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Will the Euro and S&P Divergence Hold?

December 2, 2011 By Steven Place

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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