Russell 2000 Map- IMPORTANT POST

We rarely spend enough time on the broad market overview, which is the most important. Any time I look at a new asset I start with weekly charts and work down to intraday charts. Market cycles are reliably repetitive and the head fake concept is very reliable, thus every once in a while it makes sense to revisit the macro view to know where we are on the map and where we are going.

I'm specifically using the Russell 2000 for 2 reasons, (1) there are so many charts dealing with one index, I don't think you'd get through this post nor I get it out today if I covered more than 1 index, (2) the R2K is the average that "should" lead all risk on moves, it's a broad index encompassing many areas of the economy and the heart of the economy which is small to mid cap business. If you ever watched Bernanke at his bi-annual Humphrey-Hawkins Congressional testimony, interestingly when he talked about the market he chose to talk in terms of the Russell 2000 which is a bit surprising being the Dow Industrials or the S&P-500 are by far much more common / familiar household names, but Bernanke recognized the Russell's impact as a market lead ing Index and chose to use it as his market benchmark at least in Congressional testimony.

Lets start at the beginning with some long term 3C charts, remember the longer the chart, the heavier the underlying money flow trend or the stronger the implications of divergences. Often many long term day or multi-day charts won't have the detail that intraday charts will have simply because divergences from price or the underlying flow of funds which may be more than enough to move the market, are not that big that they'll move the market in any significant way on the longer daily/multi-day charts, unfortunately watching the market all day every day we tend to watch shorter term action as you can only make the same observation about longer charts so many times while the shorter term charts are more fluid, dynamic and call out shorter term trends, which can be substantial such as the early October accumulation we saw in to the mid-October lows which led to our forecast that we'd see a monster, face ripping upside rally that would change sentiment from full on bear as it was at that point to full on bullish, I'll admit though that while I suspected new highs were possible if not probable as we do have a Broadening top in place with 5 points of contact, the intensity and more so, the length of the move even surprised me, the market is always extreme in sentiment changing moves and this move was meant to be a sentiment changer,, but as I have maintained since BEFORE the move started, it's a means, not an end as too many people were calling a bear market at the October lows, which I had said at the time made me very uncomfortable as bear markets appear when they are least expected and economic information is generally on the upswing; just look at the major bear markets, 1929, 2000, 2007, all new time highs as they topped and turned.

From a conceptual point of view, think about our Head and Shoulders Concept, the 3 areas I'll short a H&S top and the one I won't. Or the recent BABA Channel Buster concept in which we predicted where BABA would pullback to at least 2 weeks in advance and before the first day of pullback, in fact BABA was up +4.59% on the day we posted the pullback was coming, Alibaba (BABA) with the pullback starting the next day.

 These micro versions of head fake concepts are really no different than the macro version. This is why all of our concepts are able to be used in ANY asset class and in ANY timeframe you wish to trade.

Take HLF for a quick example.

 Our H&S concept in HLF, which has given us a short with a -40% gain and we entered on the strongest 1-day move up in HLF's history, over +25% not because of overbought, but because the macro signals were telling us distribution and the intraday signals on that huge move were telling us distribution. A difficult trade to short emotionally, but it was the best entry and lowest risk with objective data supporting the trade, now at a +40% gain.


For all H&S tops, I'll short the head #1, the right shoulder #2, I WILL NOT short the initial break of the neckline as this is where most traders go short on confirmation of the H&S, this is also where most shorts are shaken out. I'll only trade this area with good signals, but the concept is to wait for new shorts who have placed their stops above the neckline that is now resistance, to be shaken out with a volatility shakeout ABOVE the neckline. THIS IS THE 3RD AND FINAL PLACE I'LL SHORT A H&S TOP.

The point in this concept is not a H&S top, it is common price patterns that all technical traders know being used against them and using that to our advantage.

Just like the BABA pullback (linked above), I posted the idea on 11/10 when BABA was up over 4.5%, it was a "seemingly" bullish move above the channel, a "Channel Buster", but these are almost always red flags of a quick trend change and in this case, it almost always leads to a fast move BELOW the channel which was our prediction on 11/10 and EXACTLY what happened. It's using momentum against traders, this is the same thing we see in the market on a macro scale.

 There's a clear change in the SPX's character from a clear up trend to a choppy, volatile lateral trend or top. Most traders will recognize this as a Broadening Top. All H*S tops first start as Broadening Tops or Mega-Phone tops.

