Another V-Shaped Stock Recovery - But Rates And Credit Ain't Buying It

Tyler Durden's picture

From last Friday, the S&P 500 had decoupled somewhat (trading in a 10 point range) from credit markets (which had widened notably) while spot VIX had caught up (and over-taken) stocks. Today saw HYG (the high-yield bond ETF) trade sideways to lower all day long, catching down to its credit derivative market cousins, as VXX was the lever of choice to ramp stocks to test the week's highs once again (and scratch a few more stops). However, while AAPL made it up to the lows of the last swing down amid thin volumes, the last hour saw mid-dated volatility being bought which pushed VXX higher and reverted it towards rates and credit un-exuberance. Treasuries ended the day green once again and the USD drifted higher (though most of FX traded in extremely tight ranges). Silver rose further, Gold trod water, and oil played some catch up to the precious metals. Tech outperformed (thanks to AAPL) but financials (apart from some early vol) did nothing - despite Mario Monti's call that "the crisis is over." Another low-range, low volume, mediocre trade size, close-near-the-open day in stocks with bonds bid - and futures fade after-hours.

 

They tried to lever HYG but its call-caps were done, so once again they shifted back to VXX and it was compliant (interest rate complex did not play along)...

 

S&P 500 futures stage another V-shaped recovery to unch on the week - taking out a few more stops then fading back to VWAP for the close... and the infamour 8amET turnaround story...

 

 

AAPL filled the gap from the 12/28 lows and VWAP (and faded into the close)...

 

Treasury yields continue to slide - so much for the great rotation (oh please make it true, it was such a nice meme there for a day or two...)... yields dropping each day this week

 

 

Equity markets remains alone relative to credit this week...

 

Low range day but cross-asset-class correlation picked up with stocks reverting to their ETF cousin's view of the world into the close...

 

It seems once again, given the range-bound week, that the algos are running out of leverage (VIX limited given the term-structure, HY limited by call constraints, rates limited by POMO, and USD limited as world plays ping-pong with verbal intervention)... I guess we 'hope' for magical earnings...

 

Charts: Bloomberg and Capital Context

 

Bonus Chart: Gold and the S&P 500 have recoupled from 1/4/13 - moving tick for tick this afternoon...

 

Bonus Bonus Chart: Some 2011 Debt Ceiling Deja-Vu in VIX Term Structure...

 

Bonus Bonus Bonus Chart: The breadth today was very weak...