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Stocks In Hot Pursuit To Close Butterfly Spread Divergence

Tyler Durden's picture




 

The 2s10s30s butterfly - ES correlation trade proves its mettle once again. After hitting a low of 162 bps at the same time as the market dropped, the butterfly spread has jumped aggressively on the very successful 30 Year auction, with stock lagging substantially. Not for long though. As the market just demonstrated when it woke up to this divergence, ES ramped rapidly higher on no news but merely a substantial divergence from this latest carry trade (correlating better with stock than FX carry ever since the GC-IOER carry collapsed). Any time this trade diverges by 5 bps or roughly 10 ES point, the correct trade here is to put on a compression between the two, at least until banks, with the Fed's help, succeed in regaining control of general collateral rates. In the meantime, for those with a more macro focus, as Credit Trader points out: "flatteners, flatteners, flatteners."

 

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Thu, 04/14/2011 - 15:18 | 1169845 slewie the pi-rat
slewie the pi-rat's picture

that's enuf coffee for tyler!  jeeeeez!

Thu, 04/14/2011 - 15:46 | 1169960 Herd Redirectio...
Herd Redirection Committee's picture

For those that don't speak Wall St-ese there is always the Capital Research Institute!

"On Psychology & Markets"

http://www.capitalresearchinstitute.org

More and more people are catching on to the fact that two sets of rules are currently in place, one for the MEGAwealthy (net worth > $100 m), and one for the rest of us.  Besides the issue of the US government’s debt problems,  and spending more than they earn, there is the problem of the US dollar (world reserve fiat currency) on its deathbed, with a privately -owned central bank (the Federal Reserve) that has proven beyond a shadow of a doubt to have ONLY the interests of its private owners in mind.   Not only were the bailouts in 2008 a mistake, they were the largest theft in the history of mankind!  It was the largest reverse Robin Hood story in history!  The rich stealing from the poor to a degree only imagined (and probably salivated over) by the ‘great’ tyrants of the early 20th century, John D Rockefeller and JP Morgan.  Now in the 21st century we get Henry Paulson, Hank Greenberg, Ben Bernanke, Lloyd Blankfein,  Jamie Dimon, etc.

The question left to ask, then, is why haven’t EVEN MORE people woken up to facts, and the dire situation we find ourselves in?  After a long and careful look at this issue, the answer may be surprising to some.

Thu, 04/14/2011 - 15:20 | 1169852 cswjr
cswjr's picture

Any way for those of us without Bloomberg terminals to see real time 2s10s30s quotes?

Thu, 04/14/2011 - 15:21 | 1169866 Racer
Racer's picture

Just shows the casino for what it is...

Thu, 04/14/2011 - 15:22 | 1169872 earlthepearl
earlthepearl's picture

The market has been living in over-bought territory all-day

Thu, 04/14/2011 - 15:23 | 1169876 Bam_Man
Bam_Man's picture

More like since July 2010.

Thu, 04/14/2011 - 15:28 | 1169889 Cdad
Cdad's picture

The word "bought" implies that there are actual shares trading hands.  If you check your volume, you will see that volume looks like Art Cashin's scotch glass by 5 pm.

Nothing...there is no one in this place.  Bizzarro world continues.

Thu, 04/14/2011 - 15:45 | 1169956 SheepDog-One
SheepDog-One's picture

Art Crashin's scotch glass at 5 pm. ZING!

Thu, 04/14/2011 - 15:52 | 1170000 Cdad
Cdad's picture

Well...in all fairness...Cashin could easily fire back about my martini glass.  I be guilty.  Don't know how else to survive in the zombie market.

Speakin' of zombies, Dog...your Apple...is is white?  You haven't been having any cravings for human flesh lately, have ya?

Thu, 04/14/2011 - 16:12 | 1170083 SheepDog-One
SheepDog-One's picture

LOL, no mines aluminum, no cravings for brains yet! My glass in the evening is a relatively new pricey drink JD single barrel...the stuff is indescribably delicious.

Thu, 04/14/2011 - 16:15 | 1170100 Cdad
Cdad's picture

I used to drink the bourbon...but I found it got me in too much trouble.  Not that the martinis are doing anything for my late night DD.

