As I mentioned earlier, I think the bounce and whatever bounce may materialize from here if the Euro doesn't break to a new low first, is all technically based because the $1.30 level which is a hugely symbolic level in the Euro as well as where the most long positions are, has been broken. We rarely see a break without a test or even a head fake (like a move above $1.30 so the institutional longs can exit and get short). As a matter of fact, we already saw both, a test and head fake earlier today.
From left to right and this is early this a.m. to present, the break of $1.30 in red, a failed test in orange, a head fake above $1.30 in yellow (but it didn't last long enough for all the $1.30 contracts to be unwound and reversed) and right now we are looking at the possibility of another test to the far right of $1.30. A break below $1.2950 is probably the end of the subject and at that point things start to move quickly, the further we are from $1.30, the more the selling snowball effect will build and since equities are now coming undone from their frothy empty bounce higher and starting to move toward the dislocations, there are a lot of DOW points way above and beyond the correlation with the Euro, in other words, the market is extremely rich to all metrics and traditional correlations so it has a LOT to lose in closing the dislocations.
I wanted to make sure there's nothing behind this other then a technical move in the Euro, meaning I checked the risk/credit indicators to see if any were willing to put on a risk trade, thy are not.
Commodities are really selling off, if you didn't get a chance to take a look at the VALE trade idea, I would use ANY price strength to consider the trade. Any move above $22-$23 would be worthwhile considering, but even here it seems to have excellent profit potential, I just cannot advocate chasing trades, instead patience and let the trade come to you.
Today intraday, commodities didn't care what the Euro did, they sold off during the Euro led bump higher, which explains why oil is getting hit so hard today-PLEASE some one tell me they took that trade from yesterday (short USO)?
And here's USO vs the S&P today, you can see it didn't care what the Euro was doing either, apparently it looks like commodity traders understand how serious the Euro break of $1.30 is and they aren't messing around with an intraday bump.
High yield credit has a VERY small uptick, but this could be due to a number of reasons that aren't exactly bullish and it is not enough to be considered "risk appetite"
I have shown you how fast the market can close dislocations on the longer term charts, but here's an intraday chart of yields which the market eventually gravitates toward, they sold off hard yesterday at 1 p.m. and it didn't take the market long at all to sell off to reach intraday parity with them.
Here's yesterday's attempt in ES to hold VWAP where institutional traders want to sell short, they don't want to chase the market either, but look how fast it collapsed, even after weeks of the market ignoring the Euro.
HYG High Yield Corporates have a slight bump intraday, but again, nothing that resembles risk appetite.
Interestingly, financial momentum is a lot stronger then the market, maybe anticipating a test in the Euro?
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