Risk Indicators

From last night's post... As I mentioned last night, on a short term basis, the markets fell to roughly in line with what the credit and other risk markets had been predicting, on a longer term, those credit/risk markets still show the S&P overvalued compared to their lead. Here's the updated look for this morning, but first here's the market overnight action in ES (S&P E-mini futures) as well as FX (currencies).

 Over night we saw a positive divergence, lkely based on renewed rumors in Europe of the ECB lending to the IMF so the IMF can in turn lend to the EU, yes it is circular and doesn't make a lot of sense as to why the European Central Bank wouldn't lend directly to the EU, but they are prohibited from doing so, so this is the work around that the banks are hoping for, this rumor was floated last week and promptly shot down in the very article/interview with an ECB member ver the weekend.

There have been some negative divergences since, likely on the ECB/German rebuttal of those rumors and ES is off the best levels from premarket trade and roughly in line with 3C.

 A closer look as of the 9:30 New York open shows 3C is in fact in line with ES, there are no positive divergences, so this again appears to be a strictly news driven event on this chart.

 Here is how the Euro opened at 9:30 EDT

However, since yesterday's close, this is what happened on the rumors last night.

Here are the new indicators from last night. First the macro view, then the micro.

 Commodities as pointed out last night have underperformed the S&P

 Again this morning so far the S&P is outperforming commodities, so the "risk on cycle" is not a full risk on, as commodities refuse so far to make any higher highs and are rangebound.

 High yield Credit has also underperformed the S&P refusing to follow the October rally in making a higher high, remember that credit has led equities as you can see to the left, just before the July sell-off.

 This morning high yield opened higher, but promptly gave those gains back to near the worst levels of the morning while the S&P outperforms HY.

 This is the Euro open which is significantly higher today because of the overnight action.

 On a longer term bis though, the market has quite a bit of downside left to catch up to the natural arbitrage relationship between equities/the Euro/The $USD.

 On a tit for tat scale, the market is roughly following the micro moves of the Euro -2 minute chart.

 High yield corporate did open higher then the S&P this morning, remember on a short term basis, the fall in the S&P the last several days brought them in to line with each other.

 The financials indicator on a longer term view showing the serious under-performance of financials vs the market.

 This morning they are in line with the market, not out or under performing.

 As far as Rates go, the market tends to move toward rates as they are a leading indicator, the longer term picture of course is clearly ugly for the market.

Short term today, rates moved higher on the open, however looking at the chart above this one, while it may seem to be a big move, it isn't even perceptible on the longer term hart above this one.

So that's the opening indications, we'll watch for developments.