What can I say that really captures the essence of events that seem to be under control, that are very far from that seeming reality?
This morning many of you may have seen the Troika accepted Greece's weekend homework assignment which was to write up a list of additional and "substantial" measures the new government intends to take to not only abide by the bailout conditions accepted in 2012 by the hated Samaras government, but to expand them.
The indignities the Greeks have suffered
(not saying they are not without fault, but if you make a huge loan to a borrower you know is not credit worthy and will default, I say that's on you Troika) from mass government sector lay-offs, 60% youth unemployment to Greek national treasures to be sold off as demanded by creditors right down to a Doctor's act of self-immolation because he could no longer make a living and was forced to eat out of dumpsters and could no longer stand the indignity.
Indeed, the Samara government came in to power after former PM, Papandreou dared to suggest that Greece should have a referendum as to whether they should stay in the Euro, 48 hours later the ex-Goldmanite employee was running the show and doing the Troika's bidding (how do you think he came to power in the first place?).
Finally, the rise of Syriza who voted against all Troika bailout measures with credible promises that they'd remove themselves from the bailout and harsh austerity measures. The actions and tone of the new Syriza government that nearly won a majority of parliament in recent elections (only 3 seats shy) had put the EU on notice. The PM's first official act was to visit a shooting range in which Nazi troops had executed 200 Greeks during WWII. Tsipras's first meeting with a foreign dignitary was with the Russian ambassador. Syriza's leadership had promised to restore Greek pride, to undo the bailout and even "dismantle" the Troika. As Tsipras said only days before capitulating, all talks of the current bailout were off the table, they would not accept it, there would be no compromise on this and to do so would be driving the final nail in Greece's coffin.
Yet days later the leaders of Syriza had rolled over on every signle point and ended up with an even worse set of conditions than when they took power. Their only claim to victory was to change the terms of "Troika" to "lenders" or something of that nature and "Bailout" to "program" which is what caused the now infamous well respected Syriza veteran to pen an open apology to all Greeks for having anything to do with Syriza whom he said only accomplished changing the word "Fish" to "meat".
When I read the news that the initial draft from Greece contained numerous campaign pledges that Germany was sure to say Nien to, I thought ,"This is just getting started", then hearing that perhaps Greece didn't submit the list of measures by midnight Monday, then to hear they were not only submitted, but accepted with no changes by the Troika, I just couldn't believe it was that easy.
While I have no proof at all, I suspect the initial and official reports of the original Greek draft did contain some campaign pledges such as re-hiring government workers, protecting primary residences from foreclosure and I suspect that the reports Greece had missed the deadline for turning in the reforms was in fact the original draft being red lined by Germany. As we now know thanks to someone who simply looked at the data included in the leaked Greek draft, we know that it was an 11th hour submission written just 2 hours before the deadline and written by a Troika representative not the Greeks.
This is sure to set ablaze the already smoldering mutiny Syriza's current leaders have on their hands as one after another high ranking member writes or speaks openly of Syriza's betrayal of the Greek people and how "
It's not too late" with actions they must carry out.
The bottom line is the seemingly peaceful acceptance of the Greek reforms has now turned in to a potential firestorm showing that Germany is in fact the puppet master of Europe as all have suspected and we can only guess what this leads to as already very sour feelings toward each other only intensify with the fact that the Troika wrote the terms that the Greeks were suppose to propose.
I have one Google alert set and the keywords are "Greece" and "Troika", this will not end that easy. I suspect the uncovering of the real author of the additional reforms, showing the Greek people and everyone around the world that Syriza's current leadership is no better and in fact maybe much worse than the hated Samaras regime which was a Troika puppet.
Mark my words, mark this post, whatever comes from this, it is not going to be good, it is likely well beyond our immagination, but it is far from over.
As for Yellen today, there were dozens upon dozens of soundbites on every subject the market was interested in, but she managed to come off neutral and essentially, "Do no damage". The only fireworks were her very panicked defense of the F_E_D and complete opposition to any kind of audit, which strikes me as odd being the power they wield is constitutionally only suppose to be held by Congress, it was delegated to the F_E_D, yet they emphatically oppose any accounting of their actions. Yellen's way, demeanor, tone and maybe inexperience in front of the camera made her sound like she was desperately hiding something and it came off badly; she may have been the worst person to make a case to oppose the "Audit the F_E_D" movement.
