Russell Closes At All Time High As VIX Has Biggest Two Day Drop Ever

Tyler Durden's picture




 

Update 2: MLNX down 22%. Earnings, and cash flows, matter. And now, time to ramp some other stock only to see it implode when it announces earnings or guides down.

Update: MLNX, a $2.6 billion market cap company, was up 3% today before being halted after hours and crushing guidance by preannouncing horrible revenues. Expect many other S&P 500 companies to be forced to do the same now that their market value, driven almost exclusively by "someone's" ceaseless selling of VIX futures and by correlation engines which assume every company has to rise (and sometimes even fall) by the same amount as the biggest synthetic indicator, the E-Mini, is so disconnected from any cash-flow reality, that only the Fed can possibly assume there is fair value for the stock market at current levels.

* * *

The drop in VIX in the last two days is the biggest percentage drop on record (based on Bloomberg's data) as the S&P 500 futures (ES) have managed a 70-point rally. The exuberance at today's open ebbed through the middle of the day but then resurged into the close as the day-session range was actually quite narrow (sub-10pts). High-yield credit surged (leading the way) coupled with VXX (huge odd volume spike) as pain trades were everywhere. FX markets were decidedly unimpressed even as Treasuries tracked along with stocks for most of the day (though lagged the late-day surge as 10Y yields stalled out at the 12/187 highs). Commodities held on to gains even as the USD turned positive on the week. On the bright side, all those who have been invested in the S&P since March 2000 can exit at (nominal) breakeven and all it took was a 400% increase in the size of the Fed's balance sheet. This feels very delicate and all anchored on a massive protection unwind (as volumes and blocks were dumped into the late-day ripfest).

 

Massive volume spikes into the closes of the last two days... as ES lurches over 70 points...


 

Last time we saw a two-day swing like this we sold back 75% of it within a week...

 

VIX drops over 35% in the last two days...

 

and the synthetic ETF VXX was crushed - with an odd volume spike... -11.5% to all-time lows...

 

The collapse in VXX was the major risk-on driver today

 

as was HYG's surge...

 

10Y Yields snapped higher to 12/18 recent highs and stalled out...

 

FX markets were not following along...

 

as EURJPY - which was heralded last night as indicating the world was bid - slid back to unchanged from New Year's Eve...

 

So - FX markets did not buy it;Treasuries did not buy it; and massive vol compression (remember how overly short vol the market is and just how painful that would be) drove a huge short-covering spike in stocks... and volume was not that big by the way - despite all the excitement of a 300+ point rally in the Dow on TV.

 

Blocks were big and volume was heavy as we spiked...

 

Charts: Bloomberg and Capital Context

Bonus Chart: The chart every NYSE floor trader is worried about... TRIN vs the index today...(h/t @eminiwatch) - TRIN is a technical analysis indicator that compares advancing and declining stock issues and trading volume as an indicator of overall market sentiment.


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Wed, 01/02/2013 - 18:21 | 3116529 ekm
ekm's picture

Links works.

Pension funds want to buy protection but it's denied.

Big bank can claw back their assets.

Wed, 01/02/2013 - 18:45 | 3116601 ekm
ekm's picture

Thi is what I'm thinking right now.

Inflow have been into stock ETFs, not stocks.

ETFs are simply storage of stocks by itself. So big banks buy stocks nobody wants and package them into ETFs to sell them to suckers that have no control of of 401k accounts. Since the portfolio managers hold the decision making, buying index ETFs or major ETFs is the best way to get a juicy salary but not get blamed for anything.

 

Fonz

I think we found it. I think we did.

Wed, 01/02/2013 - 17:14 | 3116191 Theta_Burn
Theta_Burn's picture

Luckily I was wiped out a couple yrs ago selling similar news like we had the last couple days.

I certainly would have been smoked today...

Wed, 01/02/2013 - 17:15 | 3116192 qqqqtrader
qqqqtrader's picture

I stole my grandma's pension check today and bought SPX, she'll thank me for doing so in a few years!

Wed, 01/02/2013 - 17:38 | 3116316 GMadScientist
GMadScientist's picture

If she finds her way back...

Wed, 01/02/2013 - 17:15 | 3116194 ReptilianSlaveMaster
ReptilianSlaveMaster's picture

This market is going to the moon - buy now or die!

Wed, 01/02/2013 - 18:16 | 3116500 walküre
walküre's picture

+1 buy now or be priced out forever! we need moar suckas!

Wed, 01/02/2013 - 17:15 | 3116195 Cognitive Dissonance
Cognitive Dissonance's picture

Skynet should be scanned for disc errors.