The break below at the October lows is when everyone started calling for a bear market, the moment in which I said there are too many people on the same side of the trade in a zero sum game, "I suspect a big move to the upside is coming which will then lead to a bigger move to the downside" and this was before we had any evidence of either, just Mass Psychology.

The move had to be strong enough to overcome the overwhelming bearish sentiment at the time which you may have forgotten, but I even posted that we'd see a face ripping rally, when no one believed we'd even see an upside correction and that the job of the rally is to get retail to believe in the market, again something that seemed impossible at the time with EVERYONE calling for a bear market and as the Fear and Greed Index was hitting ZERO for multiple days, the strongest bearish sentiment on record. I even challenged you to bookmark the post, that the move would be so strong that even with advance notice and bookmarking that post, you'd be scared to short the market as emotionally it would look that strong and seem that crazy" and here we are.

Now a closer look...

There are usually FIVE points of contact before a Broadening top fails. The move below the trendline at the October lows dragged everyone to the short side, so no different than HLF's initial break below it's neckline of BABA's initial break above its channel, this head fake was no different and was the first reason I suspected such a strong rally BEFORE we had evidence of accumulation for the move.

In much the same way as the downside move created momentum via a series of short squeezes at various stop levels and a long amount of time before traders trustted the move enough to go long, we are at a similar momentum building area ABOVE the Broadening top which causes traders to think that just like the failed break below the top, the breakout above makes this an invalid chart pattern, it is not.

The last move below taught traders no matter how strong the move down is, BUY THE DIP, so expect the next move down even stronger not to be met with full bearishness like the October lows, but a renewed sense of the deeper the correction, the better as retail will BUY THE DIP, this time the market simply won't come back

THIS IS THE SAME HEAD FAKE, MOMENTUM, MASS PSYCHOLOGY CONCEPT AS HLF AND BAVBA.

 As for the IWM, this is a strong 2-day chart showing strong accumulation at the 2009 lows, I point this out with a rolled back chart because the size of our divegrence now will make this almost invisible.

The green arrows are 3C confirming price and the red box is a large leading negative divegrence on a head fake move that came just before the downside move that erased a 5-year bull market + another 15% and most of that in 8 months!

 This is the full 2-day IWM 3C chart. Note how small the 2009 positive divegrence looks now!

The green arrows shows near perfect confirmation of price. There were large divergences all along the way, just not large enough to reach a 2-day chart, thus any divergence on a chart this long, shows HUGR underlying flow of funds.

At 2013-2014 the negative divegrence is clear and the IWM has been essentially flat all year. I can't count how many times the Russell 2000 has closed red for the year over the past 7 months or so, it's a large, flat range/top while the SPX is a broadening top.

 This is the weekly Russell 2000 futures, notice they also go leading negative at 2013 end of the year in to 2014... and price moves laterally in a huge range.

 The 4 hour chart shows 3C negative divergences (like the elevated SKEW at each of these tops posted last night like now). There's only 1 positive on this chart, the October lows as it needed to be the strongest, most convincing rally and a last chance to make a big trade.

Note 3C is at a near leading new low as price approaches new highs, the worst divergence of the year.

 The 60 min chart shows a negative at 1 and in to #2, the decline in price since the divegrence at #3 and you can't see it, but a positive at the lows last week as the IWM threatened to move lower in to the most important week for retail stores.

 A closer look at the same chart above shows last week on Thursday a positive divegrence, not a huge one, but enough to move the IWM as much as it has. Looking back I suspect this is ALL about this week and Black Friday and Consumer Sentiment in the shopping season, hearing the market was down 300 pints will not inspire confidence in the economy.

Since, this one has gone negative too in to this week.

The 60 min IWM chart with a positive divegrence at the October lows. As I said back then, the divegrence started early October and as always, no matter where the divegrence starts, if you enter the trade right there, price will surpass the area of the first sign of the divegrence which was early October, we have well passed the area and you'd be at a large gain if you bought even at the start of October.

The current signal like all others is leading negative.

This market has done everything from the shakeout to the upside, the head fake above the Broadening Top, all of the negative divergences, SKEW rising, breadth falling apart, and VIX accumulated.

