Adding a Partial UVXY (VXX) long Short Term VIX Futures

I've been watching this one develop, since I already have a partial position in the tracking portfolio, this will raise it to a full size position looking for a swing type move or whatever the market gives. If I were to open a new position right here and now, I'd probably make it a partial position until after the F_O_M_C as that's a wild card and the initial knee jerk reactions can be very volatile and very wrong. In other words, if it weren't for the F_E_D. I'd probably go for a full size new position, but like earnings. the F_O_M_C is a wild card that relieves you of your edge near term, although I think the larger term trends are very clear and very much on the side of this position.

As for the charts, here's VXX (not pictured are confirming charts in UVXY and the inverse XIV). Also recall the odd and unusual VIX futures positive divergences last week that have made it all the way out to a 30-min chart?

 VXX 60 min from a negative turning price down to 3C confirmation at the downtrend and a leading positive 60 min divergence (a very strong time frame).

 VXX 30 min leading positive after excellent confirmation.

 VXX 15 min with excellent downside 3C price/trend confirmation at the green arrow and a leading positive divergence now.

 5 min VXX as the price trend turns more lateral indicative of a base.

 3 min trend, leading positive.

 This shows the PURPOSEFUL VIX smackdown yesterday at the a.m. market lows, there was distribution intraday long before the smack-down, this was planned.

As for the 30 min actual VIX futures, as mentioned in the past, I rarely get signals on VIX futures beyond a 1 min chart. Last week they went through every timeframe out to 30 mins and have been accruing there since.

/VX - VIX Futures 30 min leading positive 3C divergence.

REMEMBER, VIX/VXX TRADES OPPOSITE THE MARKET!!!

$USD Update

This post really belongs in a larger, broader, Market update. However with the F_E_D so concerned about a strong $USD and hiking rates, I think it is probably a useful post to have before the F_O_M_C.

On April 2 we had a second forecast which was for the $USD, it's from the post Market Update and the chart and forecast are directly below. There have been additional updates to it since then, but no changes.

"The $USD is seeing some weakness which is something I expected near term before a larger bounce and then an even larger decline"

Since then this is what has happened...

 This shows April 2 at the bottom at #1 and a base forming just a day or so later which led to the forecasted, "before a larger bounce" which is at #3, followed by in negative divergence and downside reversal at #4. has been in line with the rest of the forecast "and then an even larger decline" at #5 which is the larger decline. At #6 we have a small, but normal, countertrend bounce leading to a lower low at #7.

This is exactly the forecast from April 2 for the $USD.

I do believe we may see another countertrend bounce as we near some support on the primary trend chart.

 This is the daily chart of the $USD, note the 3C positive divergence on the uptrend and a strong negative divergence since. The forecasted bounce failed to make a higher high and the primary trend which is a significant event. The forecasted larger decline to follow that bounce has made a lower low so far Anna closing basis and is near making a lower low on an intraday basis. This is a trend changer and may have strong implications for an earlier F_E_D rate hike not to mention the implications of a $9 trillion $USD Carry trade unwind in which a lot of that Carry went in to equities.

It is this short-term countertrend bounce forming that has me a little puzzled, although it would be very normal coming up on the last vestige of support before making a  lower low in the primary trend.

However, This may indicate some short-term Fed dovishness I expected today as the USD would be expected to gain on any dovish tone.

However like the market, as you can see on the daily chart, The damage is done and there is a trend change coming. I didn't have time to confirm or at least post the confirmation charts of Japanese yen, but they do confirm as I wrote in an article about two years ago expecting the end to rise as the market enters a primary downtrend. This is the carry trade unwind.

The bulls' mantra has been, "This Time it's different", the charts above beg to differ.

Market Update

The talking would be jumping for joy this morning on the mist GDP at 0.2 percent coming down from the Q for previous of 2.2% and consensus of 1%. Amazingly, the F_E_D or at least the Atlanta F_E_D as for once made an accurate forecast with their GDPNow real-time GDP model which forecast 0.1%.

Why the market is not jumping for joy this morning on horrible news should be fantastic market news, I would like to say, "is beyond me". However as I have mentioned, this entire April move, the stage III area of it, in the head fake area of it all seem to coincidentally time to today's F_O_M_C.

In fact, as was shown on April 2 the triangles in the market they have broken out we're not even organic, they were constructed purposefully as I showed evidence of on April 2.

So instead of saying, "this morning's reaction (or lack of one) is beyond me", I would simply point out a few charts after giving you a feel of the general intraday tone so far.

Intraday so far generally look something like this...

