Risk Asset Update

This is where my primary interest is this morning, to describe the update in one word, "de-leveraging", obviously in front of a wild card, the Greek elections. Wall St. likely has no inside information, remember the last Greek elections surprised Wall Street.

Taking one look at the indicators the first thought is deterioration in many, but you can't look at them out of context of events and in context of events, it looks like smart money is lowering risk in front of the wild card event or de-leveraging.

 The CONTEXT (for ES) and sector rotation charts alone I believe show this to be the case. CONTEXT is constructed by using multiple asset classes that have correlation to risk, you can see clearly the model is much lower than ES, which indicates to me a broad sell-off in risk assets in an attempt to lower risk exposure in front of the Greek elections.

 High Yield Corp. Credit is still looking good.

 Longer term it is hitting new local highs and leading the SPX, but it is also at the top of the daily downtrend channel, so it is in a sticky spot in which it could reverse if it is to stay in that downtrend channel that has been there most of the year.

 Commodities are up a bit and above the channel I mentioned yesterday, this looks like pure FX arbitrage trade.

 This is the one that I didn't want to see, High Yield credit deteriorating more-High Yield Corp. Credit above is contradicting HY, but HY is a true risk asset and it seems this is being sold off to lower risk exposure, there is still the question of the trend and whether this sell off is just de-leveraging risk on an uncertain event or if there's something more to it.

 Longer term, there's now a very clear negative divergence with the SPX, yet High Yield Corp. credit continues to contradict HY credit. Again, this may be because HYC credit is simply moving within the downtrend channel and now has reached the top of that channel so what happens there in the next few days will be telling, but I suspect other information that develops over th weekend will make any information on HYC credit look minuscule.

 Yields have also dropped off hard today, Yields tend to attract stock prices, but this series has been volatile lately and again this likely has a lot to do with broad de-leveraging in front of the weekend election.

 Longer term Yields are now also negatively divergence with the SPX.

 The $AUD looks good, this is the mixed bag part...

 Longer term $AUD as a leading indicator looks in line, maybe a bit better.

 The Euro intraday

 And longer term , we are near that short squeeze area, but again the uncertainty oer this weekend is the primary driver in trade today, apparently even more so than quadruple witching options expiration.

 This is the HYC credit daily downtrend channel I mentioned.

This sector rotation chart (shows relative momentum of sectors vs the SPX) alone shows the broad de-leveraging, note that not even the safe haven assets are in play, it seems any type of risk is being sold, at least to some extent to lower the risk profile, this shows how uncertain smart money is feeling right now and that is the theme of the day.