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Intraday Divergence Hits Crazy Pills Level
The below chart shows all three key correlation metrics relevant to today's market: ES, AUDJPY (or FX carry), and the UST butterfly (or Treasury curve funding). In essence in a perfectly closed system, all three should track perfectly, absent massive exogenous inflows of capital into one or more of the three, which would result in dramatic dislocations. And today's action is showing precisely this kind of dislocation: currently ES is indicating a "richness" of about 15 ES points, or almost 1.5%. For all who believe that today did not see about $150 billion of new inflows into stocks alone, this is today's convergence arb, in which the long leg could be any combination of the AUDJPY and 2s10s30s butterfly, while the short leg is, naturally, ES. Yesterday, the spread closed almost 60% at which point we suggested unwinding. We don't see why today should be any different, and the positive feedback loop algos should be proven right for once, with absolutely no fundamental validation.
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Rinse > Wash > Repeat
I think you mean Lather > Rinse > Repeat...
But, I get it.
Kids, this rally, to me is a WTF moment. And yep, I know we've had quite a few lately, but I mean, there was nothing coming across the wire today that I could see that would warrant a 250 bp rally - I am motherfucking confused. Fed-bots and algos gone wild? Any and all thoughts and comments most welcome...
I've come to the conclusion that there are just days where everyone on Geithner's "Fave 5" list makes a few billion dollars. I think they mark their calendars.
I agree Clayton... Although, I had so many over the past year that I unconsciously take them for granted, and there is very little that surprises (or can surprise) me any more...
I know that there is talk about the Fraud... err... Fed Reserve directly buying stocks and Commercial RE next, but, come on, they have been doing that since the march lows with their massive interventions...
My belief is that they will do whatever they have to do to keep the S&P above 1050 and the Dow above 10000 and the only thing that will change that is some kind of Black Swan event... I bought on the way up in May 09 and went heavy short in Apr, and have been extraordinarily frustrated by the "hidden hand" - now obvious - of the Fraud...
They have this down to a science, by providing liquidity into the market sending it higher and creating the subsequent short squeeze, and at the same time creating lack of conviction on the bid side... This will shake out and the market will correct, but we will all have developed a siege mentality before this is all over with.
Rasna, how do you fix a rigged game?
Oklaboy,
You can't, especially when the refs are in on the fix and especially when you don't have infinitely deep pockets... To the Fed, money is just equal to a spreadsheet... For individual traders, like me, it's guerilla warfare... One shot, one kill and the back into the weeds for the next opportunity... What is happening in the markets today is total bullshit, and as Tyler says, does a disservice to the bull and shit...
The only thing that worries me is that this is all part of a global plan (and I hate thinking in conspiracy theory terms) to get us to a global currency and NWO... I wouldn't be so worried, but I see a corrupt Congress, bought and paid for by corporations, a corporatist President who would rather help British Petroleum get off of the hook rather than help a critical region of our country recover and punish British Petroleum... and a Supreme Court who thinks that corporations are people...
The only thing that gets our great country back on track (if indeed we ever were on track) is the financial reckoning that will take place... The great unknown is whether the American public will have the where withall to throw the bastards out who helped to create this out of office and force the system to prosecute those who fraudulently and illegally profited from the rigged system... So far the SEC, CFTC and all of the others who should be overseeing this mess are still asleep at the switch...
I hope that we don't have to spend years on the cinder heap of what was our country to eliminate the rigged game... Only evil and corrupt people could take pride in destroying what was once America...
I don't think there is plan for NWO/global currency
Doellar standard has been working fine for 2 years with new money being created by Fed Genie whenever /wherever needed
"if ain't broke,Don't fix it"
Aaaaaaall is well, Aaaaaaall is well
The Ruling Class desperately grasps for any "fix" to remain in power.
"America's Ruling Class -- And the Perils of Revolution The only serious opposition to this arrogant Ruling Party is coming not from feckless Republicans but from what might be called the Country Party -- and its vision is revolutionary."
http://spectator.org/archives/2010/07/16/americas-ruling-class-and-the
by throwing money at it and when the mountain of cash creates it's own gravity point, it means your half way there.
Yeah, what the monster said... An avalnache seeks its equilbirum point called the angle of repose...
if you love america, you throw money in her hole
http://www.theonion.com/video/in-the-know-should-the-government-stop-dum...
Classic.
they were at 1040 for a long time...the market had to rally or give up. there have been indifcators like last friday showing the market might move up. the bad news is now good news since it means more QE and other stimulus. the market is like a drugged out addict waiting for its next pill. the only irrational bit is that if the market rallies then it wont get much until it crashes....so it will eventually i figure since it wants its further freebies...
Look at the chart sir, there was lots on it.
...sooooo you are either saying buy buy buy...or you are Commie Pinko.
Aren't those the only options?
Or you will be "assimilated"...third option...
Dick Fuld : Ummm,ahhh, uummm ... We brought down our leverage, we " de risk'd"....
But our liquidity pool did run out in 3 days' after the bank run started.... Lol....