We are beyond the point of a break because historically we've never seen such bad divergences and dislocations which fits with what I said BEFORE the October rally even started. "That we'd have an incredibly strong rally meant to change sentiment followed by an even stronger decline to a new low below the October low", so far everything has happened and the signals are off the chart so to speak.

VERY BAD Market NEWS...Richmond F_E_D, CONTEXT, SPY Arbitrage and TLT-30 year Treasuries...

I have a feeling the "Invisible hand" is going to try to activate the SPY arbitrage in to the close using TLT, VXX and HYG (the 3 assets necessary to use this market manipulating intraday lever) as the SPY is on a very slippery slope right now since the last intraday negative divergences, close to slipping to intraday lows. However, let me stress this looks to be short term, if the market had the strength to do it on its own, it wouldn't need the SPY Arbitrage.

Remember , above I said "TRY", not succeed. They need to try something as yields are going to make a mess out of this market shortly.

 Remember the larger trend of 30-year yields (green)  dislocating from the market (SPY red) since the October rally got started? I mentioned that the recent rate of change in 30-year yield downside (which pressures the market toward yields-DOWN) has seen a recent increase. After today, it's at near insane levels.

A Closer look...

30 year yields (green) vs SPY (red ) intraday have just seen the floor fall out.

 The SPY just broke the 1 min 50-bar after the last intraday divergence just posted, but more importantly a lot of traders will be watching the 50-bar 5 min chart...

50 bar 5 min SPY, this is sort of an intraday line in the sand. The slippery slope can be easily represented by

 Beyond the divergences on 5 min Index futures, I still have to get out the MACRO Market Map post, which will make much more sense as to why the slope is so slippery, but for now I can represent at least the short term dislocation between risk assets with 1 simple chart, CONTEXT, which is over 32 S&P points rich vs the model.

As I said, I think they "Will try" to activate the SPY Arbitrage lever, for one they have been trying all day just to support this range.

This has been worth about $.30 cents on the SPY at the high, now less than 10 cents.


I mention this as I went through the TLT (20_ year Treasury bond fund) with our recent long there, short TBT creating a 2x leveraged TLT, Trade Idea (Swing+) TLT long via TBT Short which is in the green.

HYG is providing more support than its correlation intraday..

 However, HYG is still seeing continued distribution. I think it still has so,me gas in the tank from last Thursday's accumulation area, but again, whether they succeed in creating a stronger lever, it's obvious HYG has been used today to get what they can out of the SPY Arbitrage lever above.

VXX may not be very cooperative as it is in the middle of a positive divegrence suggesting that the market will see downside in to the close, remember this is just a short term chart, but the VIX futures showed in an early post are pointing to a very large move to the downside as is my VIX buy signal and the BB squeeze on spot VIX (see last night's post).

As for macro economic data, the Black Friday holiday spending spree couldn't have gotten 2 worse data points, Consumer Confidence destroyed this morning and according to the Richmond F_E_D release also at 10 a.m., there's good reason.

The Richmond F_E_D was expected to come in at 16 with a prior last month of 20, it came in at FOUR! The biggest M.o.M. miss since May 2006. 

More importantly backing Consumer Sentiment, the New ORders component PLUNGED, Employment and the average work week also dropped, so it's simple confirmation of why Consumer sentiment is so poor, at least for the Richmond area. Again, probably not mainstream media macro data, but I doubt politicians and certainly retailers would like this to be broadcast across the nightly news, the only thing that may be worse is a plunge in the market which they can more easily understand.

Thus the SPY Arbitrage lever as a last ditch effort, perhaps with a VIX slam. If you're not catching the bigger picture by now, the point is, "If the market were indeed strong here, why would they need any such market manipulative levers?"

On the Richmond F_E_D data the 30 year Yield plunged and at last look was at 2.969, under 3%. Remember, yields pull equities toward them like a magnet. This is only good for our TLT 2x long position.

As for TLT...

 This is TLT (20+ year bond fund) and our recent long. On the pivot highs there was a typical head fake move as we often see just before a trend reversal and a negative 3C divegrence at that head fake move in yellow. Since on the pullback which saw yields rise and initially support the October rally, TLT has seen strong 60 min 3C accumulation which is why I've been watching it and issued a buy signal on it, linked above.

 The TLT 30 min chart with more detail shows a sharper negative divegrence at pivot highs/head fake move and the 3C positive divegrence at the pullback lows, one of my favorite trade entries as price comes to us and proves it has been a constructive pullback. It's also leading positive, thus any short term or intraday antics are not likely to last more than a few hours or so.

