The EUR/USD and ES/Market Correlation

Since I was just showing you charts of this, I figure this post is a good follow up, especially in light of the very last chart I posted in the very last post.


"From a broad risk asset perspective, the intervention last night would have 'normally' suggested significant strength in ES (and other risk assets) but it seemed the risk-off sentiment was far greater than any correlation-driven strength and as the day has worn on, CONTEXT has leaked back (as risk assets in general have dropped back to sync with ES)."


Here are the CONTEXT models

The Red is where the SPY is, the Green is where the FX arbitrage suggests it should be.

This is the difference between the arbitrage model and reality, as you can see, the difference is narrowing. The point of my last post was there was a disconnect between the FX arbitrage which is the only real driver of the market as of late, as I said in the last post, it seemed like the arbitrage algos were shut down until I captured the last chart which showed the market finally moving back in line with the model, this maybe saves me the time of counting pips and figuring where the Dow should be.


Most importantly is the statement above that the intervention last night, "Should" have sent ES higher, however in a break with arbitrage last night, the market sentiment seems , or rather is as of now, in a risk off mode. So something is putting quite a bit of fear in the markets, I would guess it is the EFSF's empty box.