Stocks Jump Most In 5 Months But Bonds Ain't Buying It (Again)

Tyler Durden's picture

Best day in 5 months for stocks. AAPL jumping to one-week highs with its 2nd biggest low to high swing in 3 years. Wherever you look, the worst came first and so the talking heads re-appeared saying the worst is over and all is rainbows, unicorns, and mountains are once again molehills. Unfortunately, while ETFs were smashed higher (HYG biggest move in a year on 2nd largest volume ever back above its 200DMA, VXX crushed -9%), risk assets broadly speaking were not playing along with Treasuries especially drifting lower in yield from the European close (and EURUSD) as stocks surged to the highs of the day. Commodities soared with Oil leading the way - though post-Europe everything flattened and leaked lower. VIX collapsed 1.2vols to end just above 15% (notably ahead of stocks relatively speaking) but equity volume on the day was dismally low as S&P 500 futures broke back above the 200DMA amid larger than average trade size.

 

Bonds weren't buying the bullishness in stocks and EURUSD...

 

More broadly, while commodities soared (with Oil squeezing hugely higher)...

 

... across FX, precious metals, rates, and spreads, equity performance was uber-exuberant...

 

The last time we saw a trend divergence between HYG and its intrinsics (early September), we saw a very significant correction between the underlying and the ETF which then rapidly reverted the next day (see bullish green oval to blue oval compared to bearish red oval to blue oval). So now tomorrow we might see HY bonds bid (like CDX today) and selling (arb) in the HYG ETF itself to narrow the gap...

The HYG volume today was enormous - 2nd highest ever. The collapse in CDX spreads and this move in HYG seem massively overdone given the total and utter void of news - is this echoes of last Thanksgiving week?

Lots of 'technical' looking moves today: ES over 200DMA, HYG over 200DMA, AAPL to critical VWAP, WTI to 50DMA, EUR to 200DMA 1.28 figure...

 

This had the feel of great desparation to us - the moves too huge to be justified by any event (Greece, Fiscal Cliff, whatever - as everyone knows there is no solution in the short-term). Front-running Bernanke? Don't think so - MBS and TSYs not moving much. We somewhat jokingly comment on the hedge funds all crying out in pain at AAPL's demise - well we wonder whether this well-orchestrated massive-scale liftathon (in every direct correlated asset possible - EURUSD, HYG, Vol?) was all about enabling exits...

 

No news and no volume, it would appear, is good news for stocks.

 

Charts: Bloomberg and Capital Context


Bonus Chart: A thought about what we just did... just as we auctioned back up to Bernanke's bottom after breaking down, so this rampfest appears to be nothing but an auction to test for any follow through up to Draghi's Derriere...