First CONTEXT for ES intraday-As mentioned last night it was hard to get an accurate read as many credit and Treasury/debt markets that are part of the model weren't open yet, now they are and the trend in the ES model is not looking good, suggesting we should see some deterioration in the Risk Asset layout vs the movement in the SPX.
CONTEXT model in green vs ES (S&P E-mini futures in red above), the histogram shows the difference between ES and the CONTEXT ES model.
Risk Asset Layout (the comparison symbol is always the SPX in green unless otherwise noted).
Since the head fake low from a bearish consolidation triangle on June 6th, there hasn't been 1 very serious divergence in commodities vs the SPX; last week we noticed commodities losing momentum vs the SPX, now we have a clear divergence in commodities vs the SPX. This layout and dislocations or divergences have called a number of tops and bottoms reliably for us since we started using it.
Here High Yield credit, a definite risk asset, can be seen with a positive divergence as the SPX makes a reactionary low, the SPX moves up from there. Over the last nearly 2 weeks, High Yield credit has been dislocated as it has refused to make higher highs with the SPX.
High Yield Corporate Credit which is typically easier to move positions around in (vs other forms of credit and we follow credit because often credit leads and equities follow) because of HYG and its ample liquidity, has shown it also has been unwilling to make a new high with the SPX (HYG seen in light blue with its white trendline).
Since the June head fake low, this is also one of the most serious dislocations in High Yield Corporate Credit.
Yields I often equate to a magnet for equities, here intraday you can see yields are NOT supporting the move in the SPX whatsoever and are in fact very negatively divergent,
A little longer term and we can see the parallelogram (or large bear flag) resistance highs have been met each time with a negative divergence in yields.
As we saw in many of the longer term 3C charts of this "Flag-like pattern, the last 2 resistance highs have seen serious long term 3C chart deterioration, the longer the timeframe in 3C the more serious the signal. In other words it looks like the last 2 reactionary highs have been used for heavy distribution from the cycle that started with accumulation in April and culminated with the June 6th head fake break-dwon low.
The EUR/USD since this week's FX opening.
Here's the same pair since the 9:30 New York open.
Here's the Euro vs the SPX on a longer term basis since the June 6th head fake low as well as the last 2 resistance highs in the large bear-flag. Typically there's pretty good correlation between the Euro and the SPX/market which is more a function of the $USD, but since the Euro makes up 50% of the $US Dollar Index, it works as a good proxy without having to invert signals as the $USD trades opposite the market in most assets.
Finally, last week, especially Thurs./Friday, even as Energy and Tech started to break down with the SPX correlation, Financials moved almost perfectly in line with the SPX, this is why I said that weven though there were some negative divergences in Financials, they seemed to be the last thread the market was holding on to and once Financials broke, it was likely we'd be making a major change in market direction to the downside. As you can see today, Financials are nowhere near the correlation they shared with the SPX late last week.
