US equities close weak for the 4th day in a row - echoing last week but without some earth-moving data to save them tomorrow as NFP did last Friday. Bonds and gold were also hit hard and the USD was well bid on the day. The USD is now unchanged on the week though (with AUD down 2%) and 30Y bonds are also practically unchanged (though 5Y is +5bps on the week). JPY crosses were unable to get any traction in stocks before Europe closed but this afternoon saw them recouple and lift stocks back to unch on the day - only to disconnect into the close as stocks tumbled once again. The Russell 2000 ended back below its 50DMA (2nd day in a row) despite a ramp to try and save it. New 52-week lows spike to near 4-month highs. MOMO names rescued NASDAQ a little.
Stocks initial knee-jerk "good news is bad news" reaction was a 0.5% plunge in prices and the rest of QE-sensitive assets also reacted in a "taper" way with gold dropping, USD soaring, and bond yields spiking. But the USD strength implied JPY weakness and that just provided the momo ignition for carry traders to lift stocks 1% straight up as the heads-I-win, tails-you-lose trade continues. Gold has retraced some of its losses but the USD and bonds are stil under pressure as the US open approaches.
Everyone knows "you never go bull retard," but it seems Eclectica's Hugh Hendry, the hardiest of hardy Scots, has accepted that there is only one way for this farce to end. As Investment Week reports, the bear-turned-bull has bought 3D printing stocks as a play on trend-driven, QE-fuelled equity markets, and said the rise in the valuation of Bitcoin amounts to “the same thing”. Perhaps summing up the "trend-driven, QE-fueled" new normal better than anyone, Hendry added:"I say to my team 'don't tell me the valuations, it is trending'... This is the environment where Bitcoin could go to $1m. There is no qualitative reason, but it is trending. If I could own Bitcoin, I would. It gets worse: Hendry is now chasing the biggest momentum trend of all, that of Bitcoin, which he now "expects" to rise to $1 million! As for his hedge - don't laugh - 3D printing stocks... Sigh. We suspect, as he noted previously, he will be avoiding mirrors even more now. And yes, that this whole series now reeks of an Onion viral marketing campaign, is clear to everyone. Although sadly, we fear it is all too sincere, and a sad consequence of what happens when Bernanke's centrally-planned markets crush one after another talented asset manager and leave the E-Trade momo babies in charge.
While attention was focused on the #winning (TWTR) and #failing (NASDAQ and TSLA and so on)... the fact is that the S&P 500 futures market saw its largest collapse from high to low intraday since June 24th. While the told-you-so dance seems so inappropriate, equity markets' dump - seemingly triggered by more than one levered JPY carry trader getting a tap on the shoulder after Draghi's surprise - merely catches down to credit market's lack of exberance for the last 2 weeks (though there is still more room to drop). Stocks are at 12-day lows by the close with very litle BFTATH'ers stepping in as VIX broke back above 14.00% (highest close in over 3 weeks). FX markets were insanely volatile with early USD strength obliterated by JPY and EUR strength in the afternoon. Commodities slid lower on the day and bonds rallied - with 30Y outperformance unwinding some of the week's steepening. Stocks closed on their lows with the best volume in a month.
There is no news as a catalyst here but bonds, FX, commodity, and stock markets are smashing around as Twitter break below its open price. JPY is rushing higher against the USD (as is EUR which has retraced Fib 61.8% of its losses from Draghi). Treasury yields are collapsing. Nasdaq and all the other US equity indices are dumping as momo names suffer the most.
With everyone's attention focused on TWTR's release and following this morning's insta-lift from Draghi's surprise, US equity markets are falling fast (led by Nasdaq weakness on moar momo failures) - reverting all the gains and some. While we fully expect more "self-help" declarations as the day wears on, IB has already released a statement that Pink Sheet stock market data will be unavailable until further notice... and that NASDAQ has disable direct routing for TWTR... what a mess...
One momo company that will almost certainly miss out on all of today's Twitter/ECB induced BTFATH-euphoria, is Tesla which is down 3% premarket at last check for one simple reason: the one shown on the photo below. This is the third reported car fire in the past month. So much for that "best safety rating of any car ever tested" - perhaps it really is time to inquire just what the NHTSA kickbacks were in order to go with that "objective" determination?
