Will the Euro and S&P Divergence Hold?
- stevenplace
- December 2nd, 2011
With the gap up on Monday, a strong divergence has taken hold.
I often talk about the Great Macro Conveyor Belt.
When $UUP goes down, $SPY goes up.
A corrolary is: when $FXE goes up, $SPY goes up.
It has changed this week:
Over the past month, whenever equities have rallied without a move higher in the euro, the difference catches up with an equity selloff.
Could things be different this time? Sure- there has been a ton of newsflow this week with respect to central bank liquidity and ECB financing.
But if the relationships hold, this is one to put in the bearish evidence pile.
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