Leading Indicators

Leading indicators are still very much in line with the 3 or 4 trend expectations we have, the pullback we were looking for since Wednesday materialized today, after the pullback we are looking for an upside shakeout move, after that, we should be set up to open core shorts in a number of issues, there are still plenty of longs though as I have explained, as mentioned, leading indicators support this view.


First CONTEXT...

Yesterday I said that I thought we'd see sector and Index rotation, I said specifically it doesn't mean one will be up, but the relative performance should be much different, take the IEM for instance vs the Dow today, there's a big gap in relative performance.

That started to slide in futures overnight

ES was rich to CONTEXT all night, only recently is the model showing ES to be overdone on the downside.

First Commodities

 Commods haven't been as bad today as the the averages, recently there's been a little difference in relative performance as well.

 Yields are like a magnet for equities, interestingly they didn't confirm the downside either and are also showing a recent loss of downside momentum.

 On a longer term basis, say our shakeout move up, yields have been negative at the last two SPX tops, they were positive going in to the bottom of the current or last SPX tun up and are still in a positive position vs the SPX suggesting that the volatility shakeout is still very much a probability.

 Big, Big picture and yields are VERY disconnected from the SPX, this is why we enter core shorts.

 Short term or intraday the $AUD which is more predictive than the Euro has held up better than the SPX, also showing a recent loss of downside momentum.

 Intermediate term you can see in white where the $AUD was in a positive divergence vs the SPX and in red a negative divergence and it has worked well, it also was positive at the bottom of the last run higher and also remains in a positive position relative to the SPX.

 Big picture, the $AUD is very negative at this SPX triple top, this is why we are looking for that 1 last head fake move to short in to as long as the charts stay consistent.

 The Euro is a better confirmation currency and the $AUD a better leading currency, here the Euro fails in confirmation in red and is slightly more positive in white on an intraday basis.

 Mid term, the Euro is more positive in the relation vs the SPX, from an arbitrage perspective, the SPX should have upside based on that alone.

 CREDIT-High Yield Corp. / HYG is actually at a bottom as the SPX moved lower, this is an intraday positive divergence.

 Mid term The HYG was also positive at the start of this last run and remains in a positive position vs the SPX, this is bullish for the SPX near term, like next week, although it's hard to imagine now.

Junk Credit is giving the same signals.

As I said, it's hard to imagine when you have a day like this, but often our best trades with the lowest risk are the hardest to enter.