S&P500 Drops after LCH hikes Margins on Italy Bonds

UPDATE: Italian Bonds Sink As LCH.Clearnet Ups Margin Calls
From the Wall Street Journal 

The yield on the benchmark 10-year bond soared by 45 basis points to 7.12%, according to Tradeweb, above the psychological 7% mark that prompted Greece, Ireland, and Portugal to seek external assistance as funding costs became unsustainable.

Gold holds as market tumbles on Greek Referendum

The stock market dropped dramatically in the morning, bounced then sold off near the end of day.  S&P500 down 2.79%.  Gold however held up very well, selling with risk off mood but bought up on the dip showing the bulls are back in control of this market.  It isn't surprising that gold is catching a bid while other risk assets tumbled.  With Yen intervention Sunday (Sharp 5% jump) Night and Greek Referendum (over 3% drop in Euro) called today, major currency are at risk of volatile moves.

Continue to watch gold as the US will be entering debt discussions shortly to find ways to trim its deficit.

Note the volume is above average and bearish.  This market is in trouble with breaks of 121 on the SPY.

Correlation breakdown SPY vs GLD: Repeat of August 2011?

During the market crash in August 2011, gold found its place as a reserve asset as the USD was under fire due to a lack of a debt agreement.  It appears that from the latest move in gold and S&P500 that this reserve / safe haven status is returning.  With the market dropping almost 2% today and gold rallying almost 3% the lock step correlation over the past 2-3 months appears to have broke down. 

The next few days will be key to determining where these asset classes will go next.

Correlation breakdown at end of day: SLV (silver) and SPY (S&P 500)

I have been a believer in some form of correlation breakdown between metals and the stock market during a rapid decline.  However, it appears SLV and GLD have traded down with the market recently.   However, something happened at the end of the day Monday October 17th, 2011.  Just after 3:30pm, SLV had a nice rally into close as the SPY sold off to close near the lows of the day. 

You can see that silver has continued to trade slightly up as the Hong Kong exchange opened.
As it still seems that metals and the SPY are functions of the USD, until central banks (in the east most likely) start to buy gold / silver on equity sell offs, SLV and SPY will probably continue to trade up and down roughly together.