I hope your right again (on the ES side), but I don't think they want to give the shorts any chance to cover.
Someone mentioned 1073 being the line in the sand today. Should be interesting.
They "naturally" front run the long only funds doing their 1st/4th allocations.
It also provides the added cushion for a -350K to -450K on Friday. ;>
Trying to be as objective as possible - GM and KKR IPOs are huge revenue bumps the street is salivating for. With the ability to ramp prices to give an illiustion of a healthly market, JPM, GS, stc will get these deals done this fall so that they may reap serious bonus cashish.. 1100 by friday, bitchez
Watching these markets just makes me laugh, cry and both at the same time. It's days like these which makes me regret i didn't choose a career as a carpenter or some other honourable profession, thanks to the mad scientists at central banks.
To the moon Ben, to the moon!
This is to celebrate Queasing2. You have your party hat, yes? No? Ah, then this will be reported to the authorities.
that's still more then 3 to 4 weeks from now. I wouldn't call it a frontrun.
Just a good day in heaven :)
Wow. Of all the weird looking S&P charts, the one today is, to my eye, the weirdest. After the super ramp up, it's just cruising in static mode. Almost looks like a 10yr chart. Astonishing.
don't worry... they'll find a way to ramp it up another 50bp on the close.....
unless it's mister fat fingers turn to press the PPT ignition button.
Probably something like that. What I find so fascinating is the orderliness of it all today, the steady ebb and flow, one investor enters as another exits. Zero chaos and maximum order right now. It looks so tranquil and safe . . .
this is a perfectly reasonable chart.
see that 1037, many many times?
48, 52.50, 62.50, 72.50? see those levels?
look at a chart and macd on 30 min, 1 and 4 hours. Do you not see it?
market moves up 150 points and volume goes dead doesn't anybody want to take a profit? It's like turning the motors of a 747 off in midair and it just stays where it is.
Smalltime traders may be taking profits, but then program "HoverAt1080" kicks in to correct.
Nice metaphor.
And if you actually experience that, it would be the first indication that the 747 in question never left the ground in the first place, and the scene before of the land going by as you "flew over" was a projection on the windows. It was all a fake. Have a nice laugh, pretty good prank. On the other hand, you didn't get where you needed to go, either.
Nor will this market. Nor will this economy. It's a prank, but it's not funny.
They will ramp the close on high volume. The lower the volume now, the higher the VWAP, the more their clients get raped. Same game different month.
We'll see if QE 2 flies once people realize that Bernanke is simply raising input costs for companies, while at the same time increasing the nations debt burden.
Bernanke = increased unemployment, higher energy and food costs
What say you, O-team?
WOW WOW WOW!! Don't speed it man.
Let's start with the basics: FREE MONEY!! FREE MONEY!!!
COKE FOR ALL!! FREE!! THANKS TO BENNY B.!
Queasing2 is buying time, that's all. During that time something worse might happen and that will be blamed for the loss of a once-great nation and the next 100 years of decay in the West.
See, they have a strategy. You might notice that their strategy has nothing whatsoever to do with any of us here actually surviving. But don't ever say they didn't have a strategy.
There won't be a QE2 measure.
QE1 was the life boat for the 1st class of family and friends. When the boat struck ice, the family and friends of Wall Street and Washington screamed and demanded to be saved.
The rest of the peons can try and swim to survive or the sinking ship will pull them down into the abyss.
It was never about America or the economy or anyone outside of the circle.
Excellent point, I never thought about it like that. Bondholders are laughing now, QE2 isnt necessary for them.
QE2 is about November elections, and nothing more. The party in power wants to stay in power and will sacrifice a lot of debt to do it. Then they default. But they want that 4-more-years at any price.
They might not get it even with all the effort. They absolutely are going to try.
In my own thinking, everyone seems to be moving on the assumption that we are about to witness the last free election in America. Whoever wins ... won.
Free elections? Nothing is free. Diebold free would be better
Free to choose repugnicons or demoncrats, same boss.
Free to live with the choice the sheep make ...oh hurrah! Sarc/off
Can't argue with that.
I should have put "free" in air-quotes. We lost that battle a long time ago.
Each day we get closer and closer to S&P 900 or less, no matter how many candy bars it eats. Symptoms of a pure sugar diet consumed by silicon-based lifeforms.
It's about time for Robo to print the wildebeest herd pix again.
The wildebeest herd has long been devoured.
This is no longer about animal spirits.
Animals have instinct. We give them too little credit for that.
This is psycho drug enduced behaviour which can be diagnosed in your typical Wall Street coke head.
Yeah, but the herd pix still make me laugh.
Crazy market... can't break through 1040 with a week of horrendous econ reports, then stocks explode higher on an awful (if better than expected) Chicago PMI report. Time to figure out which sports drink you prefer. The Fed obviously drinks the one on the left. (Hat tip: Idiocracy)
http://img816.imageshack.us/img816/816/drinks.jpg
Thou shalt not profit from shorting this market!!!
spoke G'd's busiest WORKER aka Lloyd Blank .. (cheque to trade anything anytime) .. Fein
Anyone notice the 10 year? Almost above 2.6%
A buying opportunity. Seriously.
