Credit/Risk basket indications

These assets are very important in judging a bounce, whether it has legs or whether it's a good tactical use of price strength to short in to. Risk assets which include equities should show broad strength in a healthy bounce, in a shifty bounce there will be dislocations between them as we have seen over the last month, leaving the S&P way over valued compared to other risk assets, and these dislocations revert back to the mean, meaning equities can fall quickly to the levels credit and other risk assets are trading at, or in a bullish scenario, credit will pop first and equities will follow.

Here's today's update:

 Here are commodities in tan vs the S&P in green and the Euro in light blue, commodities are going to rise on a weaker dollar, but are stuck somewhere between the S&P (which is breaking away from the Euro correlation as they try to keep the market up as long as possible to sell in to strength) and the Euro/weaker dollar correlation.


 High yield credit saw some buying yesterday, getting in position to sell on strength today, I mentioned this in yesterday's credit update, you can see yesterday's chart by clicking on the link. Today it's being sold, so they made a decent little trade, but obviously they don't want to be holding some of the lower quality credit when the market reverses, so High Yield is definitely being sold after getting the bounce this a.m. and being in position to capitalize off it yesterday.

 Rates are more or less in line intraday, daily they are severely dislocated.

 As mentioned above, the S&P is holding up better then the Euro right now as they will try to keep it as high as possible for as long as possible to do the same thing we are looking to do, sell in to strength.

 I also pointed out in yesterday's post (linked above) the move in High Yield Corporate Credit, which is now at a profit on the 1 day trade, but showing some initial signs of being sold. Apparently it appears that institutions don't want to be caught holding this credit if tomorrow's LTRO is disappointing.

As you can see on the last chart of the BAC VWAP, it opened above the VWAP and then has spent the day just trying to hug it, that is reflected here in financial momentum as it outperformed early on the open in green and since has fallen off from the s7p's relative performance.

All in all, everything looks as expected, no unwanted surprises here.