Inter-market correlations broke down as quarter-end looms and the US dollar came back better bid. US equities added 1.8% in broad terms as volumes were ostensibly thin. The jump was despite ominous economic data. The Chicago Fed National Activity Index continued to flash below trend growth ahead, dipping to a much lower than anticipated -0.90 in August after a -0.56 print the prior month. The relapse in a month that was supposed to be propped up by ''cash for clunkers'' should give the bulls some pause. In any case, quarter-end looks to be wreaking havoc on volumes and price action.

In this vein, we took a look at where the potential money flows will be in the equity space. The Eurozone has handedly outperformed in 3Q †adding 27% (USD terms) in the quarter. The UK returned 18% while the US is up a similar 16% thus far. Japan has underperformed significantly and despite the JPY strength, has only added 8% for the quarter (in USD terms). If one were to re-balance this kind of stock portfolio, they would likely be a seller of EUR and a buyer of JPY while remaining relatively neutral USD and GBP. This could explain some of the recent strength in the JPY -- Fujii comments notwithstanding. With quarter-end two days away, the path of least resistance also seems to be for a lower EUR overall.

In a likely surprise to the systematic trading community, the extremely robust correlation between EUR/USD and equities broke down today. These two had enjoyed a 97% positive relationship all month. EUR/USD opened NY trading at 1.4642 and squeezed down to a 1.4588 low midway through. Most of the drop was on the back of comments from ECB President Trichet. His musings were decidedly bullish on the greenback. He said that it is ''extremely important'' to have a strong dollar and that such an outcome is in the US interest. This still looks to be keeping the pair under pressure and we would expect better sellers ahead of important hourly trendline resistance at 1.4677 currently.

The commodity space also witnessed confusing price action. News reports of an Iran missile launch renewed fears of potential conflict in the region and this helped BCO/USD extend higher. Brent squeezed up from a 64.49 intraday low to sit just below 66 as the session closed out. The September 4th low at 66.67 now looms as the next important resistance level. Gold was weaker on the back of USD strength. The precious metal initially caught a bid on the back of the equity market rally and shot up to a 996.81 session high. This would not last, however, and it was a rather swift and violent drop into a 989 low. The Kijun line lurks at 982 and a daily close below there would be technically detrimental for the precious metal.