On a below average volume day, there were three intriguing divergences across asset classes today. Thanks to CVX (and a few others including MSFT) the megacaps of the Dow Industrials lurched to new record highs as the Transports dropped their most in a month and the momo names (led by TSLA) took high-beta NDX and RUT down on the day. Another divergence was oil (which surged notably) and copper (which was pummeled) as gold and silver limped higher (on weaker USD ahead of tomorrow's rumored 'no cut' ECB meeting). The last notable divergence was in the Treasury complex where the long-bond continues to push higher in yield while 'forward-guidance' belief is dragging the front-end lower in yield (5s30s now 10bps steeper on the week). The short squeeze of the "most shorted" names into last night's TSLA earninsg appears to have imploded and today saw "most shorted" names dropped the most in a month...
Having been "on fire" for most of the year - managing a simply remarkable (Venezuela stock market-like) 472% gain from the start of the year to September highs; it appears the momentum stock of the year is 'running out of gas'. Now down over 22% from its highs, Elon Musk's experiment in exuberance has entered a bear market. Indices most levred to the momo mayhem are struggling this morning also with NASDAQ leading the 'charge' lower. At 3-month lows, TSLA is now up 'only' 335% YTD...
Credit markets have been nervous for over a week. Treasury yields have been rising notably. The USD has been pushing higher and with all eyes focused on the momo name du jour (and indices 'near' all-time highs) it seems few have noticed US equities have actually had 3 down days in the last 5 days. Only NASDAQ managed a green close. Of course, this is merely an excuse buy moar with all the money on the sidelines but today's move in Treasuries (and intraday volatility in stocks) suggest some anxiety is back that a flow-slowing Taper is closer on the horizon of hope than many believe. Oil and Gold lost ground on the day - though the latter is the best of the commodities on the week. The USD is back to unchanged on the week (with CAD and EUR weakness in charge). VIX diverged higher into the close with its first up-day in the last six.
Credit markets remain notably less sanguine than stocks; VIX remains relatively well bid; and in a freakish state of affairs most US equity indices closed the day with an odd shade of red against their price... all that is, except for Trannies which soared 0.67% to new all-time highs once again. Nasdaq was the worst (-0.7%) as more momo slipped (TSLA's turn today), the S&P 500 oscillated in a very twitchy manner all day around its VWAP (for its first losing day in 5 sessions) tracking EURJPY once again, and CAT dragged on the Dow. Sector dispersion off the lows from 2 weeks ago narrowed notably today. Elsewhere, the USD slipped further, now down 0.4% on the week; commodities drifted lower with oil worst (-3.8% on the week closing below $97!); and Treasuries rallied very modestly (yields down 1-2bps).
While Cramer exclaimed this morning that his 'cult' stocks were unstoppable, the MoMo names were crushed today (for no good reason) with NFLX, FB, P (late saved by AAPL), and TSLA all monkey-hammered (as rumors of a major option algo going pear-shaped spread). Meanwhile, the S&P rose for the 9th day of the last 10 and closed once again at another all-time high above another magical level - 1750. Markets keyed off the weakness in the jobs report (ignoring the construction spending beat) and ran in a Taper-off-related manner across all assets - USD was battered, Bond yields compressed, Gold and silver soared. Oil prices did not follow the pattern leaking to $97.60 (-3% on the week). Market internals today were very "glitchy" though... EURJPY was in charge once again but VIX remains bid (and higher on the day), and while credit rallied, it remains less exuberant than stocks.
Stevie Cohen's beleaguered 'hedge' fund SAC Capital has decided to shutter its London office:
- *SAC SAID TO PLAN CLOSING DOWN LONDON OFFICE BY END OF YEAR
- *SAC SAID TO EMPLOY MORE THAN 50 PEOPLE IN LONDON OFFICE
- *SAC SAYS IT CUT SIX U.S. PORTFOLIO MANAGER POSITIONS THIS WEEK
But perhaps, even more importantly - and some suggested responsible for the collapses in several major tech/momo names this morning:
- *SAC SAYS ITS SIMPLIFYING FIRM, REDUCING CAPITAL ALLOCATIONS
With stock prices held up by the marginal levered hedge fund buyer, SAC's size makes their liquidations as big a threat as anything to this fragile market.
Newsflow is weak to non-existent. S&P futures volume is 40% below average for this time of day; and ranges across all asset classes are low. Is this the calm before tomorrow's jobs report storm or the calm before storming even higher... The S&P 500 tested new all-time highs earlier (just after the US open) but is fading back. The Nasdaq and Trannies are outperforming with a notable drift lower in the almighty Russell (as momo names stutter - ahead of NFLX earnings maybe?). Treasury yields are modestly higher; the USD in unchanged (back from higher earlier); and Oil is down 1.4% from Friday's close. Silver is up 1.5% while gold and copper are unchanged. Thera er two things of note: VIX remains divergent from stocks... and credit markets are not happy.