Risk Asset Layout

There are some interesting indications here, especially since we broke under the 60 min chart's bear flag in the market, the Risk Asset Layout is giving a better signal than it has in a while and it appear to be leaning toward the last 2 days being a head fake move under the bear flag.

 First ES intraday, as the last few updates have shown, there's a leading positive divergence in ES, the best signal would be Es pulling back some more and 3C to move up as I have drawn in with the white arrow, that would be a very good, bullish ES signal and where ES goes, the market pretty much follows.

 As mentioned before, for whatever reason, CONTEXT went from ES being WAY overvalued to pretty close to the model.

 Intraday commodities (as of this capture) are showing better relative performance/momentum than the SPX (SPX is always green unless specified otherwise).

 Longer term you can see where commodities failed first in the bear flag and the market soon followed, but over the last 2 days in a consolidation under the bear flag (potential head fake move) commodities are performing better, better today than yesterday and considering the legacy arbitrage between commods and the Euro or really more specifically the $USD, their performance today is much better than the FX correlation.

 As for the long term, commodities typically rally as a  risk asset in a healthy economic environment, their huge divergence with the SPX is bad news for the market when looking at the big picture and the reason I'm not letting go or trading around any of the short positions I've been building the last month+. This also speaks to problems in China which speak to problems with their #1 trading partner, Europe which will move through the global economy.

 Here's the Euro (as it's correlation with risk assets is easier to see and interpret than the inverse correlation of the $USD, o the Euro tends to be a decent proxy as the pair is 50% of the Dollar Index). Note in white some Euro strength lifting the SPX, in red the Euro isn't keeping pace, putting pressure on the SPX, currently in the near term they are pretty close to the mean.

 As far as the 3 major Industry groups (Tech, Energy and Financials), Tech as seen here is showing much better relative momentum vs. the SPX and especially over the last two days in which I suspect we are seeing a head fake move on the bear flag, also the consolidation of the last two days is encouraging with Tech showing good momentum as it has always been suspected that Tech would lead any last bounce.

 High Yield Credit has to be effected by JPM, but as it stands, it hasn't made a new low since the Market turned over on May 1st, that's at least somewhat supportive.

 High Yield Corp Credit intraday didn't keep pace to the left with the SPX and the SPX dropped at the orange arrow, the same happened later right after 12 p.m., right now HYC Credit looks a bit more supportive and considering the move in the market since 2:30, HYG is NOT following the market lower, so it looks even better than it does in this capture.

 A bit longer term in white HYC Credit (HYG) is supportive, in green it has reached near term regression to the mean, but intraday today something good is going on with this Credit.

 Long Term the downtrend in HYC Credit is not good news for the market, this is where the market started to top in lateral, choppy  movement. HYC Credit however may have found some support today at the upper trendline of the downtrend channel. Near term this may be supportive, long term this is another reason I'm holding my short positions.

 Yields are looking better today.they are more supportive than they were yesterday.

 Longer Term you can see how Yields are like a magnet for the market, in red they didn't confirm the market and led it lower, recently as in today, they are showing some support.

 The big picture though is very bleak here, remember regression to the mean when considering how far the SPX could fall and that is as of where Yields stand right now.

 The $AUD which is a good leading currency for the market shows a little intraday support, not a big deal though.

 Again you can see when $AUD fails to confirm the SPX in red the market heads lower, today they are near the short term mean.

 Longer term-big picture, $AUD as part of a carry trade has been unwound and you can see as it is unwound and heads lower the effect it had on the rally from earlier in the year.

 The Euro was roughly in line in green, at both white boxes the market got ahead of the EUR or specifically $USD correlation. However the market is showing some curious strength intraday on Euro weakness/dollar strength.

 Longer term in white the EUR/USD was supportive of higher prices, in red it failed to confirm at the top, it's mostly in line in the green box.

 Big picture, the House of cards built by Operation Twist has the correlation way off, think regression to the mean.

 As a Carry Trade currency, the Yen is acting as it should in the green box, however it is supportive of the market in the white box.

 Longer term the move up in the Yen which caused intervention by the BOJ (which was as usual, useless) shows the carry trade unwind and the market has acted as it should in such a situation, the recent move down in the Yen in the white box over the last 2 days is somewhat supportive of the SPX.

 Larger picture, in the red box the Yen is moving up as carry trades are closed out, note the market action as soon as this trend changed to up, it's not a good sign for the big picture for the market.

 Intraday sector rotation shows Financials seeing some relative momentum (as of this capture), the Defensive sectors are coming out of rotation a bit, Energy is weak because of the stronger $USD, but interestingly Industrials and Tech are rotating in.

Since yesterday, Financials are at least holding their own on a relative momentum basis vs the SPX, Utilities as a defensive sector have dropped, Energy has dropped because of the FX correlation, but again Industrials and Tech as well as Discretionary yo some degree seem to be rotating in. Tech rotating in is what I'd be looking for if the market can pull off a short squeeze.

Now to take a closer look at underlying trade since the market's afternoon fit.