E-Bay Market Sends Stocks To VWAP As Bond Yields Spike To 8 Month Highs

Tyler Durden's picture

The short-squeeze rip extended through the middle of the day today but on considerably lower volume as we tested up to QE3 highs and sucked in just a few more traders. It seems retail sales (and outlooks) disappointing, higher taxes for 77% of us, debt ceiling and spending cuts to come, and earnings outlooks being slashed en masse was not enough to break the market's spirit... But, when the FOMC minutes hinted at the punchbowl being removed (even modestly), the bid disappeared and S&P 500 futures dropped 10 points and Treasury yields spiked (with 10Y pushing to 8 month highs). USD strength (+1% on the week) and commodity weakness (though gold and silver remain marginally higher on the week) weighed on risk assets in general but algos went quiet and ES depth-of-market plunged as correlations broke. The usual e-bay style close saw ES ramp off the lows of the day to test VWAP and end the day-session there (-4pts or so close to close) as VIX was held lower (sub-15% at 2-month lows). We said yesterday this feels fragile and sure enough today showed its brittleness - as AAPL clung to yesterday's lows staring into the gap. Now the bulls await NFP hoping for a bad print, we assume?

 

Bonds snapped higher in yield as the rest of risk assets turned highly correlated and risk-off...

 

Credit (HY spreads) seemed to break first... (maybe on Gundlach's credit risk bubble comments)

 

S&P 500 futures ramped to VWAP into the close of the day-session and are fading a little after-hours...

 

but VIX was held down as we dropped...

 

And the QE4EVA divide narrows modestly...

 

with 10Y yields pushing to May 2011 highs - 30Y up 25bps this week...

 

Commodities rolled over but remain up for the week...

 

as the USD rose by around 1% with EUR weakness post-repatriation in full force...

 

Much of the move today was risk-assets and equities recoupling from late-yesterday's ramp close. The chart below was more or less in line at around 230pmET yesterday, then ES (red) ramped into the close and CONTEXT (risk asset proxy) did not follow... today's close saw ES fade and Treasury weakness lead CONTEXT higher...

 

And note that 1) the move in TSYs is nothing compared to the selloff into QE3 (this is not the 'great' rotation; and 2) the FOMC's concern at ending QE is not driven their optimism on unemployment or the economy (see their forecasts) - its driven by their fear of the size and impact they are having on the market itself.

 

Charts: Bloomberg and Capital Context

Bonus Chart: AAPL clinging to yesterday's lows - and the gap below...