Archive - Aug 27, 2015 - Story

While oil prices are surging (global economic meltdown averted), stocks are back in the green on the week (crisis averted), and bonds are collapsing (not because of China selling according to the mainstream because "everything is awesome" again), we point traders' attention to the continued inversion in the VIX term structure. While well off the peak crisis levels, we have a long way to go to "normalized" levels of risk...

If today's ridiculous move is the kind that no retail investors would chase, it is precisely what HFTs around the globe love: nothing but momentum, momentum, momentum. In fact, HFTs are trading so much, they are literally overheating!

Wondering why the world's risk assets are all exploding higher... wonder no more. JPY - funding currency of choice for many leveraged traders - has been monkey-hammered 500 pips lower against the USD in the last few days with the last 24 hours, since Kuroda unleashed his comedy gold last night, seeing another 150 pips surge...

Varoufakis’ fans get ready! The ex finance minister is preparing to launch a European movement that will develop into a political party. Yanis Varoufakis will push for a Pan-?uropean network to fight austerity. Instead of running for the upcoming elections, he will put his energy into political action on European level.

Over the years, Socgen's Albert Edwards has repeatedly expressed his skepticism of both the economy and the market (the longest US equity "bull market" since 1945) both propped up by generous central banks injecting liquidity by the tens of trillions (at this point nobody really knows the number now that the 'black box' that is China has entered the global "plunge protection" game) and yet never did he have as "conclusive" a call as he does today. As the following note reveals, when looking at one particular indicator, Edwards is now convinced: 'we are now in a bear market."

Presented with little comment, aside to ask why is Bloomberg "Consumer Comfort" for The NorthEast region at its highest in 8 years, when The Midwest region's "Comfort" is plunging to its lowest since Nove 2014?

The 5.9% rise in the last 2 days is the largest for the S&P 500 since March 11th 2009 - when The Fed announced QE1...

The last two times the Kansas City Fed survey was this low, the US was in recession.The KC Fed survey has missed expected for eight straight months, falling to -9 in August from -7 (missing the -4 estimate). Across the board, underlying components were ugly with Shipments collapsing, Order backlogs echoing earlier surveys in demise, New Orders tumbling, and Prices received crashing.

WTI Crude just surged from $38.50 to over $41 and at the same time the USD Index has been surging. In fact, the correlation regime between these two seemingly negatively correlated assets has entirely shifted since last week's FOMC Statement.

In a well-worn tradition, where it takes one cover to offset a cover, here is Bloomberg Businessweek's latest, which shows that bears were were "covering" everywhere in the market yesterday (and continue to do so today), and certainly on the front page of the latest issue of Bloomberg's publication.

The biggest surprise in today's NAR release came from the following Larry Yun statement: "Uncertainty in the equity markets — even if the Fed raises short-term rates in September — could stabilize long-term mortgage rates and preserve affordability for buyers." So with China, Larry Summer and the IMF now calling for a rate hike, the NAR - of all entities - is suddenly quite happy to see the recent market rout continue, which would keep rates lower and promote "affordability." Guess nobody tell Larry that China has now started dumping bonds.

"China's exchange rate reform had nothing to do with the global stock market volatility, it was mainly due to the upcoming U.S. Federal Reserve monetary policy move," Yao said. "We were wronged."

Ben Bernanke and his cohort central bankers built a Brave New World (SOMA, SOMA, SOMA!) where central bank money printing would boost stock prices and the wealth created would trickle down to workers and cause a booming economy. If you doubted that, you are now seeing proof that maybe this world was a little bit of Lewis Carroll’s Alice in Wonderland along with the Aldous Huxley.