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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The Joker's picture

Thanks Hux, the check is in the mail.  Wait...oh, I see what you did there.  You gave me the WRONG answer didn't you.  You sly dog you.  Go back to work now Hux, I need you to smack it down tonight.

Roosting Chicken's picture

Easy.  Just take the day's volume and divide it by 2yr avg SP500 multiplied by the VXY and the 3 yr avg GDP divided by the current ES2 minus the SPY and then invert it...but only after you factor the DOW with 10yr TSY multiplied by the real inflation rate (use your best guess on that one). 


Al Huxley's picture

Oooo, I'll try that next time then!

The Joker's picture

I like Hux's method better.  I would tip you but I haven't left a tip since I was circumcised.

Schmuck Raker's picture

Confession: It would appear my call, in Dec. of 2011, for a VIX spike to 80 in 2012 was a bit wide of the mark.

Anyone who wants their money back, well...

Schmuck Raker's picture

I predict a VIX spike above 80 in 2013. September 6th. You can take that to the bank. Double or nothin'.

razorthin's picture

Hyperinflation has arrived...

jeff314's picture

when hyperinflation will be here VXX will climb a lot higher

Frank N. Beans's picture

i did one, and only one, smart thing lately, even tho i was tempted:

i did NOT buy TVIX


chump666's picture

Surely no one shorted this?  DXY collapse Asian session was the indicator there was going to be big rally.

Dow and S&P are still trading below Oct 2012 highs.  It is Europe and Asia that is overbought. 

Lets see how the money printers handle break outs of oil inflation, Asian geopolitical issues, Europe 2013 endgame...with German election and widespread riots, war in the middle east and south china sea, corn price blow out again, some more inflation, extra nasty riots, environmental uncertainty, HFTs going bananas, rogue trades with extra sauce on top, another bank bailout - probably a Wall Street brokerage firm etc etc etc.


razorthin's picture

"Stocks"  was trending last night on Yahoo!  You know what that means.  Surrogate to your shoeshine boy.

MarcusLCrassus's picture

Thank you, Barack Obama!

walküre's picture

MLNX is I$rael Jew money baiting - Sha$om

I hope every dual citizenship holder in Congress is totally "in" on that. They deserve to lose every penny for their stupidity and greed.

Did anyone really expect that either Senate or Congress would vote for a collapse of their ponzi system that delivers them paycheque after paycheque without ever lifting a finger? They're lazy ass actors who get paid to show up. Now they're getting paid even more. Yes that's right, the deal they voted on was basically sweetened with a pay raise. How could they not vote FOR it? Where I'm coming from that's called a conflict of interest. Just sayin'. Where's the rule of law in this country? They gag everyone until the last minute, make everyone hold their breath literally and vote in the middle of the night on the last day of the year?



The Joker's picture

Rule of law.  BWAH HA HA HA HA!

You're in the jungle baby, you're gonna die!

Chartist's picture

Here's what I don't like, all the super bears like Janjuah, Rogers and Faber have zip locked mouths now that the market is ripping...I expect these guys to say they were wrong....Of course they'll admit it after they've accumulated their long positions.

dwdollar's picture

Oh yes, everything is FUCKING FANTASTIC. Way to go market. Way to go...

So when does +QE4VER end again?

EclecticParrot's picture

On days like this, in times like these, for some odd reason I always find it helpful to re-watch 1964's "Les Parapluies de Cherbourg," with the unequaled teamwork of Jacques Demy/Michel Legrand (oh -- and, by the way, Deneuve at age 20 makes one's LCD screen levitate in the air), as a reminder of the difference between true artistry and public masturbation, i.e., Congress and these markets.

Russell all-time highs, eh ?  Oh, really !  Anyone not seeing this coming with that rambunctious index being goosed daily at 10:35 in 2012 should be forced to use a photo of that dork from the Fox Network's gold commercials, who resembles a cross between a lizard and Alfred E. Newman (forever discouraging teens from smoking pot in a pet store), as their ZH avatar.

Without question, today was one big self-flagellating wizz-job.  As grandma said, if you don't stop it, you'll go blind (or crack your head open).

salami_tsunami's picture

well, my portfolio jumped $700 today. not bad for sitting around in pajamas.

salami_tsunami's picture

anyone interested, it's TC, INTC (bought at $19 low), DLPH, NVDA, and LLTC


TC has almost doubled up since I got it for 2.80


these are all super long, not a day trader, just a freelancer with no pension lol

salami_tsunami's picture

the rest of my money is in a cashbox

overmedicatedundersexed's picture
just got my 2013 property tax assessment, they dropped my assessment 50,000 dollars..thats gotta be good for the re market and economy, note live in maryland land of high taxation..