<Because this just does not compute.>

Wed, 01/02/2013 - 17:15 | 3116196 dirtyfiles
dirtyfiles's picture

common really?`

Wed, 01/02/2013 - 17:15 | 3116197 Future Jim
Future Jim's picture

What is supressing the VIX? Is it intentional?

Wed, 01/02/2013 - 17:44 | 3116335 Schmuck Raker
Schmuck Raker's picture

That's the rumor. Or "Tylerism" is better.

Great clue HD! LOL

Wed, 01/02/2013 - 20:59 | 3117087 Future Jim
Future Jim's picture

So no one knows?

Wed, 01/02/2013 - 17:19 | 3116212 HD
HD's picture

Whatever tiny amount amount of faith I had in politicians and financial markets finally and completely evaporated today.

There really is no shame, no truth, no courage and no integrity. Everything is about optics and nothing more.

The tinfoil hat wearers of the world are right. I guess I'm going long Alcoa.

Wed, 01/02/2013 - 17:24 | 3116232 SheepDog-One
SheepDog-One's picture

All 100% totaly fake and rigged....anyone who believed in any way there was real 'political rancour' or actual markets can now rest totaly assured its all completely fake.

Wed, 01/02/2013 - 17:31 | 3116274 HD
HD's picture

Agreed.  The fact that a lame duck GOP approved a last minute craptacular deal is proof enough for me.

Wed, 01/02/2013 - 17:23 | 3116227 Alpha Monkey
Alpha Monkey's picture

Markets gonna beat 2007 peaks in nominal terms(forget real terms) ?  I think not...

Wed, 01/02/2013 - 17:54 | 3116385 Panafrican Funk...
Panafrican Funktron Robot's picture

85 billion unsterilized pumping per month.  Think again.

Wed, 01/02/2013 - 17:25 | 3116238 Bay of Pigs
Bay of Pigs's picture

CRACK UP BOOM bitchez

Wed, 01/02/2013 - 17:25 | 3116240 mr. mirbach
mr. mirbach's picture

Today's rise in the market only reflects the latest devaluation of the dollar thanks to CONgress' can kicking.

 

Wed, 01/02/2013 - 17:25 | 3116243 Ras Bongo
Ras Bongo's picture

ZH, give up on the bearish calls. You are make idiots poorer.

Wed, 01/02/2013 - 17:32 | 3116261 CaptianSpaulding
CaptianSpaulding's picture

No are... Fixed it for ya

Wed, 01/02/2013 - 17:37 | 3116312 GMadScientist
GMadScientist's picture

All your grammar are belong to us with sense of humor.

Wed, 01/02/2013 - 17:42 | 3116334 CaptianSpaulding
CaptianSpaulding's picture

I are get it. My bad

Wed, 01/02/2013 - 17:31 | 3116266 otto skorzeny
otto skorzeny's picture

i never remember any ZH articles giving advice to buy or sell anything-other than a few hack contributors. also-you gots the gud inglish.

Wed, 01/02/2013 - 17:55 | 3116390 ebworthen
ebworthen's picture

If someone is standing outside a casino telling people the slots and table games are rigged - yet they go in and gamble anyway - whose fault is it if they lose?

Wed, 01/02/2013 - 18:18 | 3116513 walküre
walküre's picture

You wish... the day ZH turns bullish is the day of the ultimate top and short entry.

Wed, 01/02/2013 - 17:26 | 3116249 ebworthen
ebworthen's picture

Pigs fly, monkeys fly out of Bernanke's butt, debt is meaningless, unemployment good, up down, day night, etc., etc., etc.

When do I get a raise and free healthcare for maxing out my credit card and not paying my bills?

Wed, 01/02/2013 - 17:29 | 3116258 steveo77
steveo77's picture

Free 10 ounce Silver contest.  The new contest is posted!!!!!!!!

Enter early, only the first correct price gets the bar.

I did 35.21 (so don't use that one, right?)

Use the link on the side of my blog

http://oahutrading.blogspot.com/2013/01/new-silver-contest-is-open-10-ou...

Wed, 01/02/2013 - 17:32 | 3116278 chancee
chancee's picture

My opinion is the E-mini is the end-all-be-all driver of everything.  It is the epicenter of manipulation for all asset classes.  And has been for about three years now.

Wed, 01/02/2013 - 17:50 | 3116353 BlueStreet
BlueStreet's picture

And a rat hole to throw money down.  

Wed, 01/02/2013 - 17:35 | 3116295 zendome
zendome's picture

Oh for f's sake...I had a valid buy signal on 12/31 on the ES and I didn't take it because I didn't want to hold through the year end cliff crap.  Joke's on me I guess.  There is no upper limit to how absurd this thing can get.

