Risk Asset Update

We have a mixed bag, credit is starting to concern me a bit. All in all, the Risk Asset Layout is at the point where it is negatively divergent, not all assets are so negative (thus the mixed bag), but it will need to get back in line soon.

 Commodities intraday vs the SPX (green) are starting to see some better relative momentum, the Energy sector seems to be picking up, it's outperforming USO.

 This is the positive divergence in commodities as the market made its recent lows below the bear flag/pennant, but commodities are now in an overall negative divergence, they'll need to get back in line soon if this bounce is going to continue and continue in a more stable manner.

 This is the most threatening chart in the risk asset layout today, High Yield Credit took a plunge around 11:30, it had been pretty supportive recently, I'm not sure what this is all about (I would think there are still distortions in credit markets from the JPM whale trade), but I don't like the looks of this with regard to the intermediate or sub-intermediate trend expectations.

 HY Credit was positively divergent at the SPX lows, a great signal that was helpful, it's hard to view this as anything other than what it looks like, bad news. However the day isn't over and HY Corp. credit isn't reflecting the same.

 Yields intraday are moving with the market, however...

 Just as they gave a bullish divergent signal at the SPX lows, they are now in an area which is starting to look negative. They aren't so far gone that they can't flip back in line and they are moving with the market right now rather than against it which is  the only silver lining.

 The $AUD is one of my favorite leading indicators among the currencies, it is showing better relative momentum than the SPX today-see what I mean about a mixed bag?

 The Euro was showing a bit better relative momentum earlier, now it's nearly perfectly in line with the SPX.

 You may recall last Friday the Euro took a deep tumble on the open, but managed to move in the same direction all day with the SPX, showing the market was a bit more resilient than the correlations would have otherwise suggested Friday, still this will need to get back in line and to really accomplish that the EUR/USD resistance will have to be broken definitively to the upside to get the thick shorts in the Euro to cover, at least in the near term-you know what the longer term or primary implications look like-BAD.

 Here's High Yield Corp. Credit today showing much better relative momentum than the SPX and contradicting the move in High Yield Credit, I'm interested to see where these will close today.

 Overall, High Yield Corp. Credit doesn't look as good as it did when the SPX was hitting its lows, but it doesn't look horrible either, it needs to make that new high.

 This is Energy's momentum vs the SPX which has picked up recently today.

 Longer term though Energy has a ways to go to get back in line, agin, a Euro short squeeze would do it, but for now it seems the Euro moving to resistance and failing (3 times on Friday and gave up a breakout today) is keeping bearish sentiment alive and well as they see this as failed tests of resistance. We expected some game playing as we approached these areas, but at some point we'll have to make a call between game playing and a divergence. This is what happens when the market hits extremes, it's not like the nice clean signals of March-May 1

 Financials are showing a lack of momentum vs the SPX, but may have found some support, we'll see shortly.

 Tech was outperforming earlier, it's still in a stronger position vs the SPX relative momentum, but in a holding pattern here.

Sector Rotation since Friday, you can see the opening gaps in early sector movement, Financials are falling off along with Basic Materials and Discretionary. The flight to safety trades are in rotation in Utilities, Staples and Healthcare. As you can see, Tech isn't looking all that bad in rotation and Energy is also coming in to rotation as seen above. I'll have to take a closer look at the sectors themselves with 3C.