Friday, December 06, 2013
NFP came in at 203,000 on consensus of 185k. The consensus keeps getting beat with Non-Farm Payrolls, last month it was a modest 120k consensus with a print at 204k which was revised down slightly to 200k.
The Unemployment rate dropped from 7.3% (consensus 7.2%) to 7
This means one thing for a F_E_D taper, MORE LIKELY, but if you're looking for the truth, this is "Seasonal Adjustment " season and the numbers the DOL Excalibur 2000 spits out are goal sought, just input what you'd like and it will figure out how to make that happen, this happens until about April, all the Eco-data looks a lot better, then falls off a cliff after the seasonal adjustment period ends.
That means it's likely the F_E_D wanted a print above 200k. As for the Unemployment rate dropping, remember the size of the work-force is dropping as people drop off extended benefits and thus drop off the labor force, so the unemployment rate shrinks because there are fewer people eligible to be counted as "unemployed", but they're still unemployed.
The market right now is very volatile with wide swings to hit all of those buy/sell orders. Make no mistake, this is TAPER ON/QE OFF NEWS the bulls didn't want to see.
Posted by Brandt at 8:49 AM
Tuesday, December 03, 2013
However not everything is bearish...
For instance, not many people would buy a new low in USO or any stock, but we had information that this was the lowest risk, best entry as it was being accumulated by smart money so we weren't just trying to catch a falling knife, but found a high probability area to add or start a new trade in an asset that we have a longer term plan for.
Today was a nice day, the December VXX $45 call position brought in +31.7% and 91.25% for a total gain of +61.25%, the best thing is that so far as I can tell, we get to do it again.
The Dow lost the $7.77 that held it above $16k yesterday with a -.58% drop or $93.12 points to leave it at 15915.65. As expected, stops were crushed on the open.
Stops triggered as the obvious level of $16k was broken on the open.
The SPX just lost its 1800 at 1795.16 or down -0.32%. The NDX Comp was able to hand on to 4k with a close -0.24% @ $4037.02.
One thing that was different about today than 4 of 5 previous days (really 4 of 4 if you take out Black Friday) was the sell-off's in to the close, we might not call today's close a spectacular rally, but it was a short term change in character.
Another change in character was volume hitting 2 week highs, in other words, the sell-off today was in to volume.
Last night I posted a chart of each of the major averages and where 3C is in the cycle, it's pretty clear and that's why I didn't need to take much action today other than to take some profits that I get to do again.
Those 4 charts could be summed up in 1 chart I think, a 60 min chart of ES or any of the Index futures.
With a divergence like that am I surprised most of last week we sold off almost every day in to the close, the VIX calls made nearly 100%, the VIX BB squeeze, the action of the last 2-days...Am I surprised? Not at all, in fact, we're just scratching the surface.
However I try to keep things realty and fact based or as objective as possible. Yesterday I mentioned the IWM trying to putt together an intraday positive near the close, I said this about the VIX Bollinger Band Squeeze that WILL produce a highly directional breakout...
"The Spot VIX officially broke out of the Bollinger Band Squeeze, although there's often loitering around the initial breakout, sometimes even a Crazy Ivan shakeout, we'll have to see if this sees the follow through tomorrow, but I have little doubt this will make a highly directional upside breakout whether tomorrow or a week from now."
Don't get me wrong at all because I haven't got to the point yet, WE HAVE HUGELY NEGATIVE SIGNALS AND CONFIRMATION, LAST NIGHT'S WRAP SHOWS A LOT OF THEM.
But like I said, "Reality based" and reality-based objective charts led me to post at 10:36 a.m. today, the following in this Market Update
"It looks like we are going to get a bounce"
This later led me to close the second half of the VXX Dec $45 Call position for nearly a 100% gain. Honestly, I probably would have set up some very short term trading positions, but I find when I put too many of these "trimming around the fat" trades out there, people get confused, so instead I just put out this post... For a Quick Trade...