 The 15 min chart is in line and confirming the TLT move higher.

As is the 5 min chart above, this is where I see a small negative divegrence and assume this is likely about SPY Arb.

Also a 1 min chart in line confirming the trend with a small negative divegrence.

I wouldn't make any changes in the TLT long position, just be aware of what is going on.

Quick Intraday Update

Since the last Index futures intraday update, nearly all have gone negative, some were in line or slightly leading with no positive divegrence, they are clearly going negative and this is verified in the averages as well (SPY, QQQ, IWM).

Meanwhile 30-year Yields have tumbled below 3% in a flight to safety trade. same mentioned last night.

Quick Index Futures Update-VIX Futures are SCREAMING

Many of you who are using 3C have either read my articles posted on the members' site "Understanding 3C" or have heard directly from me in emails or in posts that while you can (and I often have to as a f) look at 3C and try to glean information , especially using multiple timeframe analysis and multiple asset confirmation, your best signals and strongest edge by far is when the divergences jump off the chart without the need to even look closely. I have often remarked that I use to go through several hundred charts a night to get a feel for the market as numerous assets would share a divergence or relationship which would be telling of the overall market, but I would go through about 2 assets per second (using the space bar to flip to the next chart) and when a divergence stood out at that pace, it would literally be so obvious it "Jumped off the chart" or was "Screaming".

I often remark, "These are the divergences that I NEVER ignore".  While this is an update of the Index futures for the most part, and I wish you could see what I see on the larger macro post I'm trying to get out and will get out today (I just have to keep an eye on intraday trade and opportunities between trying to finish the post) as I remarked yesterday, I took a look at VXX/UVXY and XIV (for confirmation) and their charts are "screaming" in multiple timeframes with multiple asset confirmation and it was really only the intraday 1 - 3 min timeframes (the timing charts) that needed to fall in line, otherwise, someone with deep pockets has been accumulating not only short term VIX futures via VXX/UVXY, but more specifically, actual VIX futures.

This taken with the sudden sharp rise in the SKEW Index of 16 percentage points in to the deep red zone >$140  which at minimum as demonstrated last night has called just about every IWM/Russell 2000 top this year leading to at least 5-11+% corrections, is something worth taking notice of as I doubt few have seen what we are able to see.

The point of SKEW (as a CBOE creation like VIX, with many years of history at the CBOE that are not visible to us as they just started publishing SKEW late 2011) as a CBOE metric of tail risk as demonstrated most clearly by the 1987 crash, was to measure tail risk or the probability of an unlikely event, thus it is called the "Black Swan Index", it was not meant as a timing indicator as many use to use VIX for levels of complacency and fear to signal market reversals, SKEW is meant to show the probabilities of a much deeper market event to the downside, it just so happens that its use in hedging has also called just about every R2K top/correction this year (which is as far as I looked last night).

Quickly, SKEW is a measure of out of the money options and specifically a rising SKEW points to an increase in the buying of deep out of the money puts that are only of value with a sharp move down to their deep out of the money strikes.

In any case, here's the Index Futures and more important VIX futures update. *The 1 min charts of the Index futures are going to look a little different, but if there were any divergences of anything important that has changed since their capture, I'd update those charts so there's nothing of importance that has changed on the faster moving 1 min charts.*

 ES 1 min Index futures 3C chart, as mentioned in the A.M. Update, in a near mirror reversal of yesterday's A.M. Update, in which the IWM was in line with overnight , pre-market price gains and Dow, SPY and NASDAQ futures were at negative divergences of differing intensity, which led to a massive dislocation between the averages with the Russell 2000 closing up +1.22% and the Dow closing nearly down, at a slight gain of a mere +0.04% with the SPX around +.30 and the NDX in the middle, this morning ES was the one in line while NQ and TF were negative going in to the cash open which seems to have played out almost immediately after the cash open with declines of the gap up to gap fills.

This shows a positive divegrence overnight around 10 p.m. to midnight and then in line (green arrows) or price/3C trend confirmation, with the exception of a small negative with a small pullback and returning to in line.

At the cash open, ES/SPX futures was still in line with price action.