Ironically just after fighting off "Auditing the F_E_D" in her answer and using political interference as her main reasoning, the closest thing to an ally she may have had in the form of Chuck Schummer, came out with a prepared statement not asking, but demanding that the F_E_D keep current accommodative monetary policy in place and she answered this with delicate respect, although this was the very political interference she had been railing about in her answer of the PREVIOUS question!
Still, she gave the market nearly nothing and thereby did her job. One of the better cat fights was between her and Senator Elizabeth Warren (D) who questioned her on why there had been no consequences/punishment over a leak of inside information that was traded on from the F_E_D to big banks in 2012 had been under investigation since by the F_E_D's general council, yet had produced no conclusions and no updates since 2012. Warren asked why after repeated attempts to get an update on the case from the investigating council, she received no reply and no status update. CLEARLY ILLEGAL and obviously being buried. When Yellen tried to side-step the question and danced and danced, Warren kept coming back to "It's a yes or no answer!" Finally as Yellen was tongue twisted from the repeated, "It's a yes of no answer" and her attempts at verbal gymnastics she started to say "Ye..." and Warren immediately jumped on it and said, "I'll take that as a yes". Yellen had shaken her head just after, but not as in disgust, as in she had just been hit with a right cross and was trying to shake the cobb-webs out.
A second dust up occurred when she was asked about the F_E_D's General council making statements to a lobbying firm that was working on repealing legislation from Dodd-Frank that was unfavorable to them and asked whether the General Councel's comments represented that of the governing council of the F_E_D and if not, why senior staff are making comments not consistent with the governing council, again she danced and danced, clearly not a question she wanted to answer and came off very badly as far as honesty and credibility. After seeing what I saw today, I think an audit of the F_E_D, like any other organization in the US including government, is well past due. One wonders what they are really so defensively trying to protect.
As to the market today, the NASDAQ closed up for a 10th day, but just barely as again, like yesterday it was red going in to the close as AAPL had seen poor relative performance, ironically it was AAPL right in to the close that lifted the NASDAQ out of the red for its green close.
In fact we have talked numerous times about the NASDAQ 100's weighting and the NASDAQ's proprietary formula that will cost you a $10k a year membership to get the information. I thought you might find this interesting...
All gains in the NDX for 2015 are due to only 5 stocks...
This is why, as mentioned in the market breadth section of last night's Daily Wrap I mentioned that NASDAQ's Advance / Decline line was not doing well, nor was the R2K's or the R3k's and many other measures of market breadth had not advanced in 12 or more days, many declining. This is the magic of weighting an Index, when 5 stocks can gain and 95 can be at a loss and the index can still close green on the day.
However AAPL may not be as helpful in the near future...
AAPL IN WHITE VS THE QQQ IN GREEN, THE W'S WERE JUST GOING RED IN TO THE CLOSE BEFORE A LITTLE BOUNCE IN AAPL HELPED THEM BACK ABOVE YESTERDAY'S CLOSE.
AAPL's daily chart not only has the Igloo/Chimney formation like all of the major averages now, but today's price action on volume was not a good sign. Tomorrow we'll cover the 3C charts/Update. However at the least, AAPL's relative performance today was poor.
Bond yields moved the most over the last 2-days in a month and a half...
This 15 min chart of 30 year yields (red) vs the SPX (green) shows what a divergence between yields and the SPX can do and why we use them as a leading indicator, the current divergence (remember recent TLT analysis) is pointing to a move lower in the market along with other things such as the Igloo/Chimney price patterns popping up everywhere.
Here's a closer look at yields intraday vs the SPX.
And this is a daily chart showing from left to right yields leading the market lower, yields moving down with the market or pulling the market lower and again yields leading the market lower and to the far right the largest dislocations of 2015 with Yields screaming as a leading indicator, "Market lower!".
