A Quick Run Down

I want to start with currencies because I keep meaning to get there...

 Today the Euro (orange) and the SPX tracked each other pretty much spot on as the focus continues to be Cyprus, although tomorrow the F_O_M_C will provide an interlude.

 However if that correlation were to hold, the SPX would have a lot of catching down to do to the Euro, meaning the $USD is stronger and we can see that.

USD with its normal market correlation (SPx) in white and in red, the very non-typical correlation as a stronger $USD typically drives down asset prices from oil to gold to stocks, however as I suspected, in a world where every nation is devaluing their currency, the $USD is one of the ones that is bought, cue China in 3, 2, 1... WE WILL BE TALKING ABOUT CHINA and very soon as they will not tolerate the hot money from every countries' own QE program and all that money pouring in to China and causing inflation. For now, the USD has broken above resistance in a "W" like base.

One of the more interesting currencies is the Yen as it is a carry trade favored currency and we can see what's going on with hedge fund financing and positioning by watching how the carry trade unfolds.

 Here long term the Yen moves down and the SPX moves up as the Yen is sold for the Carry, but look at what has happened recently despite the most dovish PM and new BOJ governors in the last 20 years, the Yen has flatlined out of the downtrend and caused significant market volatility when it has done so. The Japanese story is not of its own making, China will push back hard against Chinese inflation that the Yen creates, we've already talked about the conflict brewing.

 A closer look at the Yen/SPX

 One of the favored carry pairs, the EUR/JPY has seen its trend line broken, changes in character lead to changes in trend, are hedge funds moving to a risk off position and winding down the carry trade? You couldn't be blamed for suspecting it.

 And the Yen recently rising vs the Euro, when the pair falls, the Yen is generally rising.

 Yields have also been calling a red flag, they are a sign of the flight to safety, as I say about yields, "They are like a magnet for equities".

 Here yields have underperformed the market and note how the market has been following.

 Longer term, the SPX has some catching down to yields also.

For 2013, Yields have failed to make a single higher high so they remain severely dislocated.

We can also see a flight to safety in relative sector performance.

Note most risk sectors have declines this week while the safe haven ones in white have done better, Utilities, healthcare and Staples.

To me it looks like the market is ready for some early upside, perhaps anticipating the F_O_M_C, but as I said earlier, I would not buy long a new position here.

 The 3 min intraday 3C chart of TLT has a slight negative divergence just like we saw in my earlier post with the market averages, this is confirming.

 At the more important 60 min chart though, there has been a clear flight to safety with this very strong leading positive divergence, this is why I think we can probably sell in to some short term price strength, GOOG for example.

 VXX 3 min shows a short term intraday negative divergence, yet...

The 10 min chart is very strong suggesting a move to the upside that will be faded as money continues to seemingly take the path of safety or risk off.

Tomorrow at 2 p.m. we are scheduled for the f-O_M_C announcement, we have caught a leaked announcement in 3C once before and successfully front ran the trade, but those are few and far in between, but I'll be watching as the F_O_M_C statement is embargoed with the news outlets way ahead of the actual announcement.

REMEMBER AS I ALWAYS SAY IN FRONT OF THE F_O_M_C, "BEWARE THE KNEE JERK REACTION, IT IS ALMOST ALWAYS WRONG", this is where it takes some patience and emotional discipline, but we can often get good setups there as well, so be ready to move and unfortunately I'll have to tune in to CNBC for a few hours.

As far as futures tonight, there's not a whole lot that's very exciting so far, I doubt there will be too much movement in front of the F_O_M_C unless something breaks in Cyprus or maybe even China.

Everyone will be listening carefully tomorrow, seeing where periods and commas are placed in the F_O_M_C statement to figure out if the F_E_D is actually looking for an exit from accomodative policy as they have hinted more than once, I suspect Bernie will try to dial it back and do some damage control, but I don't think that will be the truth of the situation, that we'll know more about when the minutes from the March meeting are released. For now, just remember, the F_O_M_C almost always causes a knee-jerk and it's impressive, it's also almost always wrong.

If anything special happens while my eyes are still open, I'll bring it to you, but for now I leave you with always interesting British MP, Nigel Farage on the EU.