Something Breaks: ES, Carry Crosses Tumble

Tyler Durden's picture

Out of the blue, ES just dropped a good 5 points. Yes, in the good old PCP (Pre-Central Planning) days, this was perfectly normal, but since now we have a whole army of millisecond, algorithmic robots and a whole floor at 33 Liberty dedicated exclusively to making sure things like this never happen, it is rather disturbing. And in tried and true (anti) correlation fashion, the USD/JPY are jumping against all carry crosses. As far as we know this was not predicated by any news: granted, export news out of Japan were horrendous (12.5% Y/Y drop), but those should have been mostly priced in. Having observed the overnight futures every day for the past two years, this kind of thing "just doesn't happen" any more, which is why we are eagerly searching for what may have been the catalyst. If we find one, we will promptly update. In the meantime remember: he who defects first, defects best.

ES upward channel now solidly broken:

One potential explanation is in the form of the following report from the WSJ that banks face potential liabilities of over $17 billion on fraudclosure, but we doubt it.

State attorneys general told the nation's five largest banks on Tuesday they face a potential liability of at least $17 billion in civil lawsuits if a settlement isn't reached to address improper foreclosure practices, according to people familiar with the matter. The figure doesn't cover additional billions of dollars in potential claims from federal agencies such as the Department of Housing and Urban Development and the Justice Department. State and federal officials haven't proposed a specific comprehensive settlement figure, but Tuesday's discussions represented the first effort to formally quantify potential liability.

This is precisely as we predicted when we reported on the $5 billion counteroffer from the banks to the first suggested $20 billion AG settlement: "this is merely a counteroffer to the $20 billion
preliminary bid. Which means that the final number to put the entire
robosigning affair behind us will be about $10 billion give or take. And
banks can go back to doing what they do best: post 0 trading losses per
quarter, and other such infinite sigma events. " in other words, following the initial $20 billion bid, and the banks' $5 billion counteroffer, a settlement will be found in the middle. $17 billion sounds like a nice, solid 2nd round bid.

Another possible explanation is that the market is reacting to the tumble of Glencore shares in their HK debut:

Glencore shares were trading at HK$64.65 compared with the offer price of HK$66.53 each. Last week, Glencore raised $10 billion through a London and Hong Kong initial public offering, giving the Swiss commodities trader the firepower for acquisitions.

Glencore's London-listed shares were stuck under water on their first day on Tuesday, dashing hopes of a strong start after it set a mid-range flotation price for London's largest-ever offering.

We doubt this too: GETCO deals with such a puny distrubance in the farce with a few million channel stuffing ES bids (and offers) each and every morning.

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kato's picture

was waiting for oyu to find out what it was. if you do not know yet, who does?

Don Quixotic's picture

No0b question: what does "ES" stand for?

silberblick's picture

Click below to see a visual graph of Bankster's dirty needs arranged according to Abraham Maslow's hierarchy of needs:

suldog's picture

Futures contract for S&P 500

Goldenhands57's picture

Some Futures Contracts are traded "mini" which is 1/5 the size (and cost) of a full Contract. A Full S&P Contract has quite a large Margin Mini is accessable to more folks.  ES is a very activly traded Futures ..the Volumns are in fact astounding in a normal trade day! ES is one of favored of Futures Day Traders because of the ability to both enter and exit a position in very short periods of time. This is the symbol of this particular Commodity contract..ES  

DaBernank's picture

Excellent description, Gh57.

msamour's picture

Best description i've seen so far, Thanks.

luckylogger's picture

Just a little shock and awe to show Bennie boy what will happen.

enjoy and trade accordingly !

should be fun.

bigelkhorn's picture

I think this is something bigger set for the day. The market has been slow and wet and weak monday and tuesday. I think this means something HMMMMM

I subscribe to the guy from australia and his FFT economic newsletter at  that guy has called many big events before they have happend, including the stock market crash in 2008 and the current financial collapse of the US. (currently happening) I found him from a friend last year, and he has some important work.

His oil calls are insane, and I have been making good money with them. He is well worth a look, if you want to keep two steps ahead of the sheeple out there.

