VWAPalooza Keeps Risk Anchored (For Now)

Tyler Durden's picture

After last night's craziness, equity markets anchored off the synthetics and the synthetics anchored to VWAP. We clung there at VWAP all day long in S&P 500 futures with some rumor-driven angst into the close to try and get some levitation. Much was made of VIX's decline from its opening highs, however, a look back at the week and it is obvious that this was hedgers unwinding their positions (leaving VIX still notably more worried than stocks). Equities in general collapsed down to where yesterday's risk-assets had languished and cross-asset-class correlations were very high today (which makes sense as every algo in the market was working over time to hold us together after the flash crash overnight). The USD ends the week unchanged (with AUD 1.5% weaker and SEK 1.9% stronger) and early winners and losers in commodities reverted (oil down and silver/gold up today) leaving Silver -7% on the week still! Treasury yields ended only 7bps higher on the week (well off the 15bps on Tuesday) as Financials remain the week's winners (+2.5%) and Staples the losers (-2.25%).

VIX is still telling a different story... despite the compression today... lots of theta now until 12/27 when congress is back so makes some sense...


Stocks slumped to broad risk-assets' view of the world (from yesterday) and clung there all day (upper right). ETFs were a little more noisy with SPY under- and over-performing after Europe's close (upper left). Correlations (lower right) were almost 1 as algos were in charge...


which is even more obvious from the VWAP-hugger in S&P 500 futures today...(+/- 2 sigma around VWAP all day bid and offered)...


The USD ended the week unchanged...


and today saw commodities revert a little though Silver remains slammed...


Treasurioes and stocks stayed well corelated most of the week - though it seems that it is always stocks that get overexcited and revert...


Charts: Bloomberg and Capital Context

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Rathmullan's picture

Check out $DJX.X January Put pricing. Never seen such F'd up price movement even with triple witch. Someone thinks they know something or there was a premature Mayan calendar miss relief rally.

Winston Churchill's picture

Unless its our dear congresscritters buying those puts its the Mayan relief rally.

PM's ,if you can't beat them join them;

The pattern is so blatant now with the PM rise for the first two weeks ,and down for the

second fortnight of the options cycle, that everyone can make some fiat to buy the real thing.


AynRandFan's picture

The way PM's have resisted any upward rally in the midst of QE3 and QE4, seems prices have hit a strong resistance level.  Gonna take a lot to rally from here without a decent pullback.  I'm hoping for another $1500 support on gold.

Rathmullan's picture

No, someone came in selling puts big time dropping the price relative to intraday market move by nearly 50%. Someone is extremely confident that this market is not going much lower between now and the January expiration.

PUD's picture

Obama will give fiscal cliff statement at 5 p.m.


AynRandFan's picture

He's gonna drop the Blame Bomb.

Clowns on Acid's picture

Forward, Fairness, or Flagellation !

EclecticParrot's picture

"It's not surprising, then, they get bitter, they cling to guns or religion -- or VWAP."

AynRandFan's picture

Kyle Bass calls it "optimism bias".  Other folks call it "complacency".  It all boils down to an overwhelming trust that traders and investors have in central banks and other government functionaries to control the outcome of financial markets.  Even now, economic confidence as measured by Gallup is extremely high among those who identify themselves as Democrats, while Republicans and Independents are quite pessimistic.

Risk assessment nowadays has everything to do with this irrational aspect of human emotion and the likelihood that at some point confidence will be lost in a manipulated, authoritarian system.

ball-and-chain's picture

It's all wealth confiscation.

The top earners are like vaccuum cleaners.

They're in lockstep with the government.

And they won't be happy till they steal the lollipops from every baby in the world.

They'll steal our money.  Then give us foodstamps to make themselves feel better.


orangegeek's picture

US Dollar moves up.




Euro does the opposite.


When the US Dollar takes off, these markets won't flash crash - it will just be down turn that will last long after 2013.