to the appropriate levels, a gap fill attempt. This doesn't change anything about the Futures analysis from yesterday as that  was more macro analysis and I think we are starting to see that play out in the intraday timeframes already.

Here are some early indications of the movement this morning and what looks probable so far...

 QQQ with the opening divergence seen in pre-market with a gap fill attempt and a negative divgerence intraday near the gao fill.

The IWM with the exact same.

And the SPY with the exact same, although not coming as far.

The NYSE TICK from yesterday's tight +/- 750 range opened very low, lower than anything seen yesterday at -1200

The SPY Arbitrage was working on the open and faded in to the gap fill attempt.

 One of the components of the SPY Arbitrage, HYG which held the market up all yesterday made a serious move down on the open and then lost further ground, likely sending the SPY Arbitrage in to the red.


HYG local 3C chart with distribution in to yesterday's closing spike so the Dow could close green by +0.007%!

Our guess at where yields were yesterday by inverting TLT were right on as they gapped down with the bond market re-opening today after being closed yesterday, the SPX is drawn to yields (and the rest of the market so this is not a bullish indication. As part of our Futures coverage, I did cover the 30 year treasury bond futures and TLT, both suggesting a move higher in 20+ year and 30 year bonds sending yields lower, thus the market.

 A closer look at yields gap down (red) vs the SPY (Green).

And TLT's larger 60 min positive divegrence suggesting a high probability move higher, yields lower.

As well as this morning's TLT action with a gap up off a positive divegrence and in line thus far so this is a pretty strong set up this morning pressuring stocks.

 /ZB the 30 year treasury bond futures are also in line intraday like TLT, meaning price / trend confirmation.

One of my early pre-,market expectations was a probable bounce in USD/JPY which we have expected to lose ground, even though the word is there  has been profit taking after algos discounted (rallied) on the same news 4 times as Reuters repeats stories and they are picked up by other media outlets for the headline scanning algos to chase. I don't know about that as we've shown at least a week back that there was weakness building in USD/JPY and it was coming down, as early as yesterday in the Futures update.

 The components of USD/JPY are a bit mixed so this may be tricky, the 1 min $USDX looks like it wants to come down which is not supportive of a USD/JPY bounce, but...

The 1 min Yen also looks like it wants to come down which is supportive of a USD/JPY bounce, I suppose it will be a matter of relative performance, but as far as the sturdiness of the move, go out to 5 or 7 min charts and....

 The Yen has the support to send the USD/JPY lower.

The $USDX's downtrend is confirmed suggesting lower prices in USDX and USD/JPY.

Taking a little longer view with a more conventional indicator, RSI 14 (Wilder's)...

 Here's a negative divegrence in the October cycle in SPX..

 In the NASDAQ 100

In the Russell 2000 and...

In the D0w 30.

All fitting well with leading indicators, 3C indications, breadth indicators and mass psychology.

A.M. Update

With Asia closing green and Europe fairly deep in the red, futures are down on the USD/JPY which has been one of our near term expectations, but nothing moves in straight lines. My initial take is that there are enough positive divergences in the Index futures to at least try for a gap fill and the yen looks as if it could pullback, bouncing the USD/JPY which is sitting above the 115 level.

 USD/JPY-the story is algos are taking profits on the marking up the same headline over a period of 4-days, but the USD/JPY forward looking weakness has been apparent long before the headlines.

 ES looks like it could bounce on the cash open.

As does TF.

NASDAQ futures are closer to in line or downtrend confirmation.

We'll see what the market looks like into any bounce attempt, but the message of the market yesterday was clearly weakness.