Most of the positives in the averages today reached to the 3 min chart so there wasn't a huge 1-day accumulation period, in fact with the exception of the IWM which started yesterday, I can show you where most of it occurred.
That was mostly real and strong selling above VWAP this morning, but around 1:30-2:30 in the white box at the lower VWAP channel. that's where most of the accumulation intraday took place.
Even looking at my custom TICK indicator you can see it...
Note where TICK goes from negative to positive.
Now before anyone gets too confused, this is what a normal market functions like, even early in a break, that's why I took the time to show you a nasty bear trend and point out the areas that would have thrown most of us out that you don't notice when posting this MCP chart. Just click this link and roll down to the MCP chart.
As far as probabilities go, there are so many stacked against the market right here, it's difficult to even say with real confidence that the bounce set up today will make it rather than be run over like one was in AAPL. In fact, in several charts, making the case for a bounce also makes a stronger case for a continues decline, the market just doesn't move straight up or down.
I'll let last night's Daily Wrap stand for the bearish side without posting it all again.
Today we had between $3.25 and $5 billion in 2 separate POMOs, a LOT of people were convinced that the market would end green today as that money found its way in to the market. This is another change in character, as soon as a POMO was done in QE1 and 2 it ended up right in the market usually within minutes driving it higher. I'm not saying the POMO money did or did not end up in the market, but if it did, then it's another change of character as it is being used to set up brief fade trades, the same kind I would have taken by selling the VXX calls and buying IWM puts today for a 1-day trade.
If we are to believe the POMO crowd following the F_E_D's balance sheet, then today's operations (2) netted a total of $4.66 bn in asset purchases and that equates to 1.4 S&P points (3.25bn per S&P point).
I really don't want to get in to hypotheticals about where the market will bounce to, assuming it's just today's accumulation, then it's more or less nothing but noise, but I'll gladly use it to enter a new VXX Jan call position.
FIGURING OUT WHAT LEVERS HAD TO BE PULLED TO PULL THIS OFF WAS EASY...
You may recall I've been saying for 3-4 weeks now that each lever is either completely failing or losing its effectiveness? So which did they choose? It looks like all of them, which would suggest they really need quite a lot to get anything off the ground.
Of course the intraday accumulation was my first clue...(I tried to keep most of these in scale for you so you can see the size vs the previous negative, only the SPY did I slip up and zoom in too tight, but it's a good look at intraday action).
DIA 3 min
IWM 3 min, I was surprised the IWM didn't make it to 5 min, I really think there wasn't as much accumulation intraday as I might have thought.
QQQ 3 min
SPY 3 min, note the time.
In any case, there wasn't a credible 5 min divergence in any of the averages, for probabilities just go back to last night's wrap and look at the 10/15 min charts posted.
The second thing I noticed was SPY Arbitrage as well as a support mechanism, in the recent past HYG (1 of 3 SPY Arbitrage assets) has been used on its own, but there were enough negative in intraday VXX charts today for me to close the December calls, really VXX just has to stay put and HYG rise and Arbitrage supporting the market works, if VXX falls a bit it works better.
Then the weighted assets in the averages were also in use, take a look at AAPL vs the QQQ today (as AAPL is by far the most heavily weighted stock in not only the NDX, but the SPX as well) when you put them together around mid afternoon.
AAPL in white vs the QQQ in candlesticks, nearly identical until AAPL ramps up at the close dragging the NDX with it by virtue of its weight alone (which at last check was the same as 50 other NASDAQ 100 stocks combined).
Here we have the Dow-30 vs MMM which is the 5th most heavily weighted stock in the Dow and it's doing the same. A good base can be made for the #2 weighted Dow component, IBM.
So they are using the old weighted index trick as well.
Then if you don't believe me about the SPY arbitrage or at least HYG credit, take a look below...
This is SPX in green with price inverted and HYG in blue, they're a perfect match for each other today.
Even HYG alone is a lever used many weeks in a row in the last several months.