 A closer, more detailed look at ES just before the cash open (vertical green arrow) shows a small positive divegrence from 5 a.m. to 7:30 a.m. leading to the highs which were still in line and a negative divegrence just after the cash open sending ES lower and in to a positive divegrence at the 11:15-ish lows. ES is still in line with price right now, but starting to look a little tired, a possible negative to form soon.

 The 5 min, stronger, more important ES / SPX futures chart shows a negative divegrence in to last Friday's gap up highs which is one reason the A.M. Update on Friday suggested fading the gap up intraday. Since 3C has not recovered to in line and remains in leading negative position with this morning's gap up also negative and a deeper leading negative divergence taking hold since pushing toward a new 3C leading negative low.

This gets more interesting as you see the VIX futures charts and their migration to timing charts.

NQ / NASDAQ 100 futures were negative before the open and reversed off the opening highs.

This is the NQ 1 min chart hitting an intraday leading negative divegrence. To the left you can see an overnight positive around the same time as ES above, right in to midnight (EDT).

The 5 min NQ chart also shows last Friday's negative in to the gap up opening and the fade trade mentioned in the A.M. Update intraday. It to is in leading negative position since and has not recovered to in line with this morning's strength seeing a negative divegrence. Compare the leading negative of 3C vs. price at points A and B and you'll see the larger leading negative 3C divegrence. Again the movement in VIX futures is very interesting below.

An updated TF 1 min chart is required...

This is an updated TF 1 min, there's not a positive divegrence at the 11:15 lows, however 3C is in leading positive position. I looked to confirm on the IWM and have intraday timeframes after 2 min in line, the 2 min is leading like this, however the faster 1 min (all new divergences including intraday will show up here first) is showing deterioration of this divergence although it will have to migrate to the 2 min chart to neutralize it. I'll keep an eye on it, although I'd say there is some support taking place in the area- likely the invisible hand.

 5 min TF/Russell 2000 charts show the same distribution in to Friday's gap up highs and the fade intraday, in line since and leading negative again at today's highs with a deeper leading negative divegrence developing.


The VIX FUTURES (not spot or VXX)

 You may recall the longer term 60 min trend with a strong positive divegrence in VIX futures, this lead to a bounce off the 11/10 lows, the same place our custom DeMark inspired indicator gave a buy signal, the second signal in VIX this year with the first at the VIX October highs (sell) to the day.

Note the pullback since last week...Remember the shorter timeframes have more detail, as they become stronger they migrate to longer timeframes and the intraday shorter charts show timing of an expected move.

The 60 min chart NEVER went negative and remains positive, just in line on the pullback since last week.

 The very strong, but more detailed VIX Futures 30 min chart didn't go negative at the pullback pivot highs either, but it has shown accumulation in to the pullback. This is one of my favorite trades, to have a strong macro chart like 60 min and then a pullback that shows accumulation which we can buy at a lower price and less risk. So far, this is showing accumulation of VIX futures in to that pullback, again and importantly, VIX futures NEVER went negative at the pullback area or pivot highs.

 The even more detailed, but still very strong 15 min VIX futures shows the pullback in greater detail with a much stronger looking positive divegrence in to the pullback, this is because while still very strong, a 15 min chart is not as strong as a 30 min, thus the same divegrence and same amount of accumulation will look stronger on a 15 min chart than a 30 min chart. However the point is, the continued accumulation of the pullback with the macro 60 min positive, multiple timeframe confirmation.

Remember the Index futures are negative at the 5 min charts, at the VIX futures (which trade opposite the market/Index futures), there's an even stronger looking positive divegrence, they all start at the same area, thus we have excellent multiple timeframe confirmation as once again, even on a shorter 7 min chart, THERE'S NO NEGATIVE DIVEGRENCE ON THE PULLBACK. 

The deep pocket accumulating this large VIX position as well as SKEW most likely (deep out of the money puts) , did not sell any significant amount of VIX futures that have been accumulated, thus they seem to be very concerned about a market collapse at virtually any moment which is the same thing we find in our indicators, even leading indicators seen this morning as the size and length of the negative dislocations and divergences are OFF THE MAP, meaning no historical precedent, SUGGESTING A FAR LARGER MOVE DOWN THAN THE OCTOBER RALLY UP WHICH WE KNEW WOULD BE STRONG BECAUSE OF THE SAME INDICATORS WHICH DON'T EVEN REGISTER NOW VS. THESE DEEPLY DISLOCATED AND NEGATIVE SIGNALS .

