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The origin of unconventional superconductivity in cuprate superconductors remains a great challenge. Early observations of stripe correlations in La_2-x-yNd_xSr_yCuO₄ confirmed the existence of spin and charge density wave orders near a “magical” p = 1/8 hole-doping where superconductivity disappears. At about the same time, ARPES measurements observed a pseudogap at temperatures much higher than T_C. The observation of CDW and pseudogap states appearing together and vanishing near optimal doping led to the speculation that these parameters are correlated and have a common origin. However, with the detection of weak charge density waves in YBCO near optimal doping (away from p = 1/8), these claims need to be re-evaluated. In that regard, rare-earth crystal field spectroscopy, used as a probe of the local structural and electronic environment in ErBa₂Cu₃O_6+x, provided evidence for charge-transfer between the copper chains and planes and the formation of clusters with three distinct states. In this talk, I will discuss recent single crystal diffuse scattering work to elucidate the nature of local short-range order and its correlation with CDW and the pseudogap states.