I think this is a result of the reversal of what I've been calling "The America Trade" which is just foreign money coming into the US market changing into USD to buy US assets. This is why the USD in normal times has a positive correlation with US markets. Because when foreign money comes into the US to buy assets that puts upward pressure on the dollar and the stock market and vise verse.
That's exactly what we saw Friday morning and that's what it looks like wants to happen now (4am 4-9-12). The 6e_f reversed off it's lows while the ES_f sat down there for a while. It has since perked up a bit but the 5 minute charts of both look drastically different.
Let's take a look at the 6e_f first:
Euro strength with $spx weakness this week would surprise the hell out of a lot of traders. The thing is we may only have one day to take advantage of this as Bernanke gives a speech Monday night @ 7:15 pm EST. So if there's a blood bath in Monday's session you can bet he'll say something to fix that. And don't let these articles about the Fed being out of ammo and only able to pay lip service get your arm knocked off. These people don't know Bernanke. They think it was a joke when he said he'd fly a helicopter around dropping money out. HE WAS DEAD ASS SERIOUS. Don't mess with this guy when it comes to deflation. And I'm quite sure he made this clear when he met with the big banks and fund managers last week or the week before. So I wouldn't even go home short Monday night blood bath or not. To be clear I think that 7:15 speech is a good opportunity for a short dollar trade. But not before some movement, wait for some movement.
The normalization of correlations in the market are a good sign. When you see it flip decisively like it did Friday morning it's probably not just a one time thing. It might be something we can look forward to every time we get bad news in the US. And it'll flip back permanently once Germany comes to grips that they have to devalue the Euro to get the periphery out from under this recession but that's another post for another time. For now, until next time, happy hunting traders!