First commodities (brown) vs the SPX (green) and the Dow (blue), as I mentioned before, commodities were weak today on the lack of QE hints from Bernie. Some QE sensitive asset fell hard today: USO -1.31, GLD -1.72%, SLV -2.6%.
Here are commodities during QE periods, note they appreciated during QE1 and started to sell off or deleverage as there was no QE2 plan in the line up, they started up again after Bernie strongly hinted of QE2 during his 2010 Jackson Hole speech and then rallied on QE2, again deleveraging before QE ended, since QE2 ended commodities have been in a downtrend.
High Yield Credit was a little scary yesterday as it trended down in an up market..
Today High Yield Credit jumped up and stayed in a flat range all day even as the SPX sold off EOD, while the next day or so may see downside in the market, the fact HY Credit remained resilient was encouraging.
The $AUD vs the SPX, yesterday the $AUD saw some extra momentum as the Australian Central bank cut rates 25 basis points as the market expected a 50 basis point cut, lifting $AUD a bit more , today it fell back to correlation with the SPX.
The Euro vs the SPX, overall the Euro is in a much better place than it was 8 days ago.
Intraday the market looked a little overdone vs the Euro, note the market did break the intraday lows, but the Euro (orange) did not break to new intraday lows. I get the impression the market received a little extra push down today, more than it would have without a little help from smart money, you'll see what I mean later. This is a gut feeling and the reasoning would be to make the test of the resistance area look like a failure, it seems that when retail alone couldn't push the market low enough to create a bearish daily candle, the magic hand stepped in late in the day to get the job done. This may seem paranoid, but you can never be too paranoid when dealing with the likes of GS. Just look at price today, it really seems to me that they stepped in to create the failed test of resistance that I mentioned early yesterday before we even reached the level.
The $USD and the market have an inverse relationship, but once again (much like the Euro), the EOD sell-off seems overdone compared to the leading indicator correlations. Here the SPX did break below the intraday lows at the EOD, note the Dollar did not break above the intraday highs, yet another indicator that seems to indicate the market was pushed a bit in the late afternoon.
High Yield Corp. Credit looks pretty much in line with the SPX, this alone is pretty good news for a bounce as it is not negatively divergence as it usually (90% of the time) at a real final top.
Looking closer at the intraday action the uptrend in HYC credit was broken late in the afternoon, but it rallied back up to the uptrend channel.
Energy momentum also did not break intraday lows like the SPX and it had every reason to do so, instead it followed the FX legacy arbitrage correlation.
5 min Energy chart, note the negative divergence on the open and a late day positive.
The 30 min Energy chart going negative at the May 1 highs, again that strange positive divergence starting on May 7th seen in so many different assets and an overall leading positive divergence. This 30 min chart would suggest there's more upside in Energy, despite high inventories in oil, this would suggest that any move in Energy to the upside would be based on a Euro short squeeze and a falling $USD as Energy moves opposite the $USD.
Just to keep everything in perspective, the daily energy chart depicts the primary trend, the 2011 top is very clear as is the deleveraging of large positions in Energy as the QE2 program was about to wind down; they understood that without excess liquidity sloshing around in the market prices would fall and started selling in to the highs before QE2 ended. This leading negative daily chart is why I consider all longs (with the exception of UNG) as speculative and I keep them at smaller sizes with less risk as intermediate long positions are still counter trend vs the primary trend.
Financials rotated in yesterday, today they underperformed, but again Financial momentum was not as bad EOD as the SPX downside momentum.
Financials 5 min show a negative divergence off the open, another negative at the afternoon highs and a slight leading negative into the close, this is 1 reason why I suspect we'll see some more downside in the near term.
Financials 30 min from the May 1 top, again that May 7th positive divergence seen everywhere and a current leading positive position.
For perspective, the primary trend on the daily chart shows a deep leading negative divergence.
Tech , as I suspected, has shown excellent relative momentum vs the market overall, it was crushed pretty bad today.
Tech intraday momentum vs the SPX, note the end of day bit of strength while the market was headed lower.
This 2 min chart of Tech may explain that end of day bit of strength .
The 5 min chart went negative right off the open as well, yet we still see a relative positive divergence in to the EOD. To me it almost seems like smart money was trying to create a more bearish market and a price candle that didn't leave a gap up. The SPY closed at +.03%, if it weren't for the EOD push down, that price candle and close would have been ambiguous for shorts as it would have left something more akin to a star that had a gap above yesterday's close, that would seem to me to appear more tentative to bears.
Tech's 5 min Trend, negative at the May 1 top which was a beautiful signal and an easy short in to strength, This chart is currently leading positive well above the May highs.
Tech 15 min has been in a leading positive position since about May 7th, that date that keeps popping up everywhere. In my experience with 3C, price often reaches the point in which a divergence first started, CHK for example is in the region where a positive divergence first started even though it saw a stronger positive at lower prices, meaning the average position cost is lower than where the divergence first started. It makes sense as there's no reason to accumulate if you aren't going to draw a profit from the position.
Again for perspective, the primary trend on the daily chart shows a very fast area of distribution at the highs, this is rare to see develop so quickly on a daily chart, then a leading negative divergence. Bounce, counter trend rally or not, it is pretty clear what smart money's opinion of the market is. This divergence is now below the 2009 lows, the implication is there's far less money in the Tech sector at these highs than there was at the 2009 market lows, which would indicate a very strong leg down as the primary trend to the downside re-emerges. Markets almost always fall faster than they rise as Fear is a stronger emotion than greed. The 2003-2007 bull market was nearly 5 years, all of the gains and then some were erased in 18 months and the majority of the damage took place in 8 short months; had the government and F_E_D not intervened, it would have been even worse.
Afternoon sector rotation confirms the relative strength that built in to tech in the late afternoon.
More charts coming...
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