What Are Risk Assets Saying?

With so many seemingly small stories with huge implications passing over the wires the last week or so,  I am very interested in how risk assets are holding up.

Some of the stories that are far more important than they may seem:

-Germany taking a more nationalistic/populace approach to EU bailouts ahead of the EU summit

-The ECB's SMP has been virtually dead silent in the secondary EU sovereign debt markets, now they are starting to officially speak openly about what we have witnessed as ECB policy over the last several months, namely the ECB is backing away from supporting yields.

-Greek politics may be about to be thrown on its head once again

-Spain and Italy are perhaps within weeks of the breaking point

-The EU's permamnent bailout mechanism still hasn't been ratified, the EFSF only has about $200 bn of dry powder, likely not even enough to cover the Spanish banking bailout

-Evidence is finally clear that China is a lot worse off than they have portrayed

-The EU spirit of cooperation is disintegrating when it is needed the most-is Germany about to wash their hands of the EU?

-Forget Iran for now, Egypt and Syria are becoming far more interesting and potentially more dangerous

As for the underlying Risk Assets...

 Commodities are performing much better than the SPX today, however I feel that is because of gold, which I believe to be on a technical bounce, not a fundamental change in near term character. Oil is also contributing, but you know why.


 The typical correlation is broken today as you can see, on a longer term basis since at least October of last year, commodities have been underperforming badly, this was the hint something wasn't right in opaque China.

 High Yield Credit for the time being, is at least holding up, typically this is one of the first to be sold off in a risk-off environment.

 Longer term vs the SPX, the question is, "Does HY credit hold or is it about to round over?" There can be huge changes in a single day.

 High Yield Corp. is holding up better today

 It too is in an overall better position, but the same question remains as HYC credit is above its long term downtrend channel.

 Yields outperformed easily Friday, they took a hit today

 For purposes of the sub-intermediate trend, we have a neutral reading here.

 The $AUD in line with the SPX, I suspect China is affecting the $AUD.

 Longer term, the $AUD is barely outperforming.


 Euro today... It remains to be seen, but we had earlier signals of Euro support building in and dollar weakness.

 Sectors- Energy showing a tiny bit of relative momentum at the last 2 hours of the day

 Financials aren't doing much, the downgrades Friday of major EU and US banking institutions will have negative liquidity effects.

 Tech is not performing well today

 Sector rotation between Friday and today, obviously we see de-leveraging today, but Industrials & Basic Materials are holding up.

Intraday Sector performance-nothing too exciting.

Basically I'd call this "worry" and this is exactly why I kept my core short positions as no one could predict something like the Syrian/Turkish news.