Add in VIX futures accumulation and SKEW rising 16 percentage points in to the deep red zone in a mere 3 days, something is certainly going on and deep pockets are quite concerned with a sudden break in the markets, which as mentioned earlier is why I didn't support the October lows as being that final break as too many people were calling for a bear market at the time. As history has shown us, tops have tended to be at all time new highs (1929, 2000, 2007, now)...

Market Update

Since this morning's opening pop and fade followed by the Consumer Confidence miss, I've been looking for signs of PPT activity, I "would think", this is one place, one week that they wouldn't want the market to slip away from them, especially with such low volume and the relative ease of moving the market.

So far no smoking guns. I'll update futures separately so I don't have stale charts. The 3C line itself will look a little different, the divergences are the same, this is because my normal StockFinder platform has a data leak in the stream, if anyone else is using StockFinder and sees the same with a.m. data missing, please send me an email. The Telechart and Tc-2000 versions are the same as SF, they just display the line a little more sharply and don't have as much history.

I'm specifically looking for any signs of market support (PPT) , so far there's not much. I'll check Consumer Discretionary as well specifically along with Futures (which I have checked and will update), so far TF and NQ are in line with a ES that is largely in line, but a intraday positive around the 11:15 (or so) lows, but it's not translating well to the SPY charts.

 SPY 1 min as of the capture, in line with price movement since the open, thus no divergence or interference.

 This SPY 5 min chart will be important in the bigger picture post I'm still finishing up and will have out soon. Note the trend since the gap up open Friday which we said to fade in the A.M. update. Since there's a leading negative divegrence and a sharper negative today on the 5 min, the reason this is important has to do with where the SPX sits in relationship to its broadening top with the head fake concept on a macro view which I'll elaborate on.

 SPY 10 min is not likely to show any subtle intraday interference, but again the overall 3C trend through this area in relation to the Broadening Top and the head fake concept is important for the bigger picture post so I figured I'd just include it as well as the near term intermediate price outlook .

The IWM is in line with the price decline this morning on the 1 min, this is the fastest and most sensitive chart, so any interference from something like the PPT or sidekicks like Goldman Sachs would show up here first, so far nothing.

The 3 min chart is leading negative this morning suggesting the intraday negative divegrence is gaining strength.

And the 10 min trend is much the same as the SPY above, especially in to this morning's gap.

QQQ intraday 1 min is actually leading negative, it has remained so despite the higher low at the 11:15 area.

The 2 min chart is showing migration and confirming the stronger leading negative from the chart above.

And again on a 10 min basis, the same trend is found as the SPY and IWM with divergences at the Friday opening gap we had a fade trade out on (intraday) and a worse leading negative divegrence at this morning.

A Quick look at some Leading Indicators...

 TICK which was in a VERY narrow range all of yesterday until the close has broken down from that range.. Since the capture it has had some improvement, but not a trend.

 The VIX in green vs the SPY (red) as all of the Leading Indicators below will show as, shows initial VIX outperformance earlier and some underperformance at the 11:15 lows area. I wouldn't call this any kind of VIX manipulation as of now.

 As posted last night, the 30 year yield (green) vs the SPY (red) is going to put pressure on equity prices as yields attract equity prices like a magnet. There's additional information I'll cover this morning with The Richmond F_E_D dropping the most since 2006, sending 30 year yields below 3%, this is market negative.

And again covered in last night's Daily Wrap, 5 year yields (after a strong 2 year Treasury Auction yesterday) are also leading the SPX prices lower or putting downward pressure on them as they diverged quite sharply yesterday.

 Pro sentiment intraday is in line, however as a reminder and for new members, since the October rally, pro sentiment is severely dislocated.

 The last divergence between pro sentiment (green) vs the SPY (red) was at #1 at the August cycle's head fake move right before transitioning to stage 4 decline and the October lows, look at the size of the divergence now vs the September divergence. #5. At 2, 3 and 4 pro sentiment is in line with the SPy.

HYG High Yield Corporate Credit was also seeing distribution from last Thursday's 1-day accumulation cycle to support the market (1) yesterday as well as a divegrence between HY Credit and SPY (#2) , this morning there's a little support from HYG at #3.

