Nikkei

The Nikkei just wiped out all gains for 2010 in less than 3 hours. Elsewhere it is not much better: Shanghai down 1.52% and Hang Seng down 1.63% at last check. Furthermore, in taking a page from the rating agency playbook, the Hang Seng Index broke earlier as a result of excess selling.

As Zero Hedge presented previously, the sharp divergence between the Nikkei and the S&P indexed in gold continues. The two reindexed indexes, which have correlated 0.91 since March, have diverged sharply in the past three weeks, and now stand at an over 11% divergence in performance since the year lows. Whether this is due to the "shocking" recent realization that Japan is caught in an ever increasing deflationary vortex (which the US likely will not avoid, at least not in the near term), or simply due to momo quants deciding that the Nikkei is no longer fun to chase, a convergence trade on the two broad indexes (long Nikkei, short S&P) seems like a rather painless way to pick 10%. Then again, ask Boaz Weinstein about "surething" convergence trades.