The VIX wasn't available to help as it underwent stealth accumulation and WOULD NOY make a lower low, but up here, it has some room to help, like I said yesterday, often the breakout of a VIX Bollinger Band Squeeze is not clean and price loiters a couple of days. However at the EOD you can see VXX weakness over the SPX.
So it appears the SPY arbitrage is going to be used as well.
Perhaps they need all of these because the most effective mover of the market is the EUR/JPY and they really don't know what to expect, but from what I can see, they probably do and this also makes the case for the bearish side as well.
This was actually the easiest part to figure out, but because it's not a simple indicator takes the most time.
This is the EUR/JPY in candlesticks and ES (SPX futures) in purple on a 1 min chart. This is what happened overnight as the JPY apparently saw some carry trade covering and it sent the JPY higher sending the EUR/JPY lower (as I explained last night, the first ticker in the pair is long and the second is short, they don't have to move up and down against each other, but it's a matter of relative performance).
The falling EUR/JPY drug all Index futures lower overnight as ES is nearly glued to EUR/JPY. So, this was an obvious place to look and the best way to figure it out is to look at single currency futures.
This is the EUR/JPY vs ES in to later in the a.m. and through the close, look how tightly they come together at the close.
Here I compare the Euro in candlesticks to the EUR/JPY in purple today, you can see there's strength in the Euro early morning, but it's not translating to the EUR/JPY, even at the Euro's high around noon, still the pair is seeing lower highs, that's because the Euro is only half of the carry pair.
Now look at a 1 min chart of the EUR/JPY in purple and the Yen in candlesticks also from today (remember the Yen is the short so it would have an inverse relationship with the pair).
It's clear to see Yen strength was stronger than Euro strength and the Yen's high was the EUR/JPY's low, so...
If they want to manipulate the market and have already pulled all the other levers in existence, they'd need to have some assurance that the EUR/JPY will cooperate.
So I looked at single currency futures, you know 1 min doesn't mean anything to me overnight so I went to 5 min and checked 15 where there wasn't anything.
This is the Yen on that strength seen above, but it's also seeing a 3C negative divegrence. In fact, that divergence worked and the Yen already topped for today and is headed lower... This is what the market would need, but also some Euro strength.
So here's the Euro single currency chart, you can see the distribution that led to recent weakness, it's the strongest type of 3C divergence, leading negative. The Euro also has a negative divegrence, but not as bad and it has a better accumulation zone at the upside reversal pivot.
All that really needs to happen though for the pair to rise is for the EUR to outperform the Yen, even if they both fall, as long as the Yen falls faster.
I CHECKED LONGER CHARTS TO SEE IF THIS COULD BE A LARGER MOVE THAT I CAN SEE RIGHT NOW, THERE WAS NOTHING AT 15 MIN CHARTS, BUT LOOK WHAT I FOUND AT STRONGER 30 MIN CHARTS.
That's the Yen with a HUGR leading positive divegrence, it looks like the days of the EUR/JPY ramp are just about over. This also confirms all the market signals, VIX signals, Leading indicators, etc (most of which can be found in last night's post.)
As for the EUR, on the same 30 min chart we have negative divergences, one of the smaller ones already sent the Euro lower.
This is even worse news for the EUR/JPY and thereby the market.
I don't need to post all of the charts backing up our view, you have seen it in market character, indicators, leading indicators, price action and a VERY desperate attempt to use EVERY lever at once on an intraday bounce!
This is the kind of thing that gives me the confidence to take some of the trades that are emotionally difficult to take.
I'll let you know if anything changes, but that's the way I read it now. There were no dominant Price/Volume relationships tonight.
Thursday, November 21, 2013
There are some 5 min positives in the Index futures, NQ (NASDAQ futures) look the best, and we saw late day improvement in the averages as I posted.
I showed late in the day how the averages suddenly started to improve, they have some work, but perhaps some late night Yen slam or EUR/JPY carry lifts the market..."
"perhaps some late night Yen slam or EUR/JPY carry lifts the market..."
