Credit and Risk Assets Warned Short Term, It's The Long Term That Should Be Your Focus

For newer members, yesterday's Credit/Risk Indicators that I introduced a few months ago, have been a huge leap forward in understanding the market. I often say, "What everybody knows is not worth knowing'  and it is in that spirit that I introduced these indicators.

Yesterday's post explains in more detail.

Today every risk asset warned intraday, however what should be your focus is what the long term indications are showing, this is another reason why I believe this rally has been a bear market rally and the next drop will not be a correction, but the next leg down in a primary bear market.

Here are the charts of today's warning signals and the implications of the long term warning signals.

(the SP-500 is always represented in green)

 Intraday Commodities topped before the market, a red flag.

 Long term they were in sync with the market during most of 2010 as there was a true risk on rally, they went divergent at the 2011 top and called the late July 2011 decline in the market of over 16%. Right now they have not participated in this rally at all and are severely dislocated, showing again the high probability that this has been a bear market rally used by smart money to sell/short in to strength.

 High Yield Credit (credit leads equities) warned intraday today

 Credit has sold off over the last 2 weeks while the S&P-500 has lost -.19% as of this capture. Translation, the market is doing nothing while Credit is delveraging fast.

 Yields warned today...

 They also warned right before the July sell-off, they were positive in October right before the market bottomed and put in the October rally. However, Rates which are like a magnet for equities are now at multi-decade lows.

 For those who think the Euro correlation is dead, again, as I have been proving nearly every day, the Euro warned Friday's lows would see a bounce, that the market would decline from its highs on Monday, as well as today.

The long term implications?

 The Euro called the July decline, the October rally top which lost ground and went sideways before taking off and have been severely dislocated since the last rally, which is the one I consider to be the bear market rally. Equities have huge potential downside just to revert to the mean.

 High Yield Corporate Credit warned today

As far as Credit de-leveraging, it hasn't made a single higher high in 3 weeks. These risk assets should move together in a true risk on environment, they are all warning of big trouble ahead.