Credit/Risk Assets and more

 Commodities vs SPX (SPX is always green unless otherwise noted), commodities have definitely had a good run the last few weeks, led by crude.

 Intraday today there's a little weakness in commodities vs the SPX as USO is down a bit as mentioned earlier.

 Long term commodities are severely dislocated , you can see when they were in line with the market as a risk asset during the 2010 rally, then they signaled the top in 2011 with a divergence and now are at a severe divergence again, refusing to follow equities higher in the risk on trade in equities.

 As I have mentioned several times, High Yield Credit hasn't made a higher high since the 6th, 3 trading weeks of selling off relative to the SPX.

 And locally today, Credit didn't follow the market, instead it went the other way.

 Rates are like a magnet for equities, you can see them hitting new lows today, not rallying with stocks, longer term they are at multi-decade lows.

 I changed the symbol here to USO just to see how it was performing today vs the SPX. Again, it may be a blip, but today's action in USO should be watched.

 Financials have been deeply unimpressive during this last run as you can see in red.

 Even though they have been lagging, they did go in to rotation in January as can be seen here.

 This is XLE/Energy, again I just wanted to see what it looked like vs the SPX, as you can see, not performing well.


 Here's a recent change in character in financials since they came in to rotation, you can see they are underperforming and look similar to the Dow-30/Dow-20 Transport divergence.

 This is XLF intraday today, which has been pretty much in lock step with the market as you'll see in sector rotation.

 Financials are at the bottom and you can see they are in rotation today or at least outperforming, Utilities have dropped off as you would expect with flows in financials today, Healthcare looks as if it may be hitting a low in its rotation and may move back in to rotation, this would be defensive market action. Energy, which has been strong the last few weeks is clearly off its game today. Industrials seem to be sliding a little, while Tech is doing better today then Friday afternoon, it is still one of the weaker groups relatively speaking, Discretionary is completely falling off.


A member mentioned a correlation between the market and FCT which is a floating return income fund. I did some research and compared it to the market and indeed it has called some tops such as 2007, 2011 (July specifically) and is in a relative negative position and losing momentum quickly.

 In red FCT warned about the July 2011 decline seen at the red arrow, on a relative basis, you can see how it has underperformed the SPX by the associated trendlines. I didn't have time to put together a rate of change for both, but the charts below show the momentum fade.

First FCT hasn't been looking too hot the last week or so with Friday being a bearish engulfing candle.

 Looking at the early part of the rally from Dec. 20-Jan 23 we have a nearly 9% return, which is more then the SPY's 6% return below for the same period.

 SPY...

More recently from 1/23 until today, we have a 1% return in FCT...

Compared with a 4.21% return in the SPY for the same period, so 2 things stand out, one FCT seems to be a higher beta fund then the SPX which you could see in the early trend momentum, second the relative performance or ROC has fallen off dramatically and in the large scheme of things, it is divergent with the market.

I'm not sure what is behind the correlation, but it seems pretty solid from looking at past charts.