Golden5: Breadth: getting worse

Maturing neg. Divergences...

The liquidity Index is still elevated and the leading Indicator is falling like stone....

Golden5: Sentiment: Correction has already started in the Sentiment measures

Lower Highs in the Indicator vs. higher Highs in Price. Compare this to our historical analysis and see what it could mean.

The high probabilty case is that Price will follow the indicator, but there is also a remote extremely bullish possibility that the Indicator corrects without prices diving. This could have a bullish catapult effect...

Let's see what comes.

(there will be no further posts this weekend. For guidance look at our recent OptionFlow post.)

OptionFlows: The Correction still has way to go

We paired our option analysis with FibTime and came out with this......

Gold could be interesting next week. Pls also observe that most od the correctio takes place on the call options side, meaning there are no bearish signs yet....

Gold in Euros looks at crossroads...

Besides the overpowering dollar weakness of the last months, which translated into all kind of inflationary risk trades, we see that Gold has shown some strength.

This Gold in euros chart adjusts for the Dollar effect and it seems to enter into a zone of converging trendlines, FibTime zones, support & resistance zones which hints at some sore of resolution in the next 1-2 weeks....

The ultimate Sentiment Chart

Pls find the graphical almagation of ...

• ISE Options Call/Put ratio (unweighted)
• CBOT Options Call/Put ratio (unweighted)
• NYSE Options Options $ weighted Call/Put ratio (our calculation)
• NYSE Options Options $ weighted Call/Put flow (our calculation)
• FibTime high probability future turning dates

Takeaways:

• Sentiment leads the market irrelevant of fundamentals, ioW. there is always someone, somewhere frontrunning in the levered world of options....
• $ weighted ratios show more action as a better reflection of true flows
• Oct 25/26 looks like a interesting call for a top

Exhaustion Watch

The bull has run for quite some time and we have reached some solid exhaustion levels.

Golden5: Breadth: No ray of strength here...

Our leading indicator (red) still looks bearish!

Sluggish action at best, but no compelling bull story and don't forget all the neg. Div's.

OptionFlows Overview: There is a smell of fire in the air....

Precious Metals: So we had the sell off from a short term exhaustion level, but notice that all we got was a sell of in Call Options, but nobody dared to buy puts!!

Also see how nicely we can see the rise in the Strike Spreads, i.e. the shift into more speculative OTM/ATM Call Options - nice blow off signature.

.....but be careful with the prec. metals, because in the 6day-2month options we see continued rising as if some PLAYAS just rolled some stuff simply over to stay in the game.

There is still plenty of speculation in the Gold space and it seems the Playas are reluctant to buy puts, which could mean the final chapter is maybe not yet in....

Tech mirrors the derisking story we described for the Institutional Hldg Portfolio, with a smell of correction in the air...
Banks have seen a nice amount of put buying and re-risking on the Bear side (rising Strike Spread).
Same feel as with the Banks we get in Emerging Markets !!
(see the glossary on the sidebar for more explanations)

OptionFlows: Players are positioned for a correction

Add'l explanantions:

• Why would you substitute stocks with ITM (in the money) Call Options like we see in the red line in the top chart:
  
  a) Cash Flow: you pay out the option premium for the option purchase and receive the full value from the sale of the stock
  b) ITM options are relaively cheap in premium terms compared to ATM (at the money) Options
  c) The Delta btw the current Stock Price - ITM Strike Price functioned as an automatic stop/loss where you cannot loose more then the premium you paid out but still have the full upside

(for more explanations see here)

Golden5: Sentiment: Be patient, but History should be on your side

The current Neg. Div will resolve. We don't know if Mr. Market will go for another round down and up to expand the neg. Div, but we do know they should expect some correction here in the nearterm future, unless we see the Market taking off to the moon....

Goldman & GE deviate from the HERD...!?

Could it mean something when Goldman and GE decide to take a raincheck on the last climb up there. The S&P500 is only 50 odd points from a serious superbullish breakout. Shouldn't the alpha dogs be present for that move (and don't look at Jamie's Bank....)

Timing Guidance for October

Exhaustion Watch

Buying Panic during last week's OPEX

We believe in real Flow and technicals here at Reflections and are therefore offering you a preview into our BETA Option Flow tool. We aggregate all Option flows of all liquid lg. Cap Stocks of our must hold Institutional Portfolio , run trough every single option chain and calculate real money flows. Here is what we came up with....

Bottom line:

1. Too many Longs and relatively less shorts in terms of Flows
2. the synthetic option longs measured by the Call/Put ratio are less then in August (less conviction)

=>> unhealthy MARKET!!

Golden5: Breadth hints at a Top or a topping Sequence

(Our Breadth Indicators are applied to a must hold large Cap. Institutional Portfolio.)

The main NewHighs20 and the Demand Pressure1 are showing neg. Div's that need to resolve or negated.

Demand Pressure2 (much more extreme measure them DP1) looks the same.
Liquidity is improving slowly bur still at high risk levels. Our Leading Indicator which shows a reasonable track record (as shown on the chart) wants the market to go down.

Will he be right?

Now or in a couple of weeks ?

Golden5: Sentiment still looks out for a PEAK in the Market

Double Breakdown in Bond-Wonder-Land

Was this the Peak in EURO....will stock follow?

Let's see whether the Euro can re-enter the channel, which would be negative for ALL risk Assets from Stocks to Silver.

So far the lead/ lag btw Euro has worked impeccable...

Dollar Sentiment is too bearish !

http://dshort.com/articles/Kimble/101014-Dollar-patterns.html

Monster Divergence in the short term Tick data

Either Newton's law of physics stop working of we should see pause fairly soon.

OPEX Madness on the Fulcrum day

1. Pls observe the PEAK !! (Interpretation: no risk today ! all risk in the future !)
2. also see the MACD Hist level that has a 100% record over the last years!
3. most of the important Tops were around OPEX weeks

The Volume Flow sport a neg. Divergence.

Euro - S&P500 Divergence right in the middle of the OPEX week

5 Reasons to be careful...

1. Wednesday is the OPEX fulcrum day (where most traders have to decide whether they want to roll or let expire = high Option Volume day)
2. The Euro returns back into the main Trendchannel (blue) after a 'throwover'
3. ...and breaks the upwards Trendline (red)
4. The S&P500 diverges from the Euro
5. RSI on the Euro heads down

Negative Divergences and a FibTime Cluster signal a turn !

See also our post from Oct 1st on the FibTime (Oct 10).

THE DUCKS ARE LINING UP!!

Gold in Euros looks like buy...

Everyone is looking at the parabolic move in Gold in USD, but take a second to look at the metal in Euros. If we break out from here (= Euro turns down) then we could see a nice move on this this chart....

Euro Exhaustion

Look how nicely the S&P500 correlates with the EURO, perfect Harmony!! The Euro has reached the top of the channel (as the S&P500) and has developed a small neg. Div. and also is highly overbought.

Bear in mind that when the Euro turns all other asset classes might follow.

Sentiment gets worse...be careful

Sentiment is clearly not following price !! Neg Div. Alert !!

(there will be no posts over the next weekend because of my travel schedule.)