There are so many concepts, fallacies about the market and otherwise ironies today that I barely no where to start. I suppose fir with overnight action in the USD/JPY pair, losing about 100 pips as "Profit Taking" is declared as the reason for the decline and the reason for the profit taking is the pair had been ramped too high on the same story at least 4 times this week. This 30 second soundbite in which an explanation for why the market did what it did is ridiculous, but people like surety, they like to hear a reason for why the market did what it did and I understand as the market is probably the most dynamic organism in the world generating huge mass emotional swings, so yeah, it's understandable that people want to know why something happened. However the bottom line is the market is never so simple that it can be summed up in a sound bite, that's just media pandering to people's need for assurance.
If the above reasoning for the USD/JPY decline overnight was correct, then why could we see in pre-market the following (From this morning's
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."
The USD/JPY lost ground overnight from $116.09 to pre-market lows of 114.87, then after the post above rallied all the way back to 115.72, not quite the overnight highs, but darn close and this in support of the positive divergences in Index futures mentioned above in the A.M. Update.
Using the same charts and logic as the A.M. Update, USD/JPY looks to be getting set for a move lower, as mentioned earlier , "There is a roof on the USD/JPY move", that roof was positive 7 min Yen charts and negative 7 min $USDX charts, not to mention the even larger macro trends in the Futures update yesterday and of the last week or so; Futures Indications
USDX intraday using the same chart as pre-market that called a near "V" reversal at the cash open.
And the Yen, also using the same exact chart that put in a near "V" reversal on the cash open, both are pointing to a lower USD/JPY coming soon. Again, this is not even considering the larger macro implications of larger charts covered yesterday in
Futures Indications
The above may be the reason why the Nikkei 225 futures are not looking very good near term...
5 min Nikkei 225 (/NKD) Futures with a negative divegrence in to the high and leading negative continuing, USD/JPY weakness would not be helpful to the Nikkei.
Next, last night while talking about the Rounding Top or Igloo with Chimney Concept (Chimney being a head fake move that is a timing marker that calls out a stage 4 decline just after the move-creating a price pattern that looks liken igloo with a chimney at the right side) which would look like this (from last night's post, Daily Wrap)...
"While I suspect the market will end the way it started, there's always the concept of the Igloo top/Chimney as rounding tops become more obvious , a head fake move used to lock in longs that may start to waiver, but also an excellent timing signal for the start of a stage 4 decline as we saw with the August cycle.
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.
The IWM had a larger base than the SPX, DOW or NASDAQ, the market tends to have a lot more symmetry than you may first notices with upside reversals being tighter than downside reversals (tops)."
Not even getting in to the last 30 min stock ramp-a-looza that failed to close the S&P and Dow green, which they barely managed yesterday with a VIX knee-caping and the NASDAQ green by +.20% solely because of AAPL 1.41% gain and heaviest weighting on the NASDAQ 100, it was the IWM last night that was identified as the most likely to see a head fake ramp if there were to be one based on the above but also on the below...
The IWM's resistance level was becoming too obvious, which leads to limit orders piled up just above resistance, that's why I mentioned last night when talking about the subject, "there's always the concept of the Igloo top/Chimney as rounding tops become more obvious "
In addition, the IWM, unlike the S&P, Dow and NASDAQ had a wider base, which was discussed last night under the symmetry of base's / tops.
Making the IWM in my opinion as of last night, the most probable average to see a head fake breakout move if there were to be any and the IWM was the only one that showed such behavior today, although it was fairly tame compared to what they usually are, it may in fact be a great timing indication and put buying opportunity. Again as discussed last night and hundreds of times before as a broad concept,
"a head fake move used to lock in longs that may start to waiver, but also an excellent timing signal for the start of a stage 4 decline as we saw with the August cycle."
Ironically while this apparent risk on move was taking place in the IWM, not so much the other averages with SPX and Dow closing red, the VIX is easily outperforming the SPX correlation.
The VIX in blue vs the SPX in green (prices inverted to show relative performance) is easily outperforming the normal correlation because the VIX's protection is being bid up. While some say this is hedging (the same some that said the USD/JPY sold off overnight on profit taking from old news repeated) , there's nearly a 3 week trend of higher 3C leading positive highs in VIX futures with an emphasis on the last 4 days.
VIX 60 min futures hit a new leading positive high today as prices flatten out, again BID.