Above is ES (SPX E-Mini Futures) in purple from about the 4 p.m. Wednesday close to 3 a.m. early Thursday morning.
The green/red candlestick chart is the EUR/JPY Carry Pair (currency), notice the EUR/JPY jumps at 1 a.m. as the Yen gets slammed?
Here's what happened next...
Wednesday, November 20, 2013
This time, even more arbitrary.
For the first two QE and Twist programs, the F_E_D gave a date when they'd start and a date when they'd end. The first hint I had back in 2012 that the F_E_D was looking to exit accommodative policy LONG BEFORE they ever hinted at it was when they changed the yardstick in which guidance was measured from a definitive and unambiguous calendar date which the market could depend on to "Data Dependent" and we all know how easily data is manipulated, right now there's an investigation in to manipulation of unemployment rates before the 2012 election.
Now the F_E_D says...
Re: When QE Ends...
"They generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months. However, participants also considered scenarios under which it might, at some stage, be appropriate to begin to wind down the program before an unambiguous further improvement in the outlook was apparent."
First we ALL know that the only way the unemployment rate actually moves down is because of the historic number of people dropping out of the labor force, it's a facade. In addition, they are considering winding down BEFORE the improvement that is easily manipulated even without the massive outflow of workers from the labor force participation rate.
THIS IS THE NEW YARD STICK, IT IS 100% AMBIGUOUS WITH NO CONDITIONS AT ALL! THE MARKET IS GOING TO HATE THIS!
"As an alternative, some participants mentioned that it might be preferable to adopt an even simpler plan and announce a total size of remaining purchases or a timetable for winding down the program. A calendar-based step-down would run counter to the data-dependent, state-contingent nature of the current asset purchase program, but it would be easier to communicate and might help the public separate the Committee’s purchase program from its policy for the federal funds rate and the overall stance of policy."
TWO THINGS, FIRST CHARLES EVANS TWEET YESTERDAY...
This was yesterday, it barely moved the market and some wondered if it was tongue in cheek, if it was out of context, or if it was a floater to test a policy idea that was clearly discussed as seen in the minutes, "A total size of remaining purchases". This tweet is essentially exactly that, although dates and amounts are obviously somewhat fictional.
"A calendar-based step-down would run counter to the data-dependent, state-contingent nature of the current asset purchase program, but it would be easier to communicate and might help the public separate the Committee’s purchase program from its policy for the federal funds rate and the overall stance of policy.""
This confirms exactly what we talked about this week, the last time QE Taper was serious in May/June, the 10 year rate popped 1%, the F_E_D is very afraid that the early guidance of quite a while ago that "Rates would rise about 6 months after QE ends" is still with investors and this is what smart money is most concerned about, RATE HIKES.
This confirms the F_E_D is very concerned and trying to separate a QE Taper from Rate Hike expectations, which are accommodative policy as well.
The minutes seem to confirm they will end treasury purchases BEFORE MBS, remember QE1 started in 2008 with MBS purchases, but had absolutely NO EFFECT and the market dropped lower until the F_E_D added Treasury Purchases to QE1, that was the 2009 bottom and the market went up, so the market WILL NOT like Treasuries being tapered first, it might as well be all of QE at the same time as traders don't care about MBS.
" For example, most participants thought that a reduction by the Board of Governors in the interest rate paid on excess reserves could be worth considering at some stage, although the benefits of such a step were generally seen as likely to be small except possibly as a signal of policy intentions."
This shows their fear as they consider a useless program just to reinforce guidance and convince investors they won't raise rates before they say, but the market will do that for them as it did in May and that's what they fear, the F_E_D ACTUALLY LOSES CONTROL OF POLICY AT THAT POINT AND THE MARKET SETS RATES!!!
MY READ...The F_E_D would end QE right now and the thing I wondered about a while ago, "WHAT IS THE F_E_D SO AFRAID OF" is now clear, it's not unwinding a nearly 4 trillion dollar balance sheet which should really scare them, it's the reaction to tapering QE in interest rates that scare them.