BUY HIGH, SELL LOW! :)
Why do I get the impression that the only function in the 'new normal' is dysfunction?
BTW, this 'new normal' mantra sounds an awful lot like the housing 'new normal' and I am just waiting for CNBC jugheads to proclaim, 'this time it's different!'
At which point, I will indeed pop up a batch of corn and find an easy chair to sit in ... because it's going to get interesting from there until 2012.
Tyler Durden wrote: "Intraday Divergence Hits Crazy Pills Level"I think asset preservation should be on everyone's priority list.
"Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy."
Groucho Marx (1890 - 1977 )
Stock Market Strategy: Irresistible Force Meets Immovable Object @ http://tinyurl.com/33dlkxq
Its going to be interesting to see if all this intervention (irresistible force) will be able to succeed against the economica reality (immovable object)
Who needs the other forces. Seasonality forces will break it.
Maybe all those crazy pills where manufactured in August. They seem to have a lot of them.
By the way, does anyone know when the market opens today, 3:30 or 3:59?
Usually 3:30 but sometimes it's late.
Unless asia closes sunday bloody sunday. Then it could be open all day.
What ratios do you use for the AUDJPY vs ES trade?
The AUDJPY does not move the same amount of pips as the ES intraday.
For example 1 contract on the ES ($50) is not the same as $5 per pip on the AJ...
match the implied $ notional. So per contract
ES = 1080*50=54000
Then on the AJ side you need to match that with the equivalent notional, which depends on the Broker. For think or swim, it would be 54,000 quantity, but need to round. For interactive brokers would be the notional converted to Aud$ or
54000/.9103 =59321 AUD$ to buy in Yen
Look at this bitch (SP), she's staying within a range of 5 points since 10 am ramp at the end not today might make todays market moves less believable. Have to keep up appearances you know.
what a sick absurd farce this shit is
go to hell team geithner crooks
eat shit and die
the take-away is CENTRAL BANK CONTROL OF MARKETS
Updated S&P500 charts:
http://stockmarket618.wordpress.com
The truly bizarre nature of all of this is just that...bizarre. "Yea, the economy is going down the shitter again. More free money from the Feds to pump stocks, that by all accounts should be going down the toilet as well." We are in the land of Oz.
Nice to see the continued to push the /ES (so it would be over the 50 day) into 4:15...what will be most entertaining is when they all say they just didn't see it coming when this fall makes 08 look like a walk through CandyLand.
Right about the time I am in such disbelief that I feel I might vomit on days like today -- I take a look at the S&P monthly chart and I am reminded of just how tenuous this whole rally thing really is....
Wasn't this pre-ordained a few weeks back? September 1, there for all to see...
http://www.zerohedge.com/article/tradition-mindless-stock-ramping-fed-po...
Market closed down on the other dates though...
That's because they were saving it for today.
Yeah, learned that the hard way after buying ATM options on the IWM weeklies. Gave up with this one, which makes perfect sense why today rallied.
Your trade isn't correct since you don't really use a real correlation.
If you want to trade this arbitrage, you should do a regression of AUDJPY vs S&P500 on different time scales.
It's what I did on the following time scale :
2004 / 2007 / YTD / April / July
It allowed me to compute 5 models calculating the fair value of S&P500 depending on AUDJPY. When on 3 or more of the model, the spread with its fair value is wider than 12 Pts, I get in.
I'm not at the office right now but I'll post tomorow the Alpha, Beta and Correlation of these models.
Depending on the models, the Beta is between 12 and 15 which means that, in practice, you need to trade between 60 and 75K AUDJPY per contrat (50$ Pt Value).
How do you do a regression or rebase to 1st?
USDCHF got awfully close to parity today at 1230 GMT, just 15 minutes AFTER the horrible ADP news got out. Doesn't add up in today's marketconditions.
From what I gather ... Still looking for SPX 1040 to 1080. Got that today. Then 980. If 1115 is seen it will be the "umteenth" opportunity to exit at the 200MA. Above 1130 (a magical fib number and a kind of twelve year line in the sand) with proper supporting structures then a run to new 52W highs is likely.
A TENP move is imminent.
I do the regression with SPX Index not with ES1.
Here's the Alpha / Beta / Correlation on different time scale :
Since 2005: SPX = 16.654 - 211.577 R^2 : 0.857
Since 2007: SPX = 16.642 - 233.121 R^2 : 0.888
YTD : SPX = 11.109 +223.78 R^2 : 0.860
15 April : SPX = 12.093+153.02 R^2 : 0.928
1st July : SPX = 16.995-224.007 R^2 : 0.856
With a AUDJPY currently at 76.50 it makes a fair value on S&P500 of :
1062.45
1038.88
1073.61
1078.63
1076.71
The S&P is then actually a bit overvalued but I don't think it's time to get into the convergence trade, we should wait until the divergence is exceeding 10 Pts on the models based on 2010 data.
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