 IWM 1 min with 3C weakness leading to downside and a small positive divergence this morning, nothing VERY impressive.

ES 1 min deterioration since yesterday , all through the overnight session in to this morning's GDP print. Interesting...

Note again, the small positive divergence intraday, but not of much consequence.

The NYSE TICK Index pegged an extreme of -1700 on the open end is in a rather mellow area now as if to put the market on hold which would not be surprising in front of the FOMC.

However if we take a bigger picture perspective that is based in our April 2 forecast and what was to happen afterward including last week's Head fake move (remember the Igloo- rounding top / chimney- Head fake?) Keep these in mind as you look at the broad trend on the following charts of SPY.

 The detailed 3 minute 3C trend since April 2

 The 30 minute chart with price action since April 2 marked on the time axis. I'm sure I don't have to point out the divergences.

 And be much less detailed but much clearer underlying trend of the 60 min chart.

 This is not the head fake move/ false breakout from the triangles that I anticipated, the NASDAQ 100's break out is the model of what I anticipated. However we have what we have for the moment.

Breaking down the April trend, There is the rounding/ igloo top we are so used to seeing and to the right is the chimney or head fake move which has always been one of our best price based indications of a trend reversal.

It is difficult to believe, although no one can say for sure, that the above is all simply coincidental.

A.M. Update

Good Morning,

As pointed out last night, the same overnight strength that developed in futures Monday night/Tuesday morning and had the Index Futures' charts in disarray near term yesterday, could just as easily change overnight , especially with the Index futures already negative in to the overnight session

From last night's Daily Wrap...

"The most current one minute index futures right now are negative like ES above. They may once again gain strength with this negative divergence overnight as they did with yesterday's positive divergence and that may answer our question near-term. "

This is what not only 1 min Index futures did overnight (which kicked the night off ugly as the chart above from last night's post shows), but the migration through multiple timeframes which have nearly reached the 15 min chart. Short term gyrations aside, there has been very serious damage done to the market this year, far beyond what I had already though was very serious prior to this year.

 Forget about the horrendous GDP print for now, just look at 3C overnight at flat ES prices on this 1 min ES chart, just continued to drop lower...

This migrated to longer charts.

 As I said last night, the positive divergence on this 5 min chart is "in the past" from yesterday morning, but the chart needs to go negative" as well as the 7, 10 and 15 min charts. That process also got under way last night.

 ES 7 min

ES 10 min which was one of the "mixed" charts in the timeframes.

And ES 15 min clearly plunging to a leading negative low, the other averages are some version of this.

As to the shocking +0.2% GDP print, it seems the Atlanta F_E_D's GDP real time forecasting, GDP-Now, is quite accurate with a forecast on +0.1% considering the +0.2% print was a miss of consensus of +1%.

Apparently the market has , for now, taken bad news as bad news.

The question is whether the F_O_M_C sees this as "transitory", "weather related" and/or "Port-strike" related and thus transitory, if so, a June rate hike is very much on the table. The release is at 2 p.m. with no press conference. As always, Be ware the initial F_O_M_C knee jerk reaction, it's almost always retraced.

We'll get to our $USD forecast and its implications as it has made a lower low as forecasted (also)m on April 2nd.

It's still very early in the day, I wouldn't expect this morning trend to hold, in fact in a few minutes in may very well reverse.

Daily Wrap

Good evening. First off, thank you for all of the supportive emails. I'm sorry I didn't get to respond to each one individually, but while we were sitting in pre-op waiting for anesthesia, I read to her all of the emails of support, best wishes, prayers, humor and it really took her mind off of the surgery and lightened her spirit (as the last several surgeries have gone horribly wrong for her) so thank you for that, it means the world to me.

Interestingly, There were several indications pointing to market relative strength today including yesterdays three C divergences as well as the overnight positive divergence in index futures. Also the treasury yields into the last hour of yesterday has pointed out last night in the Daily Wrap, very specifically the last hour after the bond market closed which can be seen in today's, Leading Indicators & Market Update. And of course yesterday's internals as represented by the Daily Wrap from last night:

"The dominant price / volume relationship came in at Dow 14 stocks, NDX 51,  R2K 952, SPX 218. This is a dominant price/volume relationship which came in at Close Down/Volume Up. 

This relationship is a short term oversold condition, not the kind of oversold that is represented by indicators such as RSI, but much more accurate based on market breadth. 

The most common bias is for a next day close higher, in line with our 3C short term indications."

The V-shaped recovery this morning, Showed exactly the kind of intraday breadth flame out we look for in terms of a bullish candlestick on significant volume.

