The documentary will air Novemeber 4th at Battle of The Quants in Shanghai and from there will hopefully make its way around the world
High-beta growth-hoping Russell 2000 stocks managed to gain 5.2% from last week's lows and make new all-time highs - sure why not. The S&P and Nasdaq regained Friday's highs on moar hopes of a deal (and held them even on the meeting postponement) giving a little back into the close. Spot VIX hugged stocks all day long and as with EURJPY (carry) provided the ammunition on a day bereft of real news and strewn with rumors. With Cash Treasuries closed, futures indicated early modest strength which gave way to selling across the complex in the afternoon. The shortest-dated Treasury futures underperformed (we suspect on some liquidity premia given Bills were closed). Gold and Silver recovered to solid gains before the US equity exuberance began, then leaked lower all day long (gold unch, silver -0.35%). It wasn't all ponies and unicorn farts for the bulls though as December VIX futures went well bid this afternoon - notably divergent from equity's exuberance.
As we noted earlier, this is not what the White House was hoping for. Thanks to no T-Bill police being at work today and on the back fo JPY-carry trades, the S&P 500 has now joined the NASDAQ in the green for the day having risen non-stop since Europe closed. Treasury futures are selling off notably too (and were higher in yield long before equities went green) - with the 5Y (shortest maturity trading) the worst hit. It's unclear whether the Treasury weakness is just a reflection of equity exuberance or (given the short end weakness) reflects anxiety over the deadline.
The fine upstanding people at the NASDAQ noticed something odd this morning with SBAC:
*POTENTIALLY ERRONOUS 'SBAC' TRANSACTIONS BEING PROBED
After some discussion, they have decided that it is indeed erroneous that, as Nanex notes, SBA Communications (a $10 billion market cap company) should see its stock price jerk from $80 to $299.73 in the space of a few seconds. NASDAQ will be canceling these trades on behalf of the participants involved (we suspect the "buying" algorithm is more relieved than the "seller")
In a world devoid for the past two weeks and certainly for foreseeable future of most US economic data (this week we get no CPI, Industrial Production and New Home Sales among others), markets are now reliant on China for an indication of how the economy is doing, which is why this weekend's weaker than expected Chinese exports (ignoring the fact that China trade data is largely made up) and higher than expected consumer price inflation (driven by higher vegetable prices), even as new yuan loans soared to CNY787 billion, well above the CNY675 billion estimate despite broader M2 slowing from 14.7% in August to 14.2% in September, means the Chinese economy is once again in a vice and following the summer's liquidity driven boost, is set to roll over. Which in turn means that once again the PBOC is flying blind: unable to inject more liquidity without risking broader inflation, while most indicators are already rolling over. In short, ugly and certainly rolling over Chinese economic indicators for the market to mull over on Columbus day, even though all this will be promptly forgotten once the Washington debt ceiling song and dance resumes and the now traditional 10:30 am surge grips the algotrons as the latest set of "imminent deal" rumors is unleashed.
We now appear to be close to the day of reckoning that likely determines what the coming weeks/months hold.
- Do we step back from the brink, see our politicians reach an agreement and carry on? Although to be fair, in 2011 the break below supports that led to accelerated losses in the equity markets actually took place once an agreement was reached.
- Do we break lower thereby causing the negative feedback loop/concerns that feed back into the economy, kill any possibility of tapering and sees the Fed re-establish its dovish credentials (Like 1998 and 2011)
- Do bond yields push higher after an agreement thereby increasing concerns about a negative feedback loop into the economy, housing, emerging markets, Europe (Like 2011) and ultimately the equity market?
Time will tell us the answers to the above questions, but whatever happens, Citi notes it looks like the price action in the near future is at pivotal levels that need to be watched closely.
In the past five years it has become apparent that America can survive a near-fatal financial system collapse, an economy teetering on the edge and kept ticking only thanks to the Fed's now perpetual QE, a collapsing standard of living for everyone but the wealthiest 0.1%, declining wages, zero interest rates, surging food, energy, rent, tuition and welfare costs, and pretty much everything else, as long as the welfare state keeps humming along. Any be welfare state we mostly mean providing the daily bread to the nearly 50 million Americans living in poverty and surviving only thanks to the only thing to have exploded to epic record highs under Obama (in addition to the Fed's balance sheet of course): foodstamp usage. However, the true stability of the US may be tested very soon following reports that due to a "possible computer glitch" the Electronic Benefits Transfer System, aka EBT, ala Foodstamps, is offline. Cue mass panic among the best-weaponized population in the world. Naturally, this latest fiasco involving a country that has grown accustomed to sucking on the government's teat was immediately blamed on a "glitch" - just like everything else that is slowly but surely breaking in the New Normal.
