ES Substantially Underperforms Broader Risk As Scramble Into Defensives Returns 4% in 3 Weeks For "QE Unwind" Basket

Tyler Durden's picture

Comparing ES to the broader RISK basket discussed extensively previously, it appears that following several days of decoupling of the S&P contract to broader risk, today we saw the opposite, when around 1 pm the two series diverged and never looked back. The selling pressure was certainly focused on stocks, led by financials and energy stocks. The shift to defensives is becoming palpable: following our  pair trade advice to retrench into consumer staples and utilities while shorting discretionary and industrials (better known as the QE Unwind trade) would have returned almost 4% since inception on May 16.

ES-Risk divergence:

And outperformance of Defensives, aka the QE Unwind trade.


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PaperBear's picture

Gold/silver holding up well.

Spitzer's picture

Too well for the summer.

centerline's picture

The next couple of weeks should be pivotal for the short term (summer).

RobotTrader's picture

Ratio traders scored huge as well.

GDX/GLD ratio plunged to new 2011 lows.

Bullion has held up well but the gold shares have been utterly horrific.

gimli's picture

Tell me about it ....... each day waiting for miners to capitulate and cover

ghostfaceinvestah's picture

Not bad advice - if you need to be invested long, at least own something that pays a dividend and can continue paying that dividend.

Trash is gonna crash, no question.

Whatta's picture

why the selling of energy stocks? prices are holding fairly well, and all the Street boys are still somewhat bullish on outlook?

tallen's picture

Time for QE3.

Greeny's picture

"QE Unwind trade" Is FED really gong to stop buying paper?

If it's really "exit" the why is the heck Dollar acting dead?

I think it's not QE exit that affecting the Equity but rater

summertime slow down and bad employment data.

And I don't think FED will take anything off the balance sheet.


AldoHux_IV's picture

Word from the trading pits via ransquawk that GS bought a subsutantial size es contracts into the close-- looks like they're hoping for a compression in the spread come tomorrow. Expect GS's sellside analysts to become bearish and recommend selling /es to their clients.

Franken_Stein's picture


When I say "I lie", and that is a lie, then I lie and don't lie at the same time.

But that's impossible.

Except ...

When the outer lie and the inner non-lie refer to different subjects.


Downtoolong's picture

I always knew you damn Goldman defense attorneys lurk here on ZH from time to time.

mick's picture

4% in 3 weeks big fucking deal.  when would you exit?  Now, tomorrow, not sure?  Come back and tell me how clever you are when you've bought, sold, paid trading costs and returned that profit (which isn't very big, by the way).

anony's picture

au contraire, bon ami.


4% of a trillion dollars is.....let's see.....carry the two..... that's about $40,000,000 FRNs














ghostfaceinvestah's picture

4% in three weeks is 95% annualized.  That's not a good return for you?

anony's picture

errr.....uuhh...what is the ".qeunwind" index composed of?

Cdad's picture


Huge Roach Motel [SPY] AH trades printing above the HOD.  But yeah, yeah...I's nothing...doesn't mean a thing.  

Just here to point out the obvious bullsh!t that goes on this market day in and day out...because I know the criminal syndicate known as Wall Street is very interested in building confidence in our markets.  So there you go...have a great big obvious bowl of market manipulation for your confidence's sake.

Man, the average criminal banker must have very little faith in the sheeples' ability to...SEE OBVIOUS THINGS.  Maybe if they just marked the trades as coming through ACE [American Confidence Exchange] we could bleat and buy Netflix shares from them with a P/E the equivalent of Tranquility Bay?

Hello criminal syndicate...DUH!

And if that isn't enough for you, the BlowHorn [CNBC] now joins the Wiener show already in progress.  

Good Grief [and by that I mean stick a fork in my sense of confidence, please]

shockadelika's picture

I've seen those prints as well, everyday after regular fleecing hours close.  WTF is that all about anyways?  Massive buy/covers or what?

Cdad's picture

Ummm...well, it is hard to know.  Mostly, people tell me it doesn't mean anything.  I don't think there is anyone left at the exchanges with enough integrity to even attempt to answer the question.

Could be something to do with all the creation units machine running all over the place in criminal syndicate Wall Street banks.  Could be unscrupulous short sellers getting ahead of tomorrow's open.  Could be short positions being set which will induce the terminators to cover said short position tomorrow in an attempt to thwart a complete index wipe out.  Could be Martians LBOing the Roach Motel [SPY] with an eye towards creating the first intergalactic insect hotel chain.

Hard to say, really.  But mostly, anyone you talk to will tell you it means nothing...which is kinda fishy smelling...or indicative of the smell of barbarians pouring over the walls right before Rome burns.


Greeny's picture

RIMM $38.91 wow, tell me it's overvalued too..


Highrev's picture

The QE Unwind trade would have returned almost 4% since inception on May 16.

And there's more meat on that bone still.

h/t ZH.


But, but, how does this jive with QE3?


Tyler Durden's picture

The trade hedges a long PM position, which would go ballistic when QE3 does appear. At that point the unwind trade will be nullified with more than enough profit sourced from a long PM (short USD) position.

Downtoolong's picture

I couldn’t help but notice how the two stocks that our government holds a huge equity stake in , AIG and GM, have gotten pummeled substantially more than most in just the last few weeks.  Coincidence, or not-so-subtle message? It’s one thing for Wall Street economists to float warnings of economic slowdowns and downward GDP revisions as a way of beating the drum for QE3. It’s maybe even more effective if Wall Street traders sell the shit out of their favorite funding patsy’s equity holdings as a way of letting them know if they don’t continue to pump you’re going to dump. Just a thought. But, it wouldn’t be the first time Wall Street turned on a benefactor or a customer to make a point, and an extra buck at the same time. 

dracos_ghost's picture

I think they announced (the gubmint) that they will divest all there holdings in AIG and GM by the end of the year. Expect the hedgies and private equity dicks to crash them even more so they can buy at firesale prices. Then, all of a sudden, they will be considered the most undervalued quality equities on the friggin planet. Fund managers will pay huge premiums to "get in on the action". 401(k)s will get dry penetrated once again.

F*(king joke.