SPY 60 min chart and exactly what I urged you to look for, a bullish candlestick like this hammer on significant volume representing short term capitulation. The very "V" shaped recovery did not give me a lot of confidence.

As for the averages intraday…

 The Russell 2000(yellow) led and the NASDAQ 100 (Blue) lagged, certainly Apple was no help.

This is exactly the kind of breakout move we were looking for in the April 2nd forecast using Apple as an example specifically. Note today's large bearish engulfing candle on significant volume after yesterday's Evening Star reversal candle on significant volume.

From today's, Leading Indicators & Market Update: the VIX smack-down had little to do with Iran unless there was a leak that was front run, otherwise this is a typical VIX smackdown to support the market, it seems quite strange to see protection being sold in front of tomorrow's uncertain F_O_M_C.

From the Leading Indicators & Market Update post this afternoon:

"Interestingly, it looks like this move had VERY LITTLE TO DO WITH IRAN. First of all we had indications in 3C, yields, internals, etc. 

At #1 is the VIX's reaction to news that Iran had captured a US flagged ship. However at #2, almost 45 minutes before it was made clear it wasn't a US ship, someone was already slamming the VIX (common to see when they are trying to ramp the market). At #3 we find out the ship was not US."

As suggested earlier in the day, it seemed like someone wanted the market rather neutral going into tomorrow's F_O_M_C, and protection or not… it did the trick.

SPY (green) vs. Spot-VIX (red).

Nearly all of the averages closed with a bullish hammer reversal candle on a daily basis, with the NASDAQ being the only one at has made an appropriate Head fake move(e,optionally moving-causing a short squeeze Friday)...

This is quite an interesting candle to close with on a daily basis in the SPX considering tomorrow's F_O_M_C. Even though my decision to remain patient on trade ideas was based on other indications, this would have given me pause as well, not to contradict my late day post clearing up the damage that has been done to the market, A Visual.

Yet, it remains very difficult to make a near term bullish case for very long with a chart like AAPL's today 

I was hoping for better performance today from NASDAQ biotechs and transports, but I'm glad we waited and I'm not so sure we missed any opportunities.

TWTR was high on my watchlist for a short entry, you can probably see why on this 30 minutes chart

 Something is very wrong on a chart this long with a divergence this stark. However, someone knew something well in advance as Selerity scoured the Internet and released a series of, Ironically, Twitter posts with their leaked earnings. This is the result just one bar later...

TWTR as of 3:07 pm when the tweets were posted. Twitter had a Q1 loss of $.25. Income adjusted EPS was $.07 versus $.04 cents consensus. However Q1 revenues came in at $435.9 million versus consensus of $456.2 million. In addition they guided lower, remember the market is all about perception. It doesn't matter what you did it matters what the market thinks you will do moving forward. Q2 was guided lower, between $470 million to $485 million versus the estimate of $538.1 million. Also full year guidance for revenues was lowered to $2.170 billion to $2.270 billion which was previously $2.3 billion to $2.35 billion versus consensus at $2.37 billion.

The closing result…

TWTR Daily chart.

As for leading indicators... 30 year treasury yields ended up 9 basis points on the day.

Just like I showed you in last nights, Daily Wrap in which yields lifted the last hour of the day suggesting a bounce today in addition to the other indications, once again today we saw the same thing which gives some more short term authority to those closing daily hammer candlesticks.

 5 year yields showing recent market supportive activity as of yesterday into today's "V" reversal.

 This was shown most clearly in 30 year yields yesterday during the last hour of trade, in the white box. Additionally extra support was added at this morning's "V" reversal and look at the close, 30 year yield leading. I think it was good that we were patient today and took the signals as they came, not as we would have them be.

 This just shows the extent VIX (VXX) futures we're slammed versus the SPX (relative performance).

 And spot VIX..

However the 30 minute VIX futures still hold a large leading positive divergence so it seems whatever we are in store for in the near-term, someone with deep pockets is looking in different direction...down.

 Our SPX:RUT Ratio which was also supportive of the market yesterday and into this morning's lows.

 However we should not get lost in the lines, here is the larger picture including the positive activity into April 2 and the negative activity since April 2 and especially this week..

And as mentioned earlier today the institutional risk asset, high-yield credit was not buying it.

It seems to me there is still some short-term upside as none of the averages other than the NASDAQ have made a solid head fake move. The charts above which would suggest the same and selling into any price strength which is clearly been the theme throughout April in multiple indicators.

