Risk Layout Update

We are going to look at intraday and the longer term as we are rapidly approaching what I believe will be a major break in the markets, the evidence has been piling up for quite some time. This is a very fast moving market so I'm sure some of the intraday charts will change before this is even published, but I've tried to stick with charts that stand out and are a little less ambiguous. Have you noticed that even my short term trades have all been on the short side?

Starting with commodities.

 Thus far intraday commodities are performing a little better then equities, this is why...

The $USD hasn't made a higher high thus far since the 10:15 area and commodities have a stronger inverse correlation to the $USD then do stocks.

 For the perma-Bulls who thought this lateral area was their long lost consolidation, there have been many indications if you look in the right spot that it is not a consolidation. Take commodity performance during this area (SPX is always green).

 Why I have had a sour taste about this rally, look at the long term performance of commodities vs the SPX, China as a global growth engine is sputtering.

 As for  CONTEXT, it is roughly in line with ES. This is an important point because when we see divergences on these charts, they almost always revert to the mean as ES has reverted to the CONTEXT model after seeing one of the largest divergences last week that I have ever seen between the two. Translation, underlying fundamentals are falling apart fast.

 Remember how many divergences we have seen with the SPX up and Yields divergently down? Today the market has reverted to the short term mean. Now consider the longer term and the concept of reverting to the mean...

 I refer to yields as a magnet for stock prices, Yields clearly signaled this WAS NOT a consolidation taking place even as the SPX made new rally highs on the last bounce-"PRICE IS DECEIVING"

 REVERSION TO THE MEAN? The last divergence in Yields vs the SPX to the left reverted to the mean. Getting the picture here? It isn't pretty.

 UUP / $USD intraday as noted was supportive of a move up in the market yesterday early in the day, today it has been putting pressure on the market, but may have found some resistance as we OFTEN see right after the EU markets close.

$AUD is not giving a bullish signal, but it is allowing a little breathing room for the market here.

 Again as to the question of consolidation or top, the $AUD's trend is yet another indication of what the story is despite all of the volatility, recent new highs and now recent new lows. Remember, reversion to the mean.

 As I suspected last week, Credit wasn't buying the rally, it was selling it and I expected a new low to be made in credit, here it is (yesterday as well).

"Credit leads, stocks follow", so this is a consolidation or more likely a....