We look at these risk assets because they "should" rally with the market. Many times they are predictive or leading indicators and the longer term shows how dislocated the market is and how serious it is. Sector rotation tells us a lot about the tome of the market and where potential trades are.
Commodities
Commodities were a leading indicator early today as the market tested yesterday's afternoon highs, commodities moved lower, right now they are just about in line with the market probably due to the Euro consolidating as it broke below $1.32. Remember we often see a volatility bounce after n important support level is broken ad that happened in the EUR/USD pair today.
As a reminder, longer term commodities are severely dislocated from equity performance
High Yield Credit still hasn't made a higher high with the market is 4 trading weeks now, interestingly this is the same area where the 3C divergences have gained downside momentum and the averages have lost momentum.
Over the same 19 days the SPX has gained +1.88%, compare that to the previous 4 weeks at 5.25% .
The R2k has a percentage move of -2.86% over the last 4 weeks compared to +9.93% for the previous 4 weeks. The Dow -30 has a .98% gain for the last 4 weeks compared to 3.65% for the previous 4 weeks and
the NASDAQ 100 (the strongest) has a current 4 week gain of 4.47% compared to the previous 4 weeks at 7.56%.
Yields which are like magnets for equities refused to make a higher high yesterday and the end of day comparison was a warning. Early today they declined while the market was lateral, even now they will not participate in this bounce.
Long term, Yields called the July melt down in equities and the October rally, they have not participated since.
Here's the EUR/USD (Euro) since yesterday's close, note the consolidation below $1.32
The Euro's performance over the last several days vs the SPX.
Longer term, the Euro called the 2011 top and July equity market decline, the Euro remains strongly dislocated from the market. I do not think the correlation is broken and I do believe equities will revert to the mean.
High Yield Corporate Credit sank badly at yesterday's close.
Here it is today, not participating as well as calling out a red flag between 1 and 2 p.m. yesterday which is precisely where we saw strong negative 3C divergences.
This is Energy vs the SPX, it did not make a higher high yesterday with the market, a negative divergence and it is performing worse relative to the market today.
The long term dislocation between energy and the SPX, note that they were in sync during August/October.
Financials yesterday also were a red flag at the 1-2 pm area, they performed a bit stronger early today and have since weakened vs the SPX.
The recent divergence between financials and the SPX
Technology is outperforming today.
Looking at today's sector rotation, Financials, Energy, Basic Materials, and Industrials have all lost ground. The trade is more defensive with Healthcare, Utilities & Staples gaining ground. Only Tech and Discretionary are risk sectors performing relatively well and not that well compared to the Defensive sectors.
This is the SPY vs AAPL, you can see where the Tech strength or at least relative outperformance is coming from.
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