Credit / Risk Basket

Yesterday we saw a simple chart that gave a head's up as to what was going on in the credit markets which was bearish and something 99% of traders would never have looked for. High Yield Corporates were selling off.


Here is the chart from yesterday

 While the S&P rallied a bit, High Yield Corporate Credit, a huge market, was selling off. Remember that the rule of thumb is, "Credit leads, stocks follow".

 Today commodities are selling off in lock step with the S&P and I'll update energy and USO soon, remember the trigger in USO for a quick short trade from yesterday.

 Longer term the dislocation suggests more downside in the S&P before it is on par with commodities.

 Rates are also selling off, so this is good confirmation.

 Here's the Euro in lock step with the S&P and will have a post of its own as a significant event occurred today in the FX EUR/USD pair, one we predicted BEFORE the bounce (which was also predicted) even started.

 Long term you can see how the Euro and market trade in lock step and these dislocations provide for good shorting opportunities, the S&P has a lot of downside to go before it reaches the fair value correlation with the Euro. If I have time today I'll figure out how many Dow points that would equal.

 And here's High Yield Corporate Credit today confirming the sell-off in equities, in a normal market where there isn't a lot of manipulation, these assets should all trade together.

Finally financials, remember I bought puts (shorted) BAC yesterday as they have been acting badly recently, they are still underperforming on a momentum basis.