Risk Asset Update, I like what I see so far...

Friday I saw a few hints which were small, but like they say, to make money you have to see what the crowd missed and with the crowd focussed on the SPX 200 day moving average, there's a lot they are missing. The signals from Friday that were encouraging are continuing today in the Risk Asset Layout.

 We discussed several different ways a head fak move could play out around the bear pennant seen here with the SPY, one thing traders would be looking for (bearish retail) is a test of resistance that fails, we saw that on May 29th at the upside breakout of the pennant, as most traders chase price as they don't have the tools to anticipate (beyond the implications of the bear flag itself), a move below the pennant was one option we also discussed, the move on 5/31 simply wasn't very strong, it didn't close below the pennant bringing in those retail traders who come home, look at the market and place an order before heading out to work the next day. Friday's break was a perfect set up for a head fake move, especially as it broke the 200 day m.a. and when we look for head fake moves we always look for the most obvious area traders will be watching, for most traders price above or below the 200 day is what determines a bear or bull market, so that break was perfect. The sell side orders came in this morning as expected last night, but thus far it hasn't moved the market much.

CONTEXT for ES is finally improving, after the model being negative most of last week, out risk asset layout shows why it's improving, which started Friday in places few were looking.

 Commodities are starting to outperform the SPX, that's not surprising given their FX correlation and the moves in EUR and $USD, it's not because of GLD as it seems the QE sentiment has tamed a bit for now.

 Here's the same chart except I added the Euro in Blue. Remember last night I showed the record level of shorts in the Euro and mentioned that the Greek election polls went dark Saturday, this is going to cause some of those shorts to close their position as it is predicated on a Syriza win and they are now blind to those indications. On May 15th we saw some unusual activity in the Euro/$USD, I just couldn't imagine what would turn them, well it may be too early to claim they have been turned, but the last two days have seen a turn in both.

 High Yield Credit is not a conservative play, it's a risk on asset and now it has 2 days thus far of trending up vs the SPX, credit usually leads as it is a much bigger market that is almost exclusively traded by smart money, not retail. We have picked many downside reversals on bearish credit divergences with the PX, now we have a bullish one.

 Yields are another leading indicator that have served us well, as I showed you in last night's post, Yields were starting to bullishly diverge , today they have really made a move.

 The $AUD is also an excellent leading indicator among the currencies, I showed you the ROC of $AUD as it uncovers trends that aren't very visible without ROC, but ROC often shows very early changes in momentum, today those early changes are turning in to very visible bullish divergences vs. the SPX.

 $AUD the last 2 days (Friday/today).

 The Euro has finally seen some real upside momentum, I speculated this was in part due to the NFP print and dollar weakness, but that could just be a cover. The news out of Europe really isn't that bullish when you look back at their track record, but I don't think it's the news that is moving the Euro, I think the news is just a cover so financial media can tell you why the market did this or that, the real reason is Wall St. manipulation of the market. As mentioned many times before, trading is a Zero sum activity, for someone to win, someone must lose and there's too many people on the bearish side of the boat, a good shakeout would mix things up and the divergences we have seen suggest such a shakeout in upon us. This doesn't change the big picture bearish nature of the market and that's why I posted the bearish nature before I put out last night's post, but there can be several trends existing at the same time, depending on the timeframe you are looking at.

 Euro today vs. SPX.

 High Yield Corp. Credit was also shown with ROC and the slight changes there, remember once again, credit typically leads and equities follow so divergences in credit are very important. It was the big picture negative divergence in Credit that gave us good timing to start shorting the March-May top.

 HYC Credit's trend, above it may not seem like much of a divergence, but remember, it's what the crowd missed that makes you money, not the obvious that everyone is trading off like the 200 day ma break.

 I wanted to see Tech relative momentum vs the SPX stay strong in considering adding the new AAPL July Calls (I already have several, this is the June position that I closed last week for a 131% gain being rolled over to July). So far so good.

 Tech today vs the SPX shows decent relative momentum, I'm leaning more and more toward opening the AAPL July Calls on a speculative basis (meaning lower risk than usual as this is counter to the primary trend).

In sector rotation the defensive sectors are obvious and there's nothing interesting there. Financials look like they may be trying to get a foot hold to come back in to rotation, Tech though is the one I was most interested in. Since the notion of 1 final very strong shakeout bounce, I have been of the opinion that AAPL and Tech would lead it, so I like the look of Tech rotation.