Wed, 01/02/2013 - 18:05 | 3116446 Al Huxley
Al Huxley's picture

Well yes, one thing was fucking dead-to-right certain, and that was that there would be a 'deal' at the very last minute, and there would be no 'going over the cliff'.   So buying should have been a no-brainer.  But the intensity of the buying today WAS pretty surprising.

Wed, 01/02/2013 - 17:36 | 3116298 youngman
youngman's picture

Japan markets way up....China´s..Germany..the USA...wow....and only one bad HFT today..one algo gone bad...just amazing actually...we can see them stealing right in front of us...and we just yawn....

Wed, 01/02/2013 - 17:37 | 3116301 Rompoculos
Rompoculos's picture

So, you are happy to sell to the Fed, who is happy to pay any price for your assets, the higher the better. But, are you happy to buy from the Fed? At any price?

Wed, 01/02/2013 - 17:36 | 3116303 DrDre
DrDre's picture

"If that markets takes off and you will not be long it, you'll regret it. Maybe not today. Maybe not tomorrow, but soon and for the rest of your life."

 

Wed, 01/02/2013 - 17:37 | 3116308 tahoebumsmith
tahoebumsmith's picture

Money for nothing and your chicks for free. It's all one big party, until it isn't...

Wed, 01/02/2013 - 17:40 | 3116322 Zen Bernanke
Zen Bernanke's picture

Hell ya.  It's all good baby!

Wed, 01/02/2013 - 17:42 | 3116331 inevitablecollapse
inevitablecollapse's picture

do you think that 4q earnings will tamper any of this exuberance?

Wed, 01/02/2013 - 17:54 | 3116382 Sudden Debt
Sudden Debt's picture

well, for europe Q4 earnings are looking at a -2% average eps vs. last year.

so that's going to stink the pop up

Wed, 01/02/2013 - 17:46 | 3116342 Racer
Racer's picture

Have you got an overlay of small business confidence with the RUT?

Wed, 01/02/2013 - 17:49 | 3116348 HD
HD's picture

The question is - after a day like today with beginning of the year allocation and massive short covering, if this was (more or less) the 2013 top.

We already know Ben is printing forever along with every other central bank  - everyone is margined to the max, so I have to wonder what's the upside catalyst for 2013?

Wed, 01/02/2013 - 17:58 | 3116412 Panafrican Funk...
Panafrican Funktron Robot's picture

"what's the upside catalyst for 2013?"

85 billion in unsterilized printing per month, for at least 12 months, if not longer, and may potentially be more.  Remember, the stock market is priced in nominal terms.  

Wed, 01/02/2013 - 18:35 | 3116570 walküre
walküre's picture

Sure, try and make money trying to catch a crumb of that $85 billion in unsterilized printing. It doesn't work that way. It didn't work that way in 2011 or 2012 either. This money is not being printed for your benefit. Maybe for your entertainment and most certainly for your pain.

No gain but lots of pain.

Wed, 01/02/2013 - 17:51 | 3116370 Sudden Debt
Sudden Debt's picture

copper up bigtime...
silver up bigtime...
gold... up... but not that much....

let's hope gold has some catching up to do when people realize printing the shit out of America will still happen.

Wed, 01/02/2013 - 18:08 | 3116466 Al Huxley
Al Huxley's picture

Since I only buy it when the bears are out in full force, and full control of the psychology, and since now more than ever is the time to own it, I kind of hope it doesn't catch up - as long as I get paid in digital paper, lower exchange rate is better.

Wed, 01/02/2013 - 18:56 | 3116647 The Joker
The Joker's picture

Hey Hux, a couple of weeks ago I said Gold will dip at 1550.  You said 1660.  Someone else, I think Roosting Chicken, said 1650.  How did you know that Hux?  What are you looking at Hux?  You work for GS don't you Hux?  I knew it.  You're the fucking manipulater aren't you?  Hux?  Inquiring minds want to know Hux, how the fuck did you know that?

Wed, 01/02/2013 - 19:13 | 3116723 Al Huxley
Al Huxley's picture

If I worked for GS, I would be telling you the WRONG answers, not the right ones LOL.

Thu, 01/03/2013 - 17:58 | 3120148 The Joker
The Joker's picture

Thanks for the smackdown today Hux ;)

Wed, 01/02/2013 - 19:15 | 3116736 Al Huxley
Al Huxley's picture

And BTW, what I was looking at when I said 1660 was the RSI.  It generally doesn't drop much below 30 for gold.

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