Remember the June minutes when they sounded like they'd end QE by the end of this year, half of the participants were for ending QE by the end of 2013, THEN THE NEXT F_O_M_C WAS THE ABSOLUTE OPPOSITE? The reason why is because of the 1% jump in the 10-year benchmark interest rates, that's what scares the F_E_D, that's what they've been trying to figure out how to deal with as it takes policy right out of their hands. Even the "Ambiguous" possible end of QE discussed that had no threshold at all, it was arbitrary, just a decision to stop shows how willing they are to end QE any time, right now if they could, it's how the market reacts as it fears they will hike rates soon after, that's what the F_E_D fears.
Tuesday, November 19, 2013
I hope everyone had a good day, it was an interesting day.
First, and this isn't to brag because we get them wrong too, it's just to show something specific, I rarely make a specific call like this one from late Friday on the EOD update...
"If the intraday charts hold up through the close, then I'd say Monday opens up or in the area, however because of the significant damage already in place, I'd think the most likely scenario would be that it closes down, perhaps that bearish engulfing pattern I was talking about in PCLN, it would fit well in any of the averages as well."
Last night in The Week Ahead I said,
"I'll start where we left off Friday which is the 3C chart action in to the late afternoon on an op-ex day, it's never price that tells me much as the op-ex pin releases because most contracts are cleaned up by then and the pin no longer matters, it's the underlying action because that is what I see most often, pick up right where it left off near the close on Friday.... Even though we don't have such an open so far in futures...The rule applies to the averages in regular market so the opening futures Sunday night wouldn't apply, it would be the early trade Monday."
So we got the open the charts were predicting late Friday for the next trading day (today) and then we got the move lower on the weakness apparent Friday, that gives us a bearish Engulfing pattern in 3 of the 4 major averages.
For a bearish Engulfing pattern like the daily IWM above, we need a gap up in the morning and a close lower, that's what we got, I don't think Icahn was hinting at this Friday.
HYG was a pretty bold statement, the post today was called, "Market Update: HYG Negative Divergences Taking it Lower" that was posted around 1:10 -1:15, well before Icahn's comments around 2:33, not to say they weren't a catalyst for something already broke, they probably were, but it could have been any of the parade of market mavens saying the same the last 3 weeks, Carl just said it on the right day and CNBC needs a 30 second soundbite to explain the market's weakness.
As of Friday's Daily Wrap, the tittle asked the Question, "Is QE Losing its Luster?"
I can't tell you how many emails I received in the last several days letting me know that Monday (today) was a DOUBLE POMO day with one of $1.25 to $1.75 Billion and the second for $3 billion to $4 Billion, THAT'S HUGE, but my analysis is based on evidence, not fear of QE or what happened in the past so again, I ask the question...
"Is QE no longer enough to lift the market?"
In Friday's Wrap I showed how a number of assets that are QE sensitive went QE OFF or TAPER ON After Yellen's Senate testimony and she didn't come off as anything other than a dove.
We also saw Stealth Accumulation in VIX futures, someone was accumulating quietly late last week, so someone had a good idea of what was happening today, it showed up on our charts which is why I made that very specific forecast for today which is not like me.
There was the VXX holding up better than it should have and the spot VIX Bollinger Band Squeeze, this hasn't even made a real move yet.
The BB Squeeze portends a highly directional breakout, this hasn't even seen a move through the bands yet.
If you look at Friday's wrap you'll see the 30 min Index Futures leading negative divegrence as of Friday, massive distribution and this is why I felt the way I did about today when all is taken together.
Then there were the same signs in Industry groups like Financials and Tech, not to mention AAPL which I still think is going to be a trade set up.
As mentioned earlier, HYG Credit was telegraphing major weakness in the market... (please look at the first two charts at least from this post)
This was one of the charts showing massive weakness and it was in HY credit as well.
This shows how HYG was used for the head fake breakout of the previous 3 days and the head fake confirmation of the move in HYG.
