Risk Asset Layout Update

 Commodities vs the SPX (SPX green) intraday, both are keeping relatively good pace.

 The longer term trend in commodities seems to have been anticipating a move higher in the Euro. The trend higher in commodities also started around the 15th which is the same day we found negative divergences in the $USD (commodity/market positive) and positive divergences in the Euro (commodity/market positive).

 Yields intraday on the 5 year (an excellent leading indicator) are not quite keeping pace in the early afternoon with the SPX, but overall...

 Again around the 15th the trend higher or positive divergence in yields was clear. Note the negative divergence in yields at the May 1 bounce top, this is an excellent leading indicator and suggests more to come in the market on the upside. As mentioned recently, some of these positive divergences are the largest I have seen in the 6 months or so we have been using this layout.

 The $AUD as a carry trade currency is often a good leading indicator as well, although there's some noise in it from events in China, today for the first time $AUD is in sync to the upside with the SPX.

 While the $AUD positive divergence isn't there, we do have confirmation today, longer term though you can see where the $AUD diverged from the SPX and that was the end of the SPX bounce, so once again it tends to be a good leading indicator in the currencies.

 Intraday the Euro and SPX are pretty well aligned, this is the first time in about a week the SPX has been aligned with the Euro which has been more positive over the last week than the SPX.

 A longer view of the Euro/SPX, the Euro is above resistance as it has been carving out what appears to be a short term bottom, but still a respectable one. The SPX is finally responding now that op-ex is past.

 Longer term Euro/SPX action, in green they are in sync or correlation pretty well, the red boxes show Euro negative divergences sending the SPX lower, the white box is the recent positive Euro divergence.

 Energy momentum intraday is falling off a bit vs the SPX momentum.

 Energy intraday vs the Euro (red), the Euro looks a little bit more positive than Energy, which suggests the SPX is more in tune with the Euro intraday.

 However once again the longer term trend in Energy went positive last week around the time the Euro started forming that base-like pattern, the SPX is finally responding.

 Intraday the Financials have fallen off vs the SPX.

 Tech is leading the SPX intraday, which is a good sign as far as expectations for a tech led move go.

 And the trend in Tech momentum vs the SPX, it was certainly much more positive than the SPX on Friday and has shown a much better trend in momentum, again good for the theory of a tech led move and specifically AAPL.

 High Yield Credit hasn't been in a blazing positive divergence, but it has held its ground much better than the SPX, Credit leads, equity follows/confirms. Longer term Credit markets are a mess, short term they look supportive of higher market prices.

 The recent trend in High Yield Credit has been more lateral as the SPX has been down, this overall is part of why I continue to believe in a strong move higher before the next leg lower.

 High Yield Corp. Credit may (like all credit) have some noise due to the JPM debacle, but today HYC Credit (HYG) is leading the market intraday.

 Looking at High Yield Corp. Credit, there's a decent little base and HYC Credit is clearly leading the SPX in a positive divergence.

 As for the major trend in HYC Credit, clearly it is market negative as it has been trending down as the market was topping laterally. This is also a good example of the pendulum-like swings in the market (credit being the example), we see a breakout above the downtrend channel-a head fake move that squeezes Credit shorts and from that we often see the snow ball effect once the head fake unwinds, like we saw in GLD and GOOG as pointed out last night, HYG fell hard and fast to break below the downtrend channel, creating another potential head fake move as shorts jump in on a break below the channel, a move higher in HYG will squeeze those shorts again and give HYG upside momentum (the snow-ball effect). This is why I like channel busters, they often appear to be positive like we first saw with the break above the channel, but any time there's a change in character, there's usually a good opportunity right around the corner.

As for sector rotation from Friday to today, while Financials are leaking lower in to the afternoon, Energy is holding up fairly well, Basic Materials (a risk on sector) has rotated in, Industrials have rotated in strongly, Tech is building steady and Discretionary is maintaining. The Defensive sectors like Utilities, Staples and Healthcare are all rotating out, this looks very indicative of a risk on (bounce) move.