If you start getting those odd cravings, Dog...you let old Cdad know.  I know how to cure that.

 

Thu, 04/14/2011 - 15:26 | 1169890 spekulatn
spekulatn's picture

Boing.

 

Thanks ZH. Great stuff.

Thu, 04/14/2011 - 15:26 | 1169891 plocequ1
plocequ1's picture

Butterfly spread, Hindenburg Omen, The Deathcross.. Too many concepts. Heres a good concept. Buy stocks and fuck concepts

Thu, 04/14/2011 - 15:30 | 1169894 Racer
Racer's picture

Buy stocks? From shark Banksters? Nooo way...

Thu, 04/14/2011 - 15:32 | 1169907 slewie the pi-rat
slewie the pi-rat's picture

slewie's designing a triple-lindy reverse BLS ETF.  not there's an idea whose time has surely come!

Thu, 04/14/2011 - 15:33 | 1169912 slewie the pi-rat
slewie the pi-rat's picture

i know! don't call you shirley!

Thu, 04/14/2011 - 15:39 | 1169942 plocequ1
plocequ1's picture

Forgive me. My sarcasm level is high today.

Thu, 04/14/2011 - 15:48 | 1169973 slewie the pi-rat
slewie the pi-rat's picture

lol! i liked yer comment, p!  just playin along;  no junks from slewie!

Thu, 04/14/2011 - 15:40 | 1169934 tek77blu
tek77blu's picture

best thing anyone could buy right now is uranium stocks. They're down 50-70% since japan crisis...here's a great commentary on it: http://www.youtube.com/watch?v=f-EkkhJi9VY

Thu, 04/14/2011 - 15:40 | 1169936 X. Kurt OSis
X. Kurt OSis's picture

In the meantime, for those with a more macro focus, as Credit Trader points out: "flatteners, flatteners, flatteners."

Bull or bear?  I can't figure anything out anymore...

 

 

Thu, 04/14/2011 - 15:44 | 1169949 earlthepearl
earlthepearl's picture

Seriously, feel unable to get any bearing on how to trade recently,

Thu, 04/14/2011 - 15:51 | 1169987 slewie the pi-rat
slewie the pi-rat's picture

no shit!  tyler's on de-caf til the weekend.  he must be stopped!  well,... at least slowed down? 

Thu, 04/14/2011 - 16:12 | 1170090 X. Kurt OSis
X. Kurt OSis's picture

Dead serious.  Is Tyler's source calling for bull flatterners or bear flatteners... I seriously would like to know. BarLehmanCap Live says bear... but who the hell knows.

Thu, 04/14/2011 - 16:24 | 1170141 ZeroPower
ZeroPower's picture

My $'s on a bear flattener. Not actually, but i will paper bet this. If you propose a bull flattener i would like your thoughts on why (can't find any myself).

Thu, 04/14/2011 - 17:26 | 1170417 X. Kurt OSis
X. Kurt OSis's picture

q-o-q rates out the long end are maybe a handful of basis points higher than the start of the year. 

Option A: GDP forecasts start to fall as result of the unending flock of black swans shitting all over the economy and financial markets start waking up to the real impact causing rates to fall in long end of the curve (bull flattening)

Option B: Black swans don't matter anymore, headline inflation starts bleeding into core inflation causing short rates to rise (bear flattening)... which would ultimately push down growth causing long rates to fall (bull flattening).... until we end up in a self-perpetuating stagflationary cycle that the fed can no longer control (bear flattening)... ultimately leading to an inverted yield curve... (steepening then more bear flattening).... leading to massive bull flattening.

I hope this whole thing blows up soon so I don't have to think about this anymore.

 

 

Thu, 04/14/2011 - 15:45 | 1169954 Cdad
Cdad's picture

Oh oh...no stick save for Apple.  Guess it did not get the "butterfly" memo.  And just this morning, some former rock star turned criminal syndicate Wall Street banker gushed with enthusiasm for "technology."  Great.  Nice entry point, buddy.  Try removing your asshole blinders...look around a bit...get some non rarefied air.

Never mind that the last and largest Ponzi scheme on the planet is chasing after two guys named Boehner and Reid, both running head long towards a financial cliff.  Hey Wall Street....just show me where the trap door is...you know, so that I can go stand on it for you.

