Risk Asset Layout

This update takes time, but there are few updates that are more important and although I need to be watching everything in the market today, ignoring this layout would be a very bad idea.

Here it is with some recent questions and perhaps answers, this also is in a place that makes an ugly downside reversal, worse than the May 1 reversal by far.

Here are Yields, I describe yields as being like  a magnet for equities so when they diverge from the SPX in green, they have always called a reversal since we have used them.

 TodayYields look worse than the market, a trend that has been seen recently, I believe yesterday I showed you historical divergences in yields and the resulting reversals in the market (in this case to the downside).

 Longer term they have been divergent since mid August, this is one of the largest divergences and implies a larger reversal.

 The Euro has been interesting this week, what is happening with the ECB drama especially today is very important and we need to take a closer look at the Euro as 3C has called the moves in the Euro and the Euro has led the market by about a day, it's pretty close intraday to the SPX, white is more positive, red is more negative, green is in line.

 More interesting though is the $AUD tracking the market nearly perfectly. There's only 1 reason I could think of for this and that's the other side of the FX pair, the $USD.

 The $AUD has also called many reversals as shown yesterday I believe, this is very negative, this means the carry trade to finance risk on moves in the markets is being unwound, with that risk on moves in the market tend to fail.

 Here's the $USD vs the SPX, the inverse relationship is why I usually use the Euro to show divergences, but if you look closely, the $USD has been tracking the market nearly perfectly today, explaining the $AUD.

 As far as Industry groups, Energy was about in line yesterday, nothing too special, it was in line earlier this morning, right now it is a bit more positive than the market-this is price momentum of Energy vs the SPX, not a 3C chart.

 Financials showed a lot of relative strength yesterday vs the SPX, today, not so much.

 Tech has been in line pretty much all day, right now it is a bit more positive in momentum than the SPX, if there's any sector that is more positive, I want it to be tech today. I'll take a look at underlying trade.

 Sector rotation matches up pretty well, Financials are off, Tech, Basic Materials and Energy are up, Industrials and the flight to safety trades are off, healthcare, Staples and Utilities. I wonder if Tech will lead the market in a late day swing?

Here's where I have had questions, every Risk Asset leading indicator is negative EXCEPT credit.

Here's High Yield, one of the simplest divergences indicators in the world and much more effective than indicators that claim to track accumulation/distribution like OBV, yet Technical Traders forget about this very simple indicator as they chase all the hottest new indicators. Just apply Rate of Change to price and you have an effective divergence indictor. The one thing I notice about the Credit averages is that they are all near or at a breakout point which brings up the question of a head fake move, we've seen it before in High Yield Corporate Credit, from ROS it looks like High Yield is divergence as it just passes resistance-it worked at the last high.

High Yield Corporate Credit also just passing resistance today, also negative on the ROC signal, just like the last high / resistance level.

And Junk Credit, also just below resistance and going negative on ROC just like the last downside reversal. This is a very easy indicator to construct, no one looks at it, I'd use it if I were you and you can apply it to other indicators to get advanced signals from them as it shows changes in character before you'd otherwise notice them, it turbo charges any indicator you apply it to-One of my TEACHING SECRETS.

Remember High Yield Corporate Credit and me mentioning we have seen a head fake move in the past? As it moved down in this channel, telling us the SPX new highs were to be shorted, it made  move above the channel, a breakout, that failed and look at the resulting waterfall sell-off, so head fake moves do occur in credit. Luckily I have the correct version of 3C that showed this in the past.

3C on HYG

 30 min chart, negative, but first enough accumulation to push it just above resistance,

 Here's the longer term 30 min chart, the channel it broke out of (not drawn well with arrows) and 3C negative at the breakout, this is a leading negative divergence. Note the parabolic lows in Credit late last year were accumulated and then sold in to strength.

 15 min chart with lows accumulated and the area just below resistance to push HYG above resistance in to distribution.

 The 5 min chart confirming the move up and then going leading negative, other than a small accumulation zone at new lows below local support.

 3 min chart leading negative on the move today above resistance

 Same on the 2 min chart.

This may be our answer as they get the most out of credit positions/shorts before a potential large scale downside reversal.