Risk Asset Update

 Commodities vs the SPX (SPX always green comparison unless otherwise noted) are underperforming today, this in large part has to do with the market outperforming the FX arbitrage correlation with the EUR/USD.

 Remember is was May 15th we first spotted something strange in the Euro and $USD, commodities rallied while the SPX sank to new lows, it seemed last week they reverted to the mean, I think the Euro/USD is putting pressure on commodities today.

 Here are commods, the SPX and the Euro, obviously Commods are following the FX correlation more closely and stocks, as they have been recently, are outperforming it.

 Yields which are an excellent leading indicator as equities gravitate toward them, were weak on the open, but since they have showed excellent relative strength, turning up before the SPX and hitting a new high on the day, this looks bullish for the market near term.

 Longer term you can see Yields leading indicator quality as they called the top back on May 1 days before the SPX topped and several other bounces they have called out as going no where. However this is the first time in quite a while that Yields have made higher highs/lows. Don't forget Friday's late day post with Rate of Change which offers additional insight that you may not otherwise realize is present.

 The SPX is oddly VERY much in sync with the $AUD, the $AUD is one of the better leading indicators among currencies and for the purpose of a near term/strong short squeeze move, I'm happy to see the $AUD is not negatively divergence, but rather in line and maybe even leading the market.

 $AUD over the last several days has had excellent correlation with the SPX, much better than the traditional Euro/USD.

 This is also the first time since the May 1 top that the $AUD has put in higher highs/lows, don't forget to check Friday's post with ROC applied to $AUD.

 In the afternoon the Euro is moving a little closer to the SPX.

 However you can see how disconnected the two really are.

 Remember we noticed something bullish in the Euro on the 15th, here it rallied from the 16th on as the SPX fell in to the start of the bear pennant formation, right now the two are quite disconnected and it's surprising to see the market as strong as it is considering, but we also know why the market is acting the way it is, manipulation.

 For a near term bounce, this chart is very encouraging, High Yield Corp. Credit is close to making a new high on the day and leading stocks, credit almost always leads equities, this is bullish for the market.

 Even more so is the huge jump up High Yield Corp. Credit made today on the open to get back in line and actually start leading the market, another excellent leading indicator.

 Long term HYC Credit has warned us about the big picture in the market, very bearish, however in the Credit downtrend you can see head fake moves both below and above the channel that give HYC credit that extra momentum it needs as traders are stopped out of their positions on these breaks above and below support/resistance, this is the point of head fake moves, to add momentum. The last upside head fake breakout of the channel led to a very rapid decline in HYC credit.

 As mentioned earlier, Energy and Tech looked better in underlying trade today than Financials, you can see it in momentum as well with Energy above.

 Longer term Energy, it is in pretty good sync with the market, although al 3 sectors will need to be to get a strong move going and sustained.

 Financials intraday fell off badly this a.m., they gained near noon and have been underperforming in relative momentum vs the SPX.

 Longer term in the bear pennant, Financials have been pretty much in sync, they are clearly out of rotation today, I would probably consider adding to a speculative financial long if I needed it while they are showing some weakness.

 Tech has been nearly perfectly in sync today.

 Longer term it has rolled in and out of rotation during the pennant in the SPX, but seems to be now moving back in to rotation which would agree with the short term 1-5 min 3C findings in AAPL.

Sector Rotation since Friday shows the Defensive sectors rotating out-Utilities, Healthcare and Staples, Financials haven't done much since Friday, Energy, Basic Materials, Industrials, Tech and Discretionary are all rolling in to rotation as the market looks more like a risk on environment than risk off, which is a significant change since last week.