Leading Indicators

There are some interesting developments here. I think part of the reason the Euro is under pressure is because of a Greek constitutional court shooting down some of the Troika's austerity demands for financial help such as the retirement age increase. Furthermore there's political upheaval among the coalition government in Greece at a very sensitive time, this doesn't bode well for the EU. We've also had 2 misses in economic data in the US today, but I think this is more about Europe.

*Unless otherwise specified, all leading indicators are compared to the S&P-500 in green.

 Commodities on an intraday basis are holding up pretty well vs the SPX, longer term commodities are one of the brightest rd flags for the economy worldwide and the market. Remember though, we are just looking for price strength/3C weakness we can short in to.

 FCT which was mentioned to me by a member and has performed very well in my back-testing to confirm it as a useful leading indicator  shows a positive divergence right where the SPX range is, it also has a negative at the last peak in the SPX sending the SPX below important support that could be read as a head fake move on the downside for an upside reversal-STILL, the loss of 2 days this week means a lot and I'm not sure how discounted that is in the cycle that was set up this week and seems to be launching today.

 FCT longer term was in line with the SPX at the first and second of the 3 SPX peaks, it was negative as mentioned above at the 3rd, this is how FCT works, as a divergence indicator, the SPX broke below support at the red trendline and formed the range we were looking for which needed to be stronger just because of the break below support and because it is likely set up as a volatility shakeout move and as such needs to be impressive.

 Yields generally follow the market, or the market is like a magnet toward yields, this is why when there are divergences in yields, they work well as a leading indicator as the market tends to move toward yields. Intraday today they are weaker than we'd like to see for confirmation, but being we don't know how long this move can last, we also want to see negative divergences in leading indicators as the move progresses, perhaps because we lost a few days, that process is starting early.

 Yields longer term show a nice positive divergence at our range, prices should continue to move toward yields here in red.

 EUR/USD since today's 9:30 open, unreal the market has had the strength it has had with the Euro showing this weakness and the dollar showing strength, the market is moving 100% AGAINST the normal correlations.

 The 1 min Euro 3C chart is in line right now with the Euro move.

 The $USD is going negative intraday on its strength today.

 The $AUD was leading positive yesterday and today is moving pretty much in line with the market.

 Longer term $AUD (which is one of my favorite currency indicator as well as leading indicators) shows a negative at the SPX second peak and a positive building since the trough between the fall of the 2nd peak and the rise of the 3rd, it is also leading positive as the SPX broke below support at the yellow trendline and at the yellow rectangle's range.

 The Euro vs SPX intraday today, impressive market strength as it fights the tide of all FX correlations!

 Longer term the Euro is still in a positive divergence suggesting more upside for the market before the next leg lower.

 Today High Yield Corp. Credit (HYG) is out of sync with the SPX, I'd like to see how it closes, again, maybe this is the start of the negative divergences, but I don't feel really good about HYG falling out of sync with the SPX today, although situationally and with the Euro, I think it can be excused.

 HYG longer term in a recent positive divergence and now moving toward "reversion to the mean".

 Junk Credit which is HY as well is acting almost exactly the same as HYG credit intraday and longer term, closing in on "reversion to the mean", today's close in credit will be interesting.

 High Yield Credit is interesting in that it has broken away from the other forms of HY credit and is in line with the market, this is used to express a risk on sentiment among credit traders (a much larger and better informed market than equities).

 The NYSE TICK chart vs the SPY in white, you can see today how the SPY held up even while the TICK was seeing deterioration.

 For a moment it looked as if the TICK might breakout to a more positive position, since the capture of this chart it keeps threatening to break higher, which would be supportive of the market.

 Sector movement today shows Financials rotating in, ALL of the Defensive sectors rotating out, Energy also on the downside, but Basic Materials, Industrials and Tech all rotating in.

Since several days ago, Financials continue acting better on a relative basis, Defensive sectors like Utilities, Healthcare and Staples are seeing rotation out, Energy has been rotating out, Basic Materials where a lot of momentum stocks are is rotating in with Industrials, Tech generally and Discretionary.

In short, we have a more recent rotation toward "Risk on" which makes perfect sense with what we saw in the market today.