First, since Europe is now closed for the week... Interestingly despite big moves in the EUR/USD up on no news and down on no news, the EUR/USD has ended the week from last Friday UNCHANGED! If the moves up and down on no news and fairly dramatic moves didn't already stink of market manipulation, the close at almost EXACTLY unchanged, really complete the aroma.
As for European Equity markets, remember they are benefitting from a 3+ month short selling ban on financials in several major European markets, the equity markets are moving in such a way that you would think something very positive is going on, yet the reason we look at risk assets is precisely the phrase, "Risk Assets". When equities rally, if it's not on manipulation, there's every reason to expect other risk assets will move with equities/stocks as they are both benefitting from the same Fundamental catalyst. On the other side of the coin, when we see equities moving down and other risk assets moving up, we usually know that there's probably some extreme downward manipulation in stocks and they will soon reverse. Many a stock trader believe what they have heard for decades, nearly a century, "The stock market is a financial leading indicator" which under normal circumstances is discounting the economy 6-12 months out. However, there are bigger markets such as credit that are the playground and almost exclusive territory of smart money, these markets tend to be smarter than equity markets and tend to mov first because of sheer size, the same as if you were turning a small boat or a large boat (obviously with a large boat you have to start the turn sooner), which leads to the phrase, Credit leads, stocks follow" or some variant of that.
Here's a look at Europe...
I bet you can guess the European stock index, it's dark blue, while all kinds of credit are less enthusiastic, which include the Financials that are protected by the short selling ban, both senior and subordinated Financial credit are underperforming, as well as X-OVER.
These are the European 10-year sovereign debt, in red Spain and in black Italy, those are the 2 worrisome ones and they are starting to leak lower as seen in to the European close.
As for the US markets and our normal layout...
I put a small white trendline at yesterday's close, here's High Yield Corp. Credit vs the SPX, still severely dislocated.
Credit was warning of a bottom as mentioned above to the far left, the bottom is the June 4 bottom, credit stayed with the market for a while, but has diverged significantly as you can see by this histogram I created.
Very high yield credit such as JNK (Junk) which should benefit from a move in stocks is also very dislocated.
Here's the histogram for JNK.
Intraday this is commodities, green is inline, white is positive momentum, red is negative momentum vs the SPX.
Yields have dislocated badly intraday, we'll be taking a look at TLT/Treasuries as I can almost guarantee something is going on there as there were 3C hints this week.
The very reliable leading currency, the $AUD also saw a major drop today like the Euro, except this seems to be a much better leading indicator than the Euro.
The Euro, strength early, reversion to the mean and weakness today.
Euro from the July lows, dislocated, longer term it's much worse.
Intraday momentum among the 3 big industry groups, first Energy falling off.
Next Financials falling off vs the SPX.
Last Tech with some late morning strength, but now the momentum is close to reversion to the mean.
Not much has changed with this layout over the last week, it is as dislocated as it has been this year and called the last 3 turns in this market this year very well.
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