Risk Assets/Credit Indications

For newer members, risk assets and Credit are some of the leading indicators we follow as Credit typically leads and equities follow. Risk assets in general should rally with a risk on trade in stocks, a failure to do so is a red flag.

 This is the 10 min intraday SPY chart since it put in the Tweezer Bottom which thus far has acted as support for the market.


 All of these risk assets are compared to the S&P-500 which will always be in green. Be sure to note the timeframes. This is a chart of commodities overall vs the SPX this morning,  thus far they are trading in line with the market, no divergences.

 This is a long term daily chart of commodities, I almost always use the same annotations on a chart, green means in line with the market, as you can see commodities were during much of 2010, red arrow means there's a negative divergence, commodities were weakening at a faster pace then the SPX and failing to post new highs, instead making new lows, this was a warning, they especially broke down in July 2011 when the market dropped 18%. Right now they are severely dislocated from the market, part of this reflects trouble in China, part of it reflects the rally doesn't have the underlying breadth and strength that price alone seem to suggest.

 This is High Yield Credit today intraday, it is in white which is usually a positive divergence, so credit looks moderately supportive of an intraday move higher in the SPX.

 Longer term, High Yield Credit hasn't made a higher high since Feb. 2nd, while the market continued higher, this is a negative divergence.


 Yields  are like a magnet for the equities market, intraday yields seem to be stronger then the SPX, which should lend intraday support to the SPX/market for an intraday bounce, we'll have to see what these look like later.

 Longer term Yields haven't made a higher high since January, a negative divergence with the market.

 Yet even longer, Yields warned about the 2011 top and specifically the July 18% drop in the market, they also called the October bottom, now they are at the worst divergence I have seen for Yields.

 The Euro intraday as mentioned looks supportive for the market thus far.

 More recently on a longer term basis, the Euro has not kept pace with the market and has put up some red flags that led the market lower.

 Longer term, the Euro went from confirmation in Green to a negative divergence in red.

 High Yield Corporate Credit is in line this morning with the market.

 Recently though it has failed to rally with the market, this was a red flag and the makret lost ground from there.

 This is financial momentum in white which is more positive then the market, again this should lend some strength to the market intraday.

 Over the last month or so, Financials have been falling apart and are negatively divergent with the SPX.

Here is this morning's sector rotation thus far, for the most part, it is more defensive with Utilities, Healthcare and Staples outperforming, Financials at the bottom have held their own. Tech is still hanging in there with Discretionary, Industrials are losing ground.