"The TICK looks like it's forecasting a ramp in to the close to try and recover some of this downside, you may be able to use it or may want to exit trading positions (very short term ones) here."
In fact I posted some TICK charts toward the end showing the trend in TICK that wasn't represented in price so it's probably good I posted this chart MCP chart this morning
There was a very specific reason, because if you just look at MCP, you can easily say which way to trade it and you might think, "I would have tore that trend up!"
Just looking at this, you might think, "this would have been an easy short", that's exactly why I posted the following in the MCP update today... because the hardest thing I ever had to teach was to teach how to look back at historical charts and put them in emotional context, suddenly holding on to this trend is not as easy as you might think, BUT THERE'S NOTHING UNUSUAL ABOUT MCP OR THIS TREND, THIS IS NORMAL MARKET BEHAVIOR AND SOMETIMES PEOPLE NEED TO BE REMINDED OF THE FACT THE MARKET DOESN'T MOVE IN STRAIGHT LINES, IT DOESN'T MEAN THIIS ISN'T A BEARISH DOWNTREND, but it does give a dose of reality...(The following is the chart and what came after it which ties in to tonight given the TICK chart)...
"In a way, this post is kind of for those who haven't paid attention to MCP until now and might want to consider it. For others, this is an update of where MCP is and finally even if you have no interest in MCP, there are some great concepts and examples of market behavior."
"Just looking at the MCP chart it looks like a simple long, short trade and the short side looks really easy , like a no brainer.
These are the stages and trends of MCP,
MCP started at stage 2 Mark-up (2) however as I have mentioned many times, changes in character are important as they precede changes in trend, I just mentioned this Friday re: MSFT (when it was a momo stock) and AAPL recently before the top. At "A" there's an uncharacteristic, nearly vertical price move, these are most often seen JUST BEFORE a stop tops so in actuality they are warnings or red flags, at least time to have a tight trailing stop. At "3" we have a large triangle stage 3 Top.
At "C" we have the break down from the top and then a 5 week bounce , try to put yourself in the emotional position of being short then.
At "D" we had a 5 month rally/consolidation, again just from a time perspective and after a 40% bounce, as a short this would be emotionally exhausting, but this is why it's important to know what is normal so you can anchor expectations and make fact based decisions rather than emotional ones.
At "4" we have a stage 4 Decline and at E and F we have "Dual Capitulation". People always think after the first capitulation it's time to go long when in fact there are usually at least 2 capitulation events and then months or years to form the next stage 1 base so those going long on the "Blood in the streets" capitulation event are often at a loss for a long time or at least at Opportunity Cost."
Now we are back to tonight. Take a look at HYG today vs the SPX...
The weakness in HYG was clear long before the market fell and if you look at the entire HYG post, you'll understand why this is important and why the close is important because by the close, the SPX reverted to the short term mean of credit.
So did commodities...
Commodities vs the SPX...
Then the NYSE $TICK Chart in to the close...
There's a clear trend in to the close, even though we hit an extreme of -1600, there's still a trend of stocks moving up or fewer moving down.
The market jiggles, it doesn't change the weakness and in fact it may help set up some nice positions, take PCLN for example, I highlighted it today (another that didn't post when it should have at 2:30) OR AAPL
PCLN 60 min massive weakness and it has done everything we wanted it to with the breakout and the Star/Dojis after. I'd like to add to the core position and maybe even a put trading position.
The intraday 1 min chart at the EOD strengthened enough that we MIGHT get that chance.
AAPL 10 min major distribution/weakness, if I could short this or buy puts in to a little price strength...
AAPL 1 min intraday, maybe it can build enough to bounce?
The only problem with this scenario is the Dominant Price/Volume relationship among all the major averages was price down / volume down, so there's no 1-day oversold condition, however we do have more F_E_D speakers tomorrow that might offset some of Dudley's hawkishness today, but Bernie doesn't speak until 7 p.m.
My feel is that the "Buy the Dip Crowd" is still out there, in fact the Sentiment Tweet of the day was...
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