US equity markets traded in a narrow range ahead of tomorrow's Yellen testimony with Trannies underperforming and Nasdaq outperforming. Cross-asset-class correlations picked up from their negligible levels on Friday as JPY (and increasingly 5Y bonds) are linked at the hip with stocks. The S&P cash tested almost up to 1,800 (but failed at 1799.94) then faded. Notably from the European close, equity handily outperformed credit markets - which ended closing near their wides of the day. Treasuries ended the day modestly bid (30y -2bps) but T-Bill yields are starting to reflect debt-ceiling concerns. The USD closed unch - drifting lower from overnight strength - but gold and silver rallied on the day (though faded of early highs). Late-day ramp efforts got the S&P green but failed to cross 1,800... and VIX decoupled on the ramp.
Despite the short-term memory-losing recency-biased perspective that a 2-day rally in stocks has seemingly set in investors' minds, Citi's FX Technicals group remains concerned that the S&P 500 is stretched by historical standards. At this point, they add, the S&P is more stretched than in 2007 and a bit less stretched than 2000 with the line in the sand around 1,700.
Following the 2nd dismal jobs print in a row, it would appear the market's new "common knowledge" is that the Fed will be forced to un-taper - despite Hilsenrath's "Fed stays the course" perspective. Everything is up today (apart from the USD). The disconnects from recent correlations were extreme as stocks lost the plot against FX carry, commodities, and bonds. The best 2 days in a row for stocks in 4 months sent most indices to critical technical levels and dragged all but Trannies and the Russell back into the green on the week. Oil prices surged back above $100. Bonds rallied (and bull steepened). Gold, silver, and copper all gained notably (with silver's best week in 6 months). Buy, buy it all... apart from VIX which was monkey-hammered back to 15% (down over 2 vols). So with FX carry left in the dust, what was the ammunition for the move? a 6.3% rip squeeze in the "most shorted" stocks.
With 31% of the float short, Green Mountain, despite announcing weaker than expected numbers, are spiking over 45% on news that Coca-Cola is taking a 10% stake. Albeit at a discount to the price at which GMCR closed today ($80.88 close vs $74.98 purchase price); the massive squeeze is Volkswagen-reminiscent. As the following press release explains, The Keurig Cold System is in development and thus SodaStream is getting creamed in the after-hours market (down over 10%). It seems, once again, that Whitney Tilson has managed to get himself in a short squeeze.
Thanks to a bounce off 101.00, USDJPY supported yet another marginal bounce off fresh 2014 lows in US equities (led by a heavyily turmoiled Russell this morning following the better than expected ISM Services). Nasdaq and Trannies bounced off its 100DMA and the Dow rallied back to modestly green and tested the 200DMA from below. The ubiquitous late-day ramp attempt failed and the Dow lost its marginal green color into the close; Trannies and Russell underperforming. Notably though, despite stocks ending flat to down, Treasury yields surged 6-8bps off post-ADP lows (and 3-4bps up on the day). Gold and silver spiked on the weak ADP data and faded back on the day with Silver outperforming on the week (+3.5% vs 1.1% gold). Credit and VIX once again were not playing ball this afternoon and diverged from stock's bounce but we do note that equities are showing notably more volatilty relative to FX carry in the last 2 days. YTD: Dow -7%, Russell -6%, S&P -5%, Nasdaq -4%
Once again the smell of NAPALM is in the air
The farce that is the so-called stock "market" gets more and more mindblowing every day. Following yesterday's record high volume in VIX futures and options, this morning saw one stock - the $4bn market cap WhiteWave Foods represent a stunning 27% of all quotes in this morning's pre-open. As Nanex notes in this great analysis, HFT algos generated 2.04 million quotes which created... drum roll please... 3 trades.
US (and Japanese) stocks began their dead-cat bounce around the European open tracking USDJPY (once again) and rising in reverse order of yesterday's selloff as Nikkei, Trannies, Nasdaq and so on (in order) recovered around 25-35% of yesterday's losses. For Fibonacci-watchers, S&P futures ticked 38.2% retracement and stalled and VWAP was support all day. Credit markets did not buy it and stocks caught down to them. Silver, having underperformed since the taper, outperformed today back over $19.50 and +1.7% on the week as gold slipped modestly today (but +0.8% on the week). Treasuries sold off modestly leaving yields -2-3bps on the week. AUD stength and JPY weakness supported stocks but the USD flatlined ahead of tomorrow's ECB meeting. MUB, the Muni ETF, was smashed lower on the Puero Rico junking (and that triggered a quick waterfall in stocks) but that was quickli BTFD'd. VIX fell an impressive 2.9 vols to 18.5%.
Equities have the worst day of the year and really no exchange around the globe was left out. Now every one on our screen is down YTD. For US markets, today was the worst day since last June. Overall, while today was active, it was still an orderly session. We did have some interest to buy topside options... Serious pain in risk assets lent a bid to US treasuries as yields continue to retreat from their New Years’ day highs.
The Nasdaq plunged by the most in over 8 months today and broke all the way back to unchanged from the December taper decision of the Fed. All major US equity indices are now negative from the time the Fed decided to slow its flow of free money. The Dow closed below its 200DMA for the first time since December 2012. The S&P 500 closed the furthest below its 100DMA since QE3 started. USDJPY was in charge and everything was higher or lower beta off of that as it broke 102 early then 101 later in the day (with the Nikkei -700 points from the day's highs). Treasuries rallied around 5bps to fresh 7-month low yields for 30Y. Gold and Silver surged, adding 1% on the day as the USD lost 0.25% on the day (led by the 1% strength in the JPY). VIX smashed to 14 month highs over 21%. Credit deteriorated but stocks are catching down.
US equities are pressing fresh lows of the day as USDJPY tests 101. The Nasdaq just broke 4,000 - its worst drop in 8 months; The Dow trading back under its 200DMA; and now every major index is in negative territory from the December Taper. Most notably though, Treasury yields are tumbling as weak data and safe-haven flows have pressed 30-year yields to their lowest sicen July 5th 2013. VIX is trading 20.7% - its highest in 4 months.
At one time it was the tough that got going when things started to get rough. Now, it’s just the money-minded that look, watch, and act before you know what has hit you.
Despite every talking head having written off the miners, they were the best performer across US equity sub-indices. In the US equity markets Biotech and REITs also performed well. On the other hand, Nasdaq Insurance and NYSE Arca Oil ETF were the worst...along with the NYSE Composite Index (which represents 61% of all global market capitalization).
Another volatile day ended with the Dow is down around 5% in January - the worst start to a year since 2009 (and 2nd worst since 1990) and the worst month since May 2012 (a 3-sigma miss of the average +1.5% per month gain since 2009's lows). Japan, Brazil, and Russia suffered greatly on the month as gold miners, Egypt?, and US Biotech did well. There is a huge 380bps spread between the performance of the Industrials and the Transports YTD. Gold had its best month in the last 5; Treasuries rallied with 10Y yields dropping their most since May 2012; USD rallied the most in 8 months with JPY's biggest rally (and Nikkei's biggest loss) since April 2012.
Despite the best efforts of CNBC to have every bull on Amazon explain how great it really is and how they could enable to magical profit machine any minute if they so choose, the hedge fund hotel stock du jour is now down 10% and Bloomberg headlines blare:
*SEC Short Sale Rule 201 is in Effect : AMZN (NASDAQ)
Last night's algo-ramp to VWAP (on rising Prime prices?) is a long-distant memory now...