Broad Market Update

*See the very bottom for the bottom line, but the entire post should be read.

I've been going through a lot of charts trying to put a composite picture together.

First what I see as an upside risk based on concepts largely, not so much objective evidence other than what might be considered passive evidence.

The upside risk I see as a head fake move is just the head fake concept in which the more noticeable a range, the more watched an asset, the more likely that there's a head fake move before a reversal, if you pay attention to a lot of the charts in any timeframe, you'll see head fake moves, whether stop runs or false breakout just preceding a reversal, as per the concept, I estimate we see these about 80% of the time JUST before a reversal (in this case down).

The SPY (market) has done EXACTLY as we forecasted for this move...

 The exact forecast was for a move ABOVE this descending triangle and/or a Crazy Ivan shakeout which technically occurred on the lows of this most recent bounce as they were the lowest intraday lows of the year, meaning they ran any stops at support for the triangle throufggh all of 2015, you'll see it moore clearly on the next chart.

Conceptually, this is the best case for a move above today, the concept of a head fake move which depends on a well formed resistance or support area, in this case resistance and the head fake move would be a false breakout.

The first yellow box to the left is the head fake/stop run below all support for the area/2015, this gives added short squeeze momentum and we just saw one of the biggest Most Shorted Index squeezes this week, so the concept worked not only as a head fake move, but the reason why, the MSI short squeeze the strongest since Sept 2013 which is what got us up to the top of the range.

I see this conceptually as the biggest upside risk, although I see it as ultra high probability of a head fake move or failed breakout, which would make it a great set-up for puts or shorts.

On the other side of things, you saw yesterday's weakness out of nowhere and quite strong, even with a strong Most Shorted Index short squeeze, the TICK barely moved all day.

Then additional weakness today, but much broader and much stronger, Market Update-Something Strange Edition

The market vs the last two bounce attempts through all of 2015 thus far, is just as weak if not weaker than when and where they failed.

 intraday SPY 1 min calling a pullback intraday and in line since, it has moved lower obviously since this capture.

 I meant this to be last, but the 2 hour SPY from the strongest point which was the October lows/base and the clear leading negative divegrence hitting consecutive new leading negative lows, this represents the resolution of this cycle's highest probabilities, very negative.

 I meant to show the shorter charts and work to the longest, but this will have to do for now- the 3 min SPY and strong weakness intraday as you saw in numerous assets today.

Represented on the TICK, unlike yesterday with a monster short squeeze in the most shorted names that barely moved the NYSE TICK Index out of a tight +/- 500 range, today's selling effected the market and showed up...

Early as we saw gains in the market the TICK was flat, as we saw the decline we hit extremes of more than -1500 which is big and we hit a lot of deep extremes.

 The 5 min chart like just about all of the averages has not confirmed any upside move, in fact it has been in distribution mode, as with the two previous bounces, the idea was they need price strength to sell in to, that appears to be what has continued to happen, although likely to a sharper degree this time which would suggest the market preparing to make a lower low.

 10 min chart with as little drawing on it as I can, look at the 3C trend through the range,

I've highlighted areas of divergence.

What I haven't seen that I'd expect to see is a sharp negative in HYG, it's not there and usually is before a reversal. I don't see any strong moves in the professional sentiment leading indicators, they remain in line with the SPX, I do however see relative strength in both VXX and VIX (spot), this would have made sense as a hedge yesterday before the NFP this morning, but today it does not make sense unless someone is expecting a move lower soon.

 VXX unusual relative strength vs (inverted) SPX today.

Spot VIX showing the same.

 As for VXX charts,

 VXX 2 min leading positive along the lines (strength) of the market's weakness today as the two move opposite each other.

 VXX 5 min positive

VXX 15 min positive, it looks like it is getting ready for a move higher and the market a move lower.

Yields are supportive (today) of higher prices as you see by the 30 year and the 5 year is the same.

However I don't know for how much longer, the drop in treasuries that made this possible today doesn't look like it will hold...

TLT 3C charts.

 TLT 2 min positive the opposite of the market average 2 min charts.