I am worried about my financial future. Is anyone else nervous out there?

BigJim's picture

I have seen this SPAM so many times now. Fuck off, twat.

ColonelCooper's picture

"Is anyone else nervous out there?" 

Do they actually put that line in a handbook for you stupid fuckers?  It sure seems like 5 or 6 hundred of you have used it.



Two Towers AU AG's picture

Heard some news about someone buying about 40000 GLD Aug/Sept Calls the investment required was about 50 Million. Any idea who it might be.. and why bet on gold price rise in spite of rising USD... or is there somone with an expectation of USD falling sharply.. which would be in case the debt limit talks are not successful... just wondering...

The time of the FRN is over.. The time of Silverrrrrrr Bitchezzzzzzzz has come..

Don Quixotic's picture
OK, so I see some relatively big volume trading yesterday in September GLD Calls. Namely: 155, 158, 175 calls which are all out of the money. The thing is they in total only about 3,500 options traded hands at these strikes. I'll give you that the open interest for Sep Calls is huge at the 150, 155, 160, 170, and 180 strikes (all over 10,000 contracts some much more). Is that what you're referring to? I mean, there's no big open interest in the August calls that could accomodate a single trader with a position that big.  The other thing is, who the heck wrote all these calls and why? That's worth wondering about at least as much.
Don Quixotic's picture

And this is why I love ZH. Thx all.

BIGBOHICA's picture

12:03 AM Stock index futures are steady at lower levels after a rapid 0.75% drop on rumors a snap election is to be called in Greece.

ToNYC's picture


If you play someone else's game for 10 minutes and don't know who is the patsy, it's quite likely you.

Belrev's picture

Looks like another "oh my god the hell is breaking lose nothing important" moments.

tgatliff's picture

Exactly... I think a better explanation is that the crazy college interns at 33 Liberty Street forgot to finish their work before they left the office.   Gosh darn kids these days...

FastBoat's picture

Raising capital to buy some of that sweet AIG offering tomorrow.

ParaZite's picture

LULZ... anyone stupid enough to bail out the fed, take on their debt, and buy AIG deserves the fist fucking they are begging for. I thought it funny that has a big expose on gambling, yet nothing about the dumb fucks who are going to shift their pension money into a nearly break even deal for the fed. I would THINK the American people would grow weary of bailing out wall street and it's beloved banks. 

Cdad's picture


It was predicated by the closing of the AH session, and the fact that the S&P broke down today [or rather all but broke down today].  As for that second point, Carter Worth of Oppenheimer has publicly stated that this particular breakdown [1313], after three previous breakdowns [failure to make a new high, short term trend line, medium term trend line] was nothing but good news because of the powerful snap back rally this particular breakdown would produce.

And if you can understand what I just said, which is a summary of what Carter Worth said, then you are a very different person than I.

So...anyway...on to the Plunging and Screaming phase of this phony market then.  Hi ho.

SwingForce's picture

Ah yes, Carter "High Net" Worth, of 1313 Mockingbird lane.........

When was the last time he was right? "Pictures of Matchstick Men" now playing on TARGET TV commercial, all is weel, go back to sleep folks.

topcallingtroll's picture

It is funny how everyone including me gets either jittery or excited over small moves now.

There seems to be a good amount of fear and worry in the market. The talking heads cant even hide it on cnbc, except rick. I still dont understand why put call ratio doesnt confirm the fear i see in all of us, even mainstream people.

It just seems we cant go down far this soon. Most sheeple i know are still in cash and bonds. Even the zheeple are mostly out of stocks.

Cdad's picture

Most sheeple i know are still in cash and bonds.

That is exactly why the criminal syndicate Wall Street bankers are nervous.  Almost three years and $5 trillion dollars spent...and  the largest rally in market history...and still, Average Joe does not give a shit about the stock market.

You answered your own query.

As for the put/call ratio, give it about 4.7 nanoseconds after the market opens below 1313...and then check your ratio again.  100% electronic.

Quinvarius's picture

It is banker panic that brings markets down.

