Divergences Galore

Divergences are everywhere if you bother to look:

Remember when the TNX was a great precursor to U.S. equities? Not only has it been lagging in the past few months – today it’s dropping while equities are pushing upward.

Dollar was first being sold off this morning but it bounced back quite a bit since then (just like Friday). Crude meanwhile was not impressed by the early drop in the buck and did not rally by much:

So, oil couldn’t catch a bid (thanks Vardoger) while the Dollar was weak and the VIX was strong.

Of course since this morning we saw quite a nice drop in the VIX – if you’re delta negative (i.e yours truly) then you really felt it in you account today. Which is probably the idea – yet another attempt to shake out weak hands.

Yes, we could see a continuation tomorrow and hence Soylent Blue might become a reality but I have been warning about that possibility since before I left. Trade according to the worst case scenario and you will not be taken advantage of by whipsaw swings that might be nothing but shake off attempts. If we make 1100 and continue to push higher that is when I will take my exit – until then I continue to add short positions.

The script and the game has not changed – and a day like today was pretty much guaranteed.

3:48pm EDT: Here’s a little follow up on why your long term puts are taking it up the ass today. According to the TOS time machine (don’t you wish the thing could go forward – hehe)  this was the bid/ask of my March SPY 70 puts last Friday:

And that’s it today:

Quit a difference – bear in mind that we got 172 days left before those expire. So a 16% drop after such a small push in the SPX is quite ridiculous. Seems like the MMs are dropping the spread on back dated options again – a nice little game they like to play to push down on Mr. VIX.