 TLT 5 min leading positive

And TLT 15 min large relative positive.

HY credit fell today at the intraday highs, leading prices of SPX (green) lower

 HY Credit intraday

Here's the HY credit trend through the range.

Still HYG isn't cooperating yet or giving its usual signal.

The upside risk would be (as per probabilities) short term/short lived and offer some opportunities, but it is passive in that the best probabilities for an upside head fake move are the concept itself, and a few leading indicators that haven't gone negative yet,  it's not in positive divergences that suggest that breakout to the upside. This is why I'd consider it passive.

On the other side we have some very fast deterioration in the same area it has already occurred twice, we have a reach for protection in the 3C charts of VIX and Treasuries.

It's a little early to guess what the closing 3C charts are going to be, thus Monday's price action's highest probability, but so far it looks like the market picks up about where it closed, followed by weakness later in the day. As of now, the example would be...

 IWM 1 min in line suggests price Monday morning picks up at today's close.

IWM 3 min suggests later in the morning or afternoon Monday, strong weakness builds in.

I have to include the head fake concept as I preach it all of the time, it would be disingenuous for me not to include that possibility as I think many of you probably had already figured out on your own being we use the concept so often.

My gut is weakness and not just a return to the lower band of the range...

I'm Putting Together The Week Ahead Post Right Now, out shortly

Market Update-Something Strange Edition

Earlier I mentioned the last 2 previous bounce attempts off the Jan. 6th small base and the Jan. 14-16th base and how they both resulted in reaching a similar price range as we are seeing now and they both saw aggressive selling that ended their bounces prematurely, they each had divergences that "were" big enough to carry them further.

Fast forward to yesterday, do you recall these odd 2 min leading negative divergences in XLK/Tech and as a result in the Tech heavy NDX 100 from this post, Technology/ XLK?

Guess what...? They're back, but not limited to two assets...

 QQQ 2 min, yesterday's leading divergence is barely perceptible along side the scale of today's.

To put this in to context, this is the QQQ 2 min chart's trend showing the most recent base mentioned earlier today, the 29th of Jan through the 2nd of February, note how deep the leading negative divegrence is today, this is why it dwarfs yesterday's.

 The 3 min QQQ chart wasn't showing much unusual yesterday, pretty much moving at a reasonable pace considering the base/positive divegrence and the move off it, today it seems , as usual in a tight range (wherever the market tends to look the quietest or most boring is where there's usually the most underlying activity going on- what does that tell you about Wall Street's secrecy?)

 Yesterday the IWM has not joined the Q's in fact it has been the best looking of the 3C charts relative to one and another, but it is starting to see deterioration out of character with it's movement as recent as this morning.

 IWM 3 min is even sharper...

And the IWM 3 min in context...

Here's XLK/Tech 1 min leading negative extremely sharply...

 XLK's 2 min from yesterday and again today


XLK 3 min migration
 

 SPY 1 min


 SPY 3 min

 SPY 3 min in context

As an example of how quickly these are deteriorating, here's the most recent capture since last capturing the chart above, still the SPY 3 min...

SPY 3 min

SPY 5 min trend as it has been throughout.

XLF 2 min leading negative

XLF 5 min leading negative

XLF's 5 min trend...

Just for confirmation, although with so many charts above, I don';'t think it is needed, this is 3x long XLF, FAS, this is the 1 min chart

 An extreme move on the 2 min FAS chart...And even though this was the most recent chart I captured, just to show how quickly this is moving, here's the same chart/timeframe only minutes later.

FAS 2 min

And FAS 5 min

As you can see, I had to put out the last "Fast Update" fast, as the charts are moving extremely fast and extremely negative, the same kind of aggressive selling seen at the last two base/bounce attempts in January.

All of these charts are much worse right now than what you see above, that's how quickly they are moving. For the sake of getting this out, I haven't had a chance to look at everything else I'd like to, I'll get shorter updates out ASAP, but as you can see, as we near the 2 pm hour when the Friday Options Expiration max pain price pin is usually removed, things have turned quite sour indeed.