Internals tonight we're somewhat mixed although the dominant price/volume relationship carried for the five major averages excluding the Dow. The NASDAQ with 42 stocks, the Russell 2000 with 814 and the SPX with 177 all came in at Close up/ Volume down. This is the most bearish of the four relationships and is one we have seen with increasing frequency over the last two weeks indicating a weakening market.

As for futures tonight, more than anything it was the index futures they gave me pause today. While Russell 2000, NASDAQ and SPX futures in the five-minute Time frame are all positive...

 ES 5 min

NQ 5 min

TF 5 min

These were all in response to the growing positive divergence from yesterday an forecasted balance for today represented by numerous indicators including leading indicators and internals and 3C. In a way, they are in the past, but they need to turn negative before I feel comfortable with a true pivot.

The most current one minute index futures right now are negative like ES above. They may once again gain strength with this negative divergence overnight as they did with yesterday's positive divergence and that may answer our question near-term. However with the daily candles looking the way they do I would not be surprised to see some early market price strength.

Wow we have caught F_O_M_C leaks at least twice in the past on the day of the policy statement, it is rare, But I will be looking for it. The market will be looking for how convince the F_E_D is that this weakness in the economy is temporary as well as inflationary expectations. Most think that this is not going to be a very exciting meeting, I disagree.

Although I have no specific knowledge or evidence pointing to anything regarding the F_O_M_C, as always I warn, "Beware the F_E_D knee jerk reaction" as it is almost always wrong.

I'll check futures again before turning in and let you know if I see anything of interest.

Our $USD forecast has moved exactly as expected from the April 2 post. I was going to put that out tonight, but decided to wait for the F_E_D as it will knee-jerk. However all indications point to our forecast of the USD making a lower low despite the occasional countertrend bounce which I believe we may be on the verge of. When I post the USD analysis (likely tomorrow) I will also cover the implications of the carry trade. Have a great night and I'll see you in the morning. 

A Visual

I didn't want my last post, Quick Market Update to come off sounding more uncertain than the market really is. I'd say that the near term uncertainty is on the level of something like today's move itself and not much beyond that, but the market is dynamic and until I see high probability, low risk, solid entries/trades based on objective information, it's my job to give you what I know and not to try to force anything, just be transparent about the market and you can use that in your analysis or disregard it.

As a visual of the charts so you have some idea and I didn't give you the wrong impression...

 SPY 60 min since the April 2nd positive divergence and now a deep leading negative divergence.

 QQQ 30 min through the same time frame and a leading negative divergence/distribution in to higher prices and the b/o head fake area.

IWM 15 min with the same trend.

*These are the most important charts, the highest probability as they represent the largest flow of funds.

 QQQ 5 min leading negative in a stronger way at its breakout/head fake area, this is how we confirm a suspected head fake move, look for confirmation or a divergence.

 IWM 3 min doing the same as the trend develops

The SPY 2 min chart above is negative intraday as is its 3 min and 5 min, all similar to this.

However the "steering" timeframe of 1 min which represents the nearest term trade, but also the weakest, looks like this...

 That's not a negative divegrence and thus as a timing indication, although very weak and causing me little to no worry, is telling me the "ballet" has not aligned which is what I also saw in futures, although those may clear up overnight.

The Q's have a VERY different look, very ugly, but I have to consider futures as well...

 QQQ 1 min trend since the head fake breakout, you can't ask for better head fake confirmation or a false breakout.

What this means in practical terms for trade ideas...I love NFLX short, I consider it a core short position, I would take it here as a trend trade/core short, but I'm looking specifically for an options/Put position entry.

The long term daily chart shows the multiple stages of a cycle/trend from left to right showing a stage 3 top, then stage 4 decline, capitulation at "C" followed by a new stage 1 base and rounding bottom, then stage 2 mark-up in to a HUGE stage 3 top (Broadening Top) with a head fake move sitting just above, a near perfect equity short entry for a trend trade.

The charts agree...

 2 hour shows the accumulation before last earnings I suspected were to bail out market makers who had losses from a large previous gap down as they held inventory at the higher levels, thus the rally on horrible earnings as it was already put in to place well before earnings. Then our short at the exact top on Feb. 26th at #3, the next gap up earnings at 4 and a worsening leading negative divegrence with NO confirmation at all.

The 60 min chart confirming the same.

The 30 min chart confirming the same.

And the 5 min chart with clear details confirming the same, these are the highest probability/strongest signals, all negative.

However for an options trade, timing is key...

This 1 min intraday chart of NFLX is not giving me a strong signal to enter that put position, it's not giving much of a signal at all, thus I'd be making a decision based on opinion as far as timing rather than objective evidence.