Founders Keeper's picture

[It is banker panic that brings markets down.]---Quinvarius

No.  I expect the serious downward market action will come when banks start eating banks. TBTF vs TBTF.


suldog's picture

TBTF becomes TBTR&H - Too Big To Run & Hide.

The hunters will eventually become the hunted.

Those will be fun days for sure.

RockyRacoon's picture

Yessir!  Banker posse forming at the saloon.  

Set 'em up barkeep, my men ride tonight!

Trillax's picture

Cdad, do you have an instant messaging account that you use (frequently or otherwise), there are questions I would like to ask that are not abusive or average run-of-the-mill troll?

One of the shortsight of the current ZH system (which I don't blame Tyler in much less the software underlying) or is there something that I don't know about, in some setting someplace that you can send private messages to other members?



Cdad's picture

Nope.  You'll have to ask your question here.  It's a brotherhood.  I do not think arranging a private room is necessary.

Trillax's picture

Understood and respected.  I am not in the same caliber that you, CD, Sheepdog, and others that I respect imminently, nor am I a trader by profession.  However, I would like to understand some of your comments.  You mentioned, ".. three previous breakdowns" in context this means the S&P, am I correct?  If so are you referring to: 8/1/10, 6/1/10, 2/1/09 (on average) or is my charting software on the brink or am I missing the picture completely?

I take your comments in the context of '[failure to make a new high, short term trend line, medium term trend line] was nothing but good news'.  Yet, but I look in the context of 2/1/09-> onwards on a news trend I don't see things (even with the delusion of the market that's it's "permi-good" out there) that overall things have contextually changed.

So knowing what you know -- and forgetting what I know -- beyond the manipulation in the market.. Why do we still see swings to the downside which are expected, yet every day at 11-3pm EST the market always closes in the green?

Wow.  Nevermind.  Beyond PTT and the obvious I think I just answered my own question.

 Thanks totally to the obvious anyhow.  I'm sure I'm gonna get flamed.

Cdad's picture

My comments about technical break points came from Cater Worth last night on Fast Money over at the BlowHorn [CNBC].  Failure to make a new S&P high was the first break, and the other two were trend lines that C. Worth drew...each of which was violated.  He then went on to suggest that the fourth break would be the jackpot!  Uh huh.

As for why the market always snaps back:  POMO.  And more to the point, the criminal syndicate Wall Street bankers have been training folk for months now to be good lil' dip buyers...which is exactly what the criminal syndicate needs now that POMO is see.

Anyway, I think you got it all figured out.



Trillax's picture

.."As for why the market always snaps back:  POMO.  And more to the point, the criminal syndicate Wall Street bankers have been training folk for months now to be good lil' dip buyers...which is exactly what the criminal syndicate needs now that POMO is see."


Thank you for leading me down the trail.  Wow.  I have some reading to do..

suldog's picture

The old "triple top" can be a powerful signal.

If you try three times to break through an area but fail, all of the traders on the side that was trying to 'break through' can capitulate and even reverse their positions culminating in a change of market direction.

In simpler terms, three strikes and you're out. 

tickhound's picture

Yup... Often even in the shortest of time scales (ticks), it can be said that there's no such thing as a triple top, or bottom.

SkySavage's picture

Still 6.5 now.

Chicago bear's picture

Maybe Panetta said, "EKIA"

Goldtoothchimp09's picture

technical break of important support.  It's a technical move.

Billy Shears's picture

Some kind of modified flash crash?

DeadFred's picture

Perhaps someone is beta testing their newest flash crash modification to their HFT algo just in time to remind the state AGs that the 5 in 5 billion means 5 not 17.

SwingForce's picture

Its a FLUSHOUT, bang the stops, shut the front door, back the truck up, if it was really The End, don't you think "they" would need the MOST bagholders? Why flush? Get Giddy widit.

TumblingDice's picture

It could have something to do with a broken trendline from Aug '10 being broken. Over the last two years most down moves were made to look impulsive and decisive, being sharp aggressive shock and awe affairs that were then aggressively bought...May 6 being the best example. This latest down move looks like a corrective bull flag, maybe to lure some bagholders in before the maelstrom.