FAST Update

The market broadly should be seeing downside very soon intraday, I'll post the charts, actually I am right now, they should be out in a couple of minutes, strange activity like yesterday's XLK/QQQ negatives, but more widespread.

GLD Update

Our position on gold near term has been steadfast, the charts have been pointing to a move to the downside in the near term, since it has seen several drops and gap fills, this morning, starting very early this morning it went negative and dropped, our charts have been pointing toward at least this, -2.75% decline.

 15 min GLD trend/3C leading negative divegrence at the flat stage 3 top

5 min trend the same

YG/Gold (mini) futures...

 60 min leading negative divegrence.


The 7 min negative showing the right tail end of the negative divegrence.

Yet the narrative for Gold's decline this morning from  Business Insider, which convienently fits in a 30-second segment or read is,

"The plunge comes after a solid employment report showed the US economy beat expectations to add 253,000 jobs in January, while the unemployment rate rose to 5.7%.

The strong jobs report, as well as a 2.2% year-over-year jump in average hourly earnings (a measure of the wage growth the Fed is waiting for,) signals that the Federal Reserve may raise interest rates as soon as June – earlier than the market expects. Capital Economics’ Paul Ashworth wrote in a note Friday that, "the Fed can't wait much longer in that environment, particularly not when interest rates are starting at near-zero."

Today’s drop brought gold to its weakest level since mid-January. Here’s a chart showing gold’s tumble this morning:"

However as shown earlier , gold futures showed a sharp leading negative divergence from about midnight to 3:30 a.m. which already had turned down. There no doubt there's an additional sharp move down at 8:30, however Gold has been destined to make this move whatever the catalyst or even on no catalyst, this is one of the most consistent trends we have been calling for in January other than USO up.

I think it's probable that gold has more downside to come, but with the Feb 20 puts, the time decay becomes a big issue if we get an oversold mini-capitulation event today and bounce even for a few days to fill part of the gap.

So far it's just before noon and volume is already at yesterday's volume, it will be significantly higher by the close and with any sort of doji, star, hammer or other candlestick on that kind of volume, we'll have at least a short term mini capitulation event even if, as I suspect, gold has more downside to go.

As for the possibility of a long GLD position as has been mentioned on a GLD pullback, we are not there, we'd need to see a decent base capable of sustaining a strong move to the upside and we'd need to see the lows including moves like today's accumulated and we don't have that yet either, but this is still a decent possibility and we'll cover bother aspects of additional downside, which I may not have closed a GLD position if it were an equity position and not subject to time decay and we'll cover the possibility if not probability of a longer term long in Gold.

As for today and looking for a short term capitulation event/selling event or exhaustion event, look for a bullish candlestick like a star, Doji, Hammer, etc and volume to lift significantly which shouldn't be an issue as we are already eclipsing yesterday's volume at noon.

Closing GLD Feb 20/$121 Put tracking position

*Closing GLD Feb 20th $121 Put tracking position, GLD is down -2.75% I suspect GLD is going to see a capitulation event today, even if short term which I'll look at and I don't feel this short time remaining on this put will be sufficient to capture additional gains now that it is in the money.

Quick Update

Since scalping seems to be where everyone is doing well right now, which makes perfect sense given the chop/range of 2015, I thought I'd post this update as a trend is starting to emerge.

Interestingly not only were all the levers deployed this week (TLT, VXX, HYG), but we also had the strongest short squeeze of the Most Shorted Index 3 of 4 days, since 2008, the market was trying hard to get to an area and I'm guessing that was "Green for 2015" and or, right at the top of the 2015 resistance range, a range this clear would make for a decent head fake move/false breakout, although that's not my forecast at the moment based on an objective evidence, it's just a conceptual thought. Whether this week's move to either the top of the 2015 range or green for 2015 has anything to do with options expiration or not I have no idea.

In any case, here's the early trend that's getting started, I'd like to see more or a stronger trend intraday, but it is just getting started , as of the last update we didn't have anything.

 SPY 1 min intraday negative developing

Same with the Q's.

Same with the DIA

The IWM has the best looking intraday chart, but does have a weaker relative divegrence.