Following three consecutive and increasingly more severe margin hikes by Interactive brokers (from Monday, Wednesday and Thursday), it was only a matter of time before the CME joined the party. And even if CME had hiked E-mini margins for all of two or three times since Lehman, whether it is due to recent surge in volatility or for whatever other reason, it had no problem doing so after the close on Friday, when moments ago it hiked initial and maintenance margins on the key market moving futures contracts including the E-Mini and big S&P, Nasdaq and Dow Jones, as well as pages of other contracts (see below) anywhere between 8% and 16%.
A lack of news on deal progress in thelast 24-36 hours was not enough to stall an epic ramp in stocks to take 'most' indices back into the green on the week. The Russell is within a hair of all-time highs again (bouncing 4.6% off Wednesday's lows) but the Nasdaq closed the week -0.27% - breaking a 5-week winning streak. All equity indices are green post-shutdown but we note in sectors, the homebuilders are still -1.6% (and Discretionary with a small gain). Treasures ended the week modestly higher in yield (with Bills ignoring equities and notably higher in yield). Gold was slammed -3%, Oil and Silver -2% and Copper -1% (as the USD gained a mere 0.3% - driven by a 1% dump in JPY). VIX underperformed equity exuberance on the day but closed lower. The close saw a mini-melt-up in stocks taking us back to the highs.
For the second time in 2013, Congress folded and stocks erupted higher. The early exuberance went dead during the middle of the day as stocks scambled back to pre-shutdown levels and stayed there but as 3pm hit (and rumors of a CR-amendment to the House DL proposal), volume exploded and broad equity indices filled all gaps and pressed up through technical levels and month- and week-to-date green levels. Much was made of the close-to-close gains in the MoMo names, but closer inspection shows they actually closed below their opening squeeze levels - on a day when the NASDAQ saw its best day of the year. Precious metals were lower on the day but dumped as the 3pm move occurred. Bonds were less impressed with the 30Y (solid auction) unchanged and T-Bills selling off ignoring equity exuberance. The USD closed unchanged.
One wonders: was this just another case of mistaken ticker identity euphoria. After all TW Telecom's ticker: TWTC. That of Twitter: TWTR. And if so, now may be a good time to put on limit sell orders 20% above the NBBO in all other permutations of TWT_ tickers.
As we noted last night, yesterday's move in US equity markets showed signs of investor panic and capitulation. BofAML points out that the inversion of the VIX to levels that have coincided with market lows for much of this year, the significant underperformance of recent outperformers (the NASDAQ Comp fell 2% and the Russell 2000 fell 1.72% vs an S&P500 decline of 1.23%), and pop in the ARMS Index all point to signs of capitulation. While this is encouraging from a technical perspective, as it says we are one step closer to completing the multi-week correction, they warn - it does not mean the correction is finished.
As headline after headline was regurgitated and used a momentum igniting ammo in stocks, the S&P managed to get back to post-Yellen-news highs before dumping into the close on the back the Fidelity "Sell" news. S&P futures closed perfectly at VWAP (and green) but the Russell and Nasdaq closed red. The Dow bounced off its 200DMA and set the lows for the day. USD strength across the board was not rotating into stocks or bonds or PMs as we suspect cash is the friend of the repo-angst deleveraging ahead. Copper and Oil are -2.3% on the week, Gold -0.4% and Silver remains positive +0.5% on the week. Treasury yields limped higher to +2bps or so on the week. VIX fell back on the day from spike high levels of 2013.
If Obama's intention in his CNBC interview was to get Wall Street to start selling, then congratulations: today he finally made some headway. However, he will have to do more before the capitulation dump we saw in the summer of 2011 pushes the House, and Boehner to finally fold (in the case of the latter, for the last time). Much More. Goldman's Sales and Trading desk explains: "Today was the first day that concerns about the debt ceiling really started to be felt."
Recent speeches from the SEC indicate they plan to use Midas to look at the details behind quote stuffing, excessive order cancellations, the cause of mini flash crashes, and other nefarious activities. While these are all good uses for a market analysis tool (Midas), they pale in comparison to a data-feed delay analysis, because the former are governed by blanket, hard-to-prove manipulation laws, while the latter can be tied directly to a core rule that lies at the heart of Regulation NMS. An improper data-feed delay was the reason for the $5 million fine against an exchange in September 2012. Furthermore, millions of people are directly affected and disadvantaged by illegal data-feed delays. Therefore, it would be a great waste of public resources to not immediately pursue a data-feed delay analysis, because there exists ample evidence that an illegal speed advantage exists in direct feeds over the public quote.