Good Grief [and by that I mean it has been quite the epiphany for me personally...to see just how fucking stupid these Wall Street guys really are.  They have killed their own industry....and they still show up with the same old script each day.]

Thu, 04/14/2011 - 15:50 | 1169978 SheepDog-One
SheepDog-One's picture

Its all over really, all we're watching now is a frantic show of bankers moving about deck chairs on the Titanic to keep the Blowhorn marveling at their arranging designs and such. It is done.

Thu, 04/14/2011 - 16:01 | 1170016 Cdad
Cdad's picture

Yep...lots of guys movin' those Apple chairs around.  Lots of them.  Looks all over, indeed...unless it is ye old Triple Bottom Zombie Formation [or TBZF] I am looking at.  And folk really seem interested in selling discounted Apple calls these last few days.  Kind of like buying Apple derivatives a Kmart or something.

Additional:

Wow...look at that puke bucket close on America's beloved Chinese Slave driving, Zombification stock!  Now that was a confident close....where's Cramer with the "sell low" call?

Thu, 04/14/2011 - 16:03 | 1170054 SheepDog-One
SheepDog-One's picture

What a POS close! Barely eeked out a bit of green, huge loss for stocks on the day with the dollar tanking as well. Shiny yellow gold up a cool $15. Im just sitting back at this point watching the BlowHorn dogs in silly hats and clown outfits jump thru their Wall St bankster hoops on cue. 

Seriously, theres an eerie feeling to all this.

Thu, 04/14/2011 - 16:21 | 1170129 Cdad
Cdad's picture

Hmmmm?  Seems to me like we were all here before...I think it was in April...and the criminal syndicate known as Wall Street told us to stand on the trap door of...steel stocks, I think.  Yes.

So even though it is the the trap door of "large cap" that the syndicate is calling for this time around...trap door it be, methinks.  And look what they be doin' to large cap stocks in the AH.  Hmmmmm?

Could be that deja vu stuff some folk talk about, brother Dog.  Or...it could be that the economic light of the world is standing on a cliff threatening to jump if the sheeple don't buy stocks with Bernanke bucks.  Not sure, but I just wish I could get into that dancin' stars thing, Dog.  If I could do that, I think I'd be a better American zombie, ready to take my marching orders from the New American Marxist/Banker Party.

Thu, 04/14/2011 - 15:44 | 1169957 scatterbrains
scatterbrains's picture

who will win?  flatteners or shitty earnings releases just off the horizon?

 

Thu, 04/14/2011 - 15:55 | 1170007 slewie the pi-rat
slewie the pi-rat's picture

QEarnings 3.

Thu, 04/14/2011 - 16:15 | 1170113 max2205
max2205's picture

TD those SPY 130 puts had a chance...we'll see Friday

Thu, 04/14/2011 - 16:18 | 1170115 cjc1023
cjc1023's picture

will someone please explain to me how the 2s10s30s works?  does it involve futures or the actual t bills/bonds?  and are you long 2s short 10s long 30s or something else?

Thu, 04/14/2011 - 17:09 | 1170354 Racer
Racer's picture

There used to be a time when the market was swayed by earnings reports... oh look GOOG down on results... but futures a minute reaction then back up again.

But that was when it was a market for shares of companies, not a casino rigged for a few banksters and their HFT gunners

Thu, 04/14/2011 - 17:13 | 1170364 Ferg .
Ferg .'s picture

I was riding the ES right down since the start of the week .  Closed the short yesterday and established a long earlier today . Crystal clear 5 wave decline . Personally I don't think that this is the continuation of the bull run but merely the start of a correction that will precede a much larger decline . Months ago I would never have been a buyer but fundamental analysis has been rendered fairly useless in this environment so the hell with it , trade what the charts are telling you I guess .

Thu, 04/14/2011 - 18:50 | 1170684 Cdad
Cdad's picture

Trade what the carts are telling me?  The charts are telling me that a central banker with the initials BB has gone mad, and criminal syndicate Wall Street bankers are running wild with it, and blowing their winnings on hookers and blow...while simultaneously telling the world to "buy."

So...if I follow you...the charts are telling me to go long tin foil hats, and short every other fucking thing on the surface of the globe.

Thanks for the tip.

 

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