Interestingly, you may recall the base of Jan 6th, January 14-16 and the most recent Jan 29th-Feb 2.

The first two bases were sold aggressively and were ended prematurely , they had more gas in the tank than what their moves saw.

SPY daily with the 3 bases mentioned above. It looks and looked at the time that they were sold aggressively and ended prematurely, they do form an almost perfect range, which may be intentional or just coincidence, but we are at the same area as when and where the last 2 significant bounce bases failed... I just thought that was interesting...

Early Update

I'm looking around this morning for a clear trend among the averages and Index futures, but none is to be found. While the talk is largely still about jobs, the price action seems to have moved toward the typical Friday op-ex pin, at least that's what I suspect.

Looking at Index futures as well as averages, there's no solid theme among the intraday 3C charts as of yet and there doesn't seem to be consensus on the jobs report, it looks to be more about the max-pain options expiration pin (now every Friday).

For example...

 ES has retraced most of the Jobs gains, but is vacillating now about at the mid point.

 NASDAQ futures (which interestingly had the worst signals yesterday, you may recall the strong, sudden and unexpected negatives in XLK/Tech and QQQ around thee 2 min mark.

NASDAQ 100 futures have retraced all of the jobs gains from pre-market and are trading lower .

While TF/Russell 2000 futures are doing their own thing.

It seems there's no consensus on jobs anymore and this is more about an op-ex max pain pin level, at least that would seem to make sense.

Gold as we have been expecting has taken a big hit this morning, of course that's easily blamed on $USD strength and jobs data, but this started long before the jobs data...

 Gold futures strong leading negative divegrence in the very early a.m. hours/overnight.

Right in line with our GLD forecast of a pullback...

GLD 15 min negative divergence and the gap down this morning.

USO is up a bit this morning, but still very much in the consolidation zone, more through time than price with an apparent strengthening chart, we'll keep an eye on this one, but since the start and the +20% gains, there has been a solid positive divegrence suggesting quite a bit more gas in the tank, I expect USO to make additional gains, in fact as I said last night, while I don't view this as a trend reversal/bottom, I do think this counter trend rally has barely started.

Hopefully things will start to calm down and fall in to a trend as the volatile A.M. trade burns off.

Charles Plosser

On CNBC thiss morning BEFORE the Non-Farm Payrolls came out, although I'm quite sure he already had the data argued,

  "Data do not justify zero rates"

On the term, "Patient", 

"It never should have been there in the first place...It's just another example of people thinking in terms of calendar dates or number of meetings."

On the economy,

"We have to stop thinking of us as an economy in crisis all the time.  We are functioning as a normal economy now."

And finally that he will argue for rate hikes sooner than later, although he is due to retire and not a voting member, but he is a contributing member to the F_O_M_C committee.

Perhaps the market is starting to finally realize that stronger jobs is of no help to it as the deliberations continue and the knee jerk reaction continues to fade...

ES 1 min this morning after the Jobs data.

Non-Farm Payrolls

It's hard to believe with so many layoffs in the US Energy sector or "oil patch" states with crude having fallen so much that domestic shale producers can't produce a barrel for what one can be bought, but January Non-Farm Payrolls came in at +257k vs consensus of 228k, breaking the streak of missed January's 9 of the last 10.

Hourly earnings saw the largest surge since 2008 from last month's -.2% to a very strong +.5%.

As part of the BLS's routine, annual revisions, many months were revised higher, for instance November was revised higher from 353k to 423k, December from 252k to 329k.

All told revisions added a whopping 147k jobs.

Ironically the unemployment rate ticked up to 5.7% from 5.6% on consensus of 5.6% despite the beat.

The F_E_D is virtually bound to hike rates by June with jobs data like this, although it defies belief with so many lay-ofs in the Energy sector...

This has been the market's knee jerk reaction thus far...

ES / SPX futures 1 min, but the last few candles since this capture appear to show the market thinking about this print, it doesn't do anything good for the market except move it that much closer to a F_E_D rate hike... We'll see if the market keeps thinking this through as it appears to be doing.