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Implied Correlation Closes At All Time Record High

Tyler Durden's picture




 

Or another possible title: Stock Dispersion Hits All Time Record Low...

It was only Wednesday when we were lamenting the collapse of alpha after implied correlation hit an all time intraday high of just under 80. Well, today should be the day when all long/short funds are shutting down: implied corr just closed at an all time record high of 79.57, after also posting an absolute intraday record of 80.08. It is getting ever more obvious that stocks continue to trade more and more as just one asset class, as seen by the constant increase in JCJ below, which has risen almost 15% in this week alone. At this rate, every stock will trade just like every other stock in under 3 weeks when alpha is officially put to rest and stock dispersion has undergone an extinction level event (better known as HFT and ETF encroachment, in which it is the price that determines value and not the other way around).

And here is some food for thought: if stocks trade increasingly as one, and if the Hindenburg Omen (as we pointed out first yesterday before the term the internet on fire) is confirmed in the next 5 weeks, just what will happen when everything sells off as one?

 

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Fri, 08/13/2010 - 17:32 | 520879 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

How much does the President's Working Group on Financial Markets own anyway?

Fri, 08/13/2010 - 17:37 | 520891 Getagrip
Getagrip's picture

Hey Lennon-Looking Good!

Fri, 08/13/2010 - 17:37 | 520887 Getagrip
Getagrip's picture

I like stocks. I buy them with the VXX. Come on Beta!!!

Sat, 08/14/2010 - 10:05 | 521521 DarkMath
DarkMath's picture

Implied correlation is a direct result of HFT. And HFT is a direct result of the SLP.

For the evidence find a 5 year graph of IC and look for the start of the uptrend. It started in 2008 at the same time the SLP came online.

So who controls the SLP: the PPT. It was put in place to provide liquidity to the markets. Without the SLP we would have crashed long ago.....

Do not panic. Put your life preservers on immediately and head directly to the exits. Do not panic but remain calm. Leave all but your most essential belongings in your cabins. Food and Water will be provided on the life boats.

Do not panic. Put your life preservers on immediately and head directly to the exits. Do not panic but remain calm. Leave all but your most essential belongings in your cabins. Food and Water will be provided on the life boats.

Do not panic. Put your life preservers on immediately and head directly to the exits. Do not panic but remain calm. Leave all but your most essential belongings in your cabins. Food and Water will be provided on the life boats.

Do not panic. Put your life preservers on immediately and head directly to the exits. Do not panic but remain calm. Leave all but your most essential belongings in your cabins. Food and Water will be provided on the life boats.

 

Sat, 08/14/2010 - 17:33 | 521966 NoControl
NoControl's picture

Wikipedia says there's no such thing.

You sir, are a rogue and a liar!

 

http://en.wikipedia.org/wiki/Supplemental_Liquidity_Provider

Supplemental Liquidity Provider From Wikipedia, the free encyclopedia

Jump to: navigation, search

Wikipedia does not have an article with this exact name. Please search for Supplemental Liquidity Provider in Wikipedia to check for alternative titles or spellings.

* Start the Supplemental Liquidity Provider article, using the Article Wizard if you wish, or add a request for it.

* Search for "Supplemental Liquidity Provider" in existing articles. * Look for pages within Wikipedia that link to this title.

 

...........Though it's linked to in the disambiguation page......

Supplemental Liquidity Provider, a pilot program under NYSE intended to stimulate market makers into providing more quotes resulting in tighter spreads

Fri, 08/13/2010 - 17:37 | 520888 Misean
Misean's picture

Joe and Jane 401K only look at the index number to feel good/bad about their net worth (now that the house is down the toilet).  Why should this be a problem?

Fri, 08/13/2010 - 17:37 | 520889 SilverIsKing
SilverIsKing's picture

"...just what will happen when everything sells off as one?"

ONE.BIG.CRASH.BITCHEZ!

Fri, 08/13/2010 - 17:57 | 520918 joseywales
joseywales's picture

Tyler:

I don't know how you run these correlations and what stocks are in your modelling universe.  Could you indicate whether you are including commodity stocks and ETFs or do you only include stock ETFs?

Fri, 08/13/2010 - 18:52 | 521033 barthezz
barthezz's picture

these are not run by TD. CBOE publishes the index value every 4 minutes.

www.cboe.com/micro/impliedcorrelation/ImpliedCorrelationIndicator.pdf

Fri, 08/13/2010 - 19:11 | 521053 RobotTrader
RobotTrader's picture

It's a product of high anxiety.

10,000 hedge funds with "billions under management"

Each hedge fund trader looking over their shoulder to see what the 9,999 other guys are doing.

Fri, 08/13/2010 - 22:50 | 521211 RoRoTrader
RoRoTrader's picture

alligator dream, crockodile heaven..........sort of like your bra

and where is Cheeky Bastard btw?.......some of your charts reminded me........up in Finnmark fishing salmon?.....or smoking it along the border........i miss his commentary.

always and forever love dreaming about your tits......the hair is nice too.......love your style more

xoxxx

Fri, 08/13/2010 - 23:42 | 521244 RoRoTrader
RoRoTrader's picture

an aside, but just imagine about all the programed dna encoded in that photo of the river crossing.........like i said, i love your style femRobot.

so all about price discovery, don't you think?

 

Fri, 08/13/2010 - 21:28 | 521147 jbc77
jbc77's picture

Some side effects to go along with the rise of the machines. Wonder if those swell circut breakers they installed will fly into action the next time we get a 1000 point drop. I'm sure all those algos were re-written, they won't bail the next time.

You can almost feel the end is near.

Fri, 08/13/2010 - 23:10 | 521240 RoRoTrader
RoRoTrader's picture

forget about the machines, it's all about the tits,..... and then the caviar......been to the daty lately?.......it's the only real y in town

Sat, 08/14/2010 - 00:19 | 521304 trav7777
trav7777's picture

Index futures dictate the market.  The daily action is just to normalize to them.

Market action now is getting more like it's forming an Einstein-Bose condensate

Sat, 08/14/2010 - 07:40 | 521432 Henry Chinaski
Henry Chinaski's picture

 just what will happen when everything sells off as one?

Not much if you are already in cash and PMs.

What good are charts when you are sailing in uncharted territory?

Just sayin.

Sat, 08/14/2010 - 10:32 | 521580 RockyRacoon
RockyRacoon's picture

You beat me to the punch.  I am becoming less and less interested in how the mannequin market is performing (to use an invalid term).  Some other observant person commented in another article that market performance is a result of economic activity, not the economy itself.  If the "market" is useful only as a confidence indicator then its role has been bastardized.   I see the real markets when I stand in line at Kroger, Walmart, and drive by the Employment Security Division of my State.   Employment Security being the worst oxymoron of the century.

Sat, 08/14/2010 - 21:02 | 522126 ZeroPower
ZeroPower's picture

FYI - nov '08 saw KCJ (Jan '09 maturity) hit 106. 

So, while yes the JCJ is at extremely high levels, this could simply revert back to the mean which has been the theme of the past few months.

Sun, 08/15/2010 - 05:17 | 522265 boogey_bank
boogey_bank's picture

Wanna now one thing that for sure will not collapse in this impending crash?

Your favorite bullion dealer ask price.

Sun, 08/15/2010 - 14:20 | 522613 Grand Supercycle
Grand Supercycle's picture

Updated DOW and SP500 charts:

http://stockmarket618.wordpress.com

Tue, 09/28/2010 - 09:01 | 609679 Herry12
Herry12's picture

Resources like the one you mentioned here will be very useful for me! I like to share it with all my friends and hope they will definitely like it.
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rocky89's picture

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