ES CONTEXT

It's way to early to glean much from leading indicators that have just opened, but the continuous CONTEXT model that runs and adjusts all night to shifting markets opening and closing has finally started to break away from risk assets more definitively.

First I want to give you the definition of the CONTEXT model straight from the horse's mouth so you understand how it works, how and when we can identify algo arbitrage activity and essentially just what it all means.

"The world has become an increasingly inter-connected place to trade. Whether due to central bank liquidity or the shortening of business cycles, asset-classes tend to behave in highly correlated ways most of the time. The CONTEXT framework attempts to distill the world’s ‘risk’ asset-classes (interest-rates and curves, credit risk, FX carry, commodities, and precious metals) into a single-measure that can be judged against the US equity market in order to comprehend potential mis-pricings (or technical flows and liquidity impacts). Institutional and algorithmic clients tend to use CONTEXT as a confirmation tool for positioning against (or with) a trend."

Now this morning's CONTEXT chart...

The current differential between the model (green) and ES (red) is -5.91 points, earlier it had hit sub -9. 

The point is, when we do look at leading indicators and risk assets such as credit and rates later as those markets adjust to opening trade, I'd expect to see some dispersion that we have not seen in recent days, but that's just conjecture at the moment until we actually look.