Yet again the larger picture trend shows the last divergence between HY Credit and the SPX at the September head fake highs before stage 4 decline set in, at 2 and 3 HYG is in line with the SPX, you may remember early October HYG accumulation and my words, "There's only 1 reason to accumulate HYG", the October rally was it, however the divergence between HYG and SPY now is FAR, FAR larger than the September head fake highs sending us to the October lows. "$a" is last week's HYG accumulation and short term (1-day accumulation) support for the market. 

I suspect this had more to do with support for the market coming in to this week and Black Friday than anything else, but this kind of dislocation will not be repaired, it's one of the largest ever seen and it will drag the market lower.

Early Update

Early pre-market negatives in the futures, after an initial directional cash open spate of price volatility gave way and just about all of the averages have given up their gaps, are in the red and not looking too good.

I think there's something a bit bigger on the map behind this which is a post I was just working on and I'll have out in a minute. I mentioned yesterday that besides the historical gains of this week, there's a psychological reason as many retailers are in the red most of the year until Black Friday and the Holiday shopping season where they claw in to the black. From a political and economic perspective, one of the last things you want to have blasted across headlines is the market losing a hundred or several hundred points (speaking in terms of the Dow as that's what most conventional media covers as a household name people can identify with), thus causing doubt about the economy which just saw a pretty big beat this morning on the second Q3 GDP revision.

In any case, I'll address this further in my next post, but for now, the all important Consumer Confidence on the week of Black Friday missed at 88.7 vs. consensus of 96 and a prior of 94.5.

We were already in decline from the pre-market futures divergences before Consumer Confidence came out...

 QQQ already in decline before Consumer Confidence misses at 10 a.m. (yellow)...


SPY in decline and Consumer Confidence at 10 a.m.

Thus far futures and the averages are showing intraday confirmation for the most part, NASDAQ 100 futures still leading negative in Futures.

This just sent shivers down the spine of retailers ...

The Dow US Retail Index on Consumer Confidence's miss, it was in line with the market before that.

If there's a time for the PPT to go active in such a low liquidity market, it is probably now, but this is what my next post I'm finishing up now addresses, apparently it looks like that may have happened last Thursday as the Russell 2000 slid for a week, not exactly the break to stage 4 you want during Black Friday week.

The post will address this, but more importantly the bigger picture, which we have been on the edge of since the suspected head fake move at 11/18 (which was before the "Surprise" PBoC rate cut on 11/21.

I'll also follow up on intraday activity as a slide here will only compound the CC miss, probably the worst miss you can imagine for this particular week and one expected to come in at a handy beat.

Again, the next post deals with this, but there's a bigger, more important component.

A.M. Update

This time it's the ECB's Coeure's turn, overnight who said he wants the ECB to have an asset buying discussion next week, adding to the recent jaw-boning from from Draghi and Constancio. However the  larger news was the OECD (Organization for Economic Cooperation and Development) that essentially blasted the world economy to smithereens from China to Japan, the US and especially Europe. This is the second global growth downgrade from the OECD in just about as many months, however this one came with a prescription, the ECB needs to buy more assets and if it doesn't, who knows what will happen as advanced and emerging economies essentially slide off  the face of the earth. 

This initially caused some softness in European stocks (the downgrade part) and in to fixed income, German Bunds gained (sort of like the way US Treasuries have recently been creeping higher), but they pared some of those gains, likely on the ECB buying language.

Other than that, macro economic data has been rather light today.

In pre-market action, the divergences in futures is exactly the opposite as yesterday, ES looks to be in line while NQ and TF are the two Index futures diverging negatively, NQ more than TF, but TF is diverging as well and these still run through the 5 min charts as well as the macro charts.

NQ  overnight positive divergence around European open to a negative divegrence pre-US open.

As almost always, the Futures tend to see directional volatility at the cash open so it may be interesting with such low volume.

I imagine volume will be even lighter today than it was yesterday. Thursday all US markets are closed, Friday is a half day with NYSE closing at 1 p.m., volume should continue to get lighter in to Thursday as is common sense, but I am surprised how light it is already this early in a holiday week.

I'd be on the look out for increasing volatility, although they won't want any negative market news before Black Friday, the markets have had a difficult time staying unbroken for more than a week even in the thinnest of liquidity, with liquidity this thin, who knows what could happen.

I'll update the opening indications as soon as they're in.