The exact opposite happened at the October SPX lows, however no where near as big as this divegrence which should tell us something about the scale of the expected decline. The scale of the rise certainly was more extreme than anyone imagined and didn't have signals like this/.
Yields dropped on the bell and then put in a "V" shaped recovery, however the last hour can't be seen as the bond market closes at 3 p.m., I suspect the 20+/30 year bond has a surprise waiting for us, not only short term, but see yesterday's Futures Indications post.
TLT 1 min and the small intraday double bottom mentioned near the close.
TLT 2 min
TLT 3 min
TLT 10 min
And like many indicators, the size of the divergence at the October lows that led to the rally pale in comparison to the size of the divergences or Leading Indicator dislocations now, take this 60 min TLT chart for example, the same can be seen in Futures Indications posted yesterday asset wide, but specifically in 30 year treasury futures as well.
30 year yields vs the SPX intraday, the 10 and 5 year yields were less exuberant.
HYG underperformed today after yesterday's afternoon melt-up to get the SPX and Dow green,
HYG's support looks to be over as HY credit is clearing out just as VIX protection is being bid up.
Even High Yield Credit sold off in to the closing ramp attempt.
HY Credit.
As mentioned, beyond the S&P and Dow failing to make a few measly 10ths of a percent to close green, the NASDAQ looked like the only reason it was green was because of AAPL's weight on the index and its nearly 1.5% move today, otherwise, it looks like AAPL gave institutional sellers any easy out of the Q's.
QQQ 5 min trend from leading positive at the October lows base to a new leading negative low today. A closer view of the same chart...
It looks like AAPL strength was used for QQQ distribution.
Some other stocks/assets covered recently that I'll update quickly....
While SLV definitely has a change of character and IO expect something will be going on soon there to the upside, I'd like to see a little more lateral or rounding or "W" shaped base, something SLV can really get some traction off of, this may be the first Silver trade in a long time and for good reason, the manipulation is insane.
Just today JPM was called out for tripping stops of its own clients in FX to its own benefit, attempted to manipulate rates and inappropriate sharing of data about their own clients with other firms. The details get worse, much worse and it was many more firms than just JPM, but getting to the point, UBS was caught fixing rates and MANIPULATING PRECIOUS METALS PRICES, , FNMA's punishment was to demand that UBS keep those traders' bonuses at only 200% of their base pay,
THt was their punishment, while at the same time to bankers who embezzled money in Afghanistan go to prison for 15 years, here traders do much worse across global markets and their punishment is their bonus can only be 200$ more than their base salary! Enough said...
In any case, we follow the money. Gold looks like it will be up to something, but for now I',m staying away from any trades long or short in gold and miners.
USO, even though it cracked to fresh multi-year lows today, looks like something is starting, I'll be keeping an eye on that as the short squeeze there should be epic.
UNG we expected a pullback, I don't think it's finished.
I have a 10 and 22 day moving average on the chart, I'd expect the 10 day to hold, but we'll have to see more accumulation than what we've seen thus far. The Trend Channel stop is still just above $21.
And BABA should pullback, but I'm hoping it stays sideways just a bit longer so we can decide if there's a high probability/low risk trade there, the stop is at $114.90 , that's when something big has changed otherwise I have a range for the pullback target, $115.70-$116.90.
Again today there was no Dominant Price/Volume Relationship, the second consecutive day after a week 3rd day.
The S&P sectors saw a weak looking 4 of 9 close green with Consumer Discretionary the big winner at a gain of +0.47% and Utilities lagging at -1.75%
MorningStar Industry Groups were nearly as dull with 144 of 238 green today, this was all reflected in the very narrow TICK range of the last 2 -3 days.
Again there was virtually no movement in Breadth indicators, for some this makes 7 days, others are on 2 trading weeks. There were a couple hi momentum/beta type stock groups like 2 SD's above 40-day moving average that saw a sharper than normal decline, showing some of these momentum stocks sold off today harder than the rest of the group, that's the first real movement in over a week.
As I wrap this up, futures are showing a severely negative $USDX and a VERY sharp positive in the Yen, the $USD/JPY should see downside very soon. There's also a strong positive divegrence in 30 year bonds, which would send yields lower, stocks have been tracking 30 year yields and finally the NKD/Nikkei 225 futures have a negative divegrence developing in them as earlier, I suspect because of the moves in Yen/USD or to come in USD/JPY.
I'll check futures before bed time and report anything out of the ordinary.