This shows TLT inverted in blue vs the SPX in green and the normal movement of what would be TLT or in this case, 30 year yields would move almost exactly the same as the blue line and the "Red flag" that something is changing and the leading indicator divergence now.
In fact interestingly today as the 10 year yield just crossed under 2%, you can see HFT's or some other algo selling instantly as 10 year rates slip under 2% intraday.
Again today our SPX:RUT Ratio custom indicator did not confirm price action. I include the green custom VIX Term Structure indicator as well just to show how far it is from a buy signal, even though we don't have a specific threshold for a sell signal.
This longer term 60 min chart of our custom VIX Term Structure shows when we have received buy signals in the past in white.
However once again as we don't have a specific threshold for a sell signal, you can see how far the indicator has moved away from the last buy signal earlier in the year inside the 2015 range.
In addition to the AAPL late day save, it appears the VIX was slammed , note the SPX's Igloo/Chimney pattern as well.
Short term VIX futures seemed to accumulate the lower prices on the VIX knock-down.
The USO trade set-up should be pretty clear,
USO Trade Set-Up however it looks like support was broken after hours on a bigger than expected API inventory build, however tomorrow's EIA status at 10:30 should give us additional information and perhaps a cash hours break below.
As for gold I think we are coming near a bottom, but not quite there yet.
This is GLD (red) vs the SPX, I can't say correlation is causation, but there does appear to be at least some inverse correlation.
The 5 min chart is improving. Thursday I updated GLD here,
GLD Next Set-Up and posted a potential set-up.
I said I have charts that look even better, but I didn't want to put them out too soon as I didn't want to give the wrong impression that GLD was at a reversal as I see it as having a little more work to do, but not much.
Here's one of those charts.
Here's the GLD 30 min chart since the pullback/correction we called for.
Very near term on the inrtraday 1 min chart it looks like GLD will do some more lateral base building which is exactly what I was looking for last week, I think we are getting very close.
There are some indications in SLV as well, my least favorite asset to analyze, but here are a few charts.
SLV 10 min showing a pullback divergence and a positive building.
It's a bit more complicated here though as it looks like SLV is close to a bounce, but perhaps may see some more downside after as the 30 min chart remains leading negative.
We'll keep a close eye on both of these for opportunities as they look very close.
As for the averages, most of the day they seemed to trade along with the news with few surprises in underlying trade, but there was a negative tone to the day overall.
SPY 1 min and the decline around 12 pm as 10 year yields broke below 2%.
The Q's intraday...
The intraday IWM is in line...
However lets not forget the bigger picture- 15 min IWM since this most recent cycle from 1/29-2/2 started.
Last week we were also looking for a pullback in FAZ, 3x short financials (bounce in XLF), here's where we stand with that trade set-up ,
Leveraged ETFs / FAZ...
This is FAZ and the time when last week's trade set-up/FAZ pullback was posted and the pullback itself with a clear positive divergence in to the correction.
The bigger picture 15 min chart for FAZ is flying so this is another as well as other inverse leveraged ETFs we'll be looking at over the next day or so.
As for internals, somewhat amazingly (not when considering today's price action, but when considering how long it has been) again we have nothing even approaching a Dominant Price/Volume Relationship.
However coming closer to an overbought bias, 8 of 9 S&P sectors closed higher with the defensive Utilities leading (yesterday's laggard) at +.74%, the laggard today was Health Care at -0.12%.
163 of 238 Morningstar groups closed green, better than yesterday, but still mediocre at best.
I just checked for the first time in a couple of days, but the CBOE SKEW Index or the Black Swan Index is elevated and in the red zone at 136.26, this means there are more traders bidding up deep out of the money puts which would only make money if the market saw a sharp drop, thus the Black Swan indicator, which is interesting given the overall environment, price patterns, Treasuries/Yields. etc.
It almost felt like the market took what I interpreted to be a pretty dovish Yellen testimony more hawkishly than I'd expect, maybe they heard something that they didn't like or is out of line with the whisper numbers on the street. In ant case, as usual, I'll check futures before turning in and let you know if I see anything exciting, otherwise I'd expect another slow day with Yellen in front of Congress tomorrow.
