Equities Stumble As VIX Term Structure Keeps Steepening

Tyler Durden's picture

S&P 500 futures (ES) ended practically unchanged (though cash was down ~5pts) on relatively weak volume but decent average trade size - thanks in large part to the entirely ubiquitous rampathon into the close. A less-than-8pt range in ES saw the standard larger block sizes come through into the close as we ramped. Stocks were supported by USD weakness (-0.35%) but commodities ignored it (as did Treasuries). The front-end of the VIX term structure was the ramping-weapon choice today once again collapsing to red as S&P 500 futures were driven up to unchanged (and Friday's VWAP). The VIX term-structure has is its steepest in over three months and has steepened its most in 20 months over the past 5 days. HYG (also levered for a ramp) surged once again (to last week's key VWAP) squeezed this afternoon as its short-interest reaches record high levels (as it seems every HY manager is hedging via the ETF since the underlying has become increasingly illiquid) with some big blocks going through. Rates overall oscillated in a narrow +/-2bps range today (not exactly the big rotation) as we suspect, given the chatter of IG issuance this week, that last week's weakness was more rate-locks and hedging (as we have seen time after time) than asset rotations. Overall, today was an equity catch-down day to risk-assets overall.


S&P 500 Futures lifted to Friday's closing VWAP then dropped into the close - though ranges were minimal...


Equities caught down to credit today - but noteworthy that futures fell after Friday's cash close so an UNCH futures close looks 'better' than the -4.5pt S&P 500 cash close...


Average trade size is showing a similar pattern of rising into a crescendo turning point...especially when overall volume is light as it was today (suggesting dominance of small-lot algos to enable big lot exits).


VIX term-structure continues to steepen as hedges are rolled out past the debt-ceiling deadline...


The USD swung from being up 0.2% to down 0.35% on the day - somewhat supportive of a more positive tone in stocks...



In general today was a catch down day to broad risk-assets (right) but the ETFs (specifically VXX and HYG) were pushed and pulled to hold the SPY ETF up into the close...


with HY Credit beating beta-adjusted...

as its short-interest reaches record levels (perhaps pushing those hedgers into puts)


At what point does cost of borrow outweigh liquidity premium and force uncomfortable hedgers to unwind foreced overweight cash positions? Especially as the odd divergence between advancing HY issues and IG issues is becoming extreme...


Charts: Bloomberg and Capital Context

Bonus Chart: The shorts continued to be squeezed to be the drivers of the epic performance in the Russell... they started to get ahead early in the afternoon but nope...saved again...

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Freddie's picture

First!  Tylers - can you work on talking down the RUT some more?   It is a joke. Bubble bubble toilet trouble.

michiganmaven's picture

It is a joke but it is the Fed new toy.... so get ready for a wild ride... first was ES then Bonds.. .then NQ.. now TF... yup.. this is gonna end so well ! BULLISH !

Looney's picture

Algo… Al Gore… Al Qaeda…

Are they cousins or somepin’? ;-)


Algo-holic Anonymous, a.k.a. Looney from Al-abama  ;-)

SheepDog-One's picture

They pulled a lever here, pushed a lever there....now time to concentrate on hitting the 'ramp futures' button some more.

SheepDog-One's picture

Stawks have a 'more positive tone'...gee that's swell.

BTFDemocracy's picture

And once again I do my daily internet round ... check CNN & NYT for lies and then come here for the truth.

Pareto's picture

Vix to zero before 80.

AccreditedEYE's picture

ubiquitous rampathon into the close

Overall, today was an equity catch-down day to risk-assets overall.


Exactly. BTFD...

busted by the bailout's picture

Got Vix?


J.P Morgan, when asked what the stock market will do, replied, "It will fluctuate".

Theos's picture

Been short for a week since I've given up on rationally. Kinda hope I get my face ripped off though. That being said, they're fundimentally flawed products so  I'll be ok eventually.

ShankyS's picture

VIX = 0 = busted - why is the VIX not even negative for that metter, with the Bernanke put where is the risk? there is none. Full risk on. (till their system breaks then VIX 100+ easily and fills the open gap near 78). 

FedMonger's picture

QE all the way to Hyper! Good on ya Bernank

Venerability's picture

Seeking Alpha technical flaw now reprinting some Propaganda - excuse me, Stories - from 2009 - and they are absolutely identical in terms of their threads of Script Bot comments to the Propaganda - excuse me, Stories - prevailing in the PM sector right now.

Literally identical!

The New Market Mechanics still prevail - in spades, now that so much commodities, PM, and general currency trading has moved to Asia:

You can't stage any sort of a Rally With Legs on the back of your darling Financials, no matter how hard you try.

If you want the general market to do well, PPTs, PMs must do well and Oil stocks must do well. These two sectors, along with Manufacturing, are still the bellwethers for the general market.

Only then do Financials and Consumer Discretionary kick in, followed by everything else.

No one sane believes the US is suddenly doing SO well, we can be the "locomotive" for the rest of the world again.

If anything, the BRICs and the lower on the totem pole EEMs are still the "locomotives."

These are no longer "dumb" markets full of Newbies and Sheeple, who have pretty much all left the field of play.

These are still thin and professionally based markets, which don't appreciate Propaganda Pushes anymore.

Freddie's picture

Are you saying Seeking Alpha is pimping old stories?  I used to go there but it became shit.  Idiot youngsters and old guys writing endless blog posts on Apple or that vile piece of shit Warner Buffert, friend of Charlie Mungo.  

Same stories every day.  "What would Buffet do?"  Well - He would foul his own bathwater because he is a despicable person. 

SA is very tech savvy.  That ain't a technical flaw. 

Venerability's picture

Infrareddie - after all this time!

No, SA not very technically savvy compared with you Fellas.

Although their Tin Ears are very similar.

Future Jim's picture

How long can the VIX be supressed?