Credit/Risk Assets Update

Remember the entire point of tracking these assets is the 1 thing they have in common, they are highly correlated, meaning in a real, healthy risk on mode in the market, they should track or lead equities, not lag them or dixlocate from them.

 Commodities for instance (the S&P is always in green) showed some correlation in the green boxes, but become dislocated in the red boxes, this puts the risk on rally in question.

 Long term commodities have been underperforming equities since October.

 Yields are like a magnet for equities, here we see a major dislocation.

 In Green they are acting like they should, in red, the stock market's strength vs this metric is cast in to doubt.

 Who says the S&P and Euro have lost their correlation? I'll tell you who, those who argue that the US can decouple from the world, rather then simply be lagging it. The last several days of US economic data have shot a lot of holes in the decoupling theory.

 That would mean the S&P has some catching up to do to the downside.

 Actually, a lot of catching up to do.

Credit leads equities, Here's a pretty darn good example.

And in case you haven't heard, the recent wedge behavior in the market...

As well as the recent breakout above the 2011 top's neckline, which to me (as I have said at least a half dozen times, looks like another head fake breakout like the last one)...

seems as if it is not been propelled by any market strength (see my post yesterday on the long term 3C trends), but instead a short squeeze as I have noted many times in different assets, for example AAPL and others, I have said, "This looks like a short squeeze".

Here's the NYSE data...

The black bars are the level of short interest, note as the market has risen in to the bearish wedge, the shorts have sequentially declined to lows not seen since April of 2011.

Furthermore the NASDAQ short interest has dropped to January 2001 levels, not 2011, 2001!