Stocks And Bonds Reconnect As Endangered Rising VIX Posts A Rare Appearance

Tyler Durden's picture

Once again equity markets disconnected (positively) from their risk-related cousins at around the European close and while broad equity markets closed around unchanged, the weakness in HY credit, and rise in VIX and Treasury bond prices as the day wore on told a slightly more concerned story than stocks would suggest. AAPL rose helping the tech sector; homebuilders saw their biggest loss in 5 weeks following weaker than expected housing data; and CAT's incredulous rally on total lack of clarity for their outlook provided just enough juice to keep the Dow near unchanged. S&P 500 futures fell rapidly to Friday's low as the US day session opened but found support and oscillated around unch/VWAP for the rest of the day. The USD round-tripped from early strength to end unchanged with GBP weakness and JPY strength. Oil rallied, Silver slipped, Gold tracked the USD, but Treasuries' overnight weakness halted instantly as the US day-session opened. Volume and average trade size were low which combined with the VIX expansion and broad risk-off suggests the equity rally is losing steam - but who knows anymore.


S&P 500 futures leaked higher all night as Treasuries weakened - as data hit early on, futures fell to Friday's lows but as we headed into the European close futures had recovered and then oscillated on weak volume around VWAP for the rest of the day. The rally in AAPL coincided with the rapid sell-off in S&P 500 futures...


VIX has very notably disconnected (not just spot but out-months too) in recent days...


HY was considerably weaker than stocks all day but in a magical liftathon into the close they perfectly recoupled...


The USD rose modestly early on but fell back after US opened. GBP weakened notably and while JPY was volatile it ends the day stronger vs the USD...


Treasuries and stocks remain recoupled - though it is worth noting that Treasury yields were a one-way street from the US day-session open today and suggest slightly more risk-off...


and a little close-up on that orange oval shows today rather notable divergence between rates and stocks after recoupling early on...


Across broad risk assets, it is clear when the disconnect occurred (upper left chart) as VXX, HYG, and TLT ignored SPY's strength. The overnight weakness in TSYs dragged CONTEXT (the broad risk proxy) up to stock's perspective and from early in the day correlation picked up and they tracked rather well...


Yet another day when market breadth was dismal as TRIN ignored equity performance...


So market breadth weak, TSY strength all day (weakness was overnight - BoJ?), Equity disconnected from VIX and HY credit, and volume and average trade size weak... but apart from that - BTFD!!!


Source: Bloomberg and Capital Context

Capital Context (@CapitalContext) LLC is the leader in integrating credit-market data to actively trade equity markets. From our world-renowned intraday 'CONTEXT' and 'SPY Arb' models to the daily long-short equity portfolio, sector-weight updates and tactical asset-allocation strategies, Capital Context offers sophisticated hedge-fund strategies to the active trading community.


Bonus Chart: YHOO roundtrips as outlook for revenues is cut...

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kliguy38's picture

Watch the're getting vethy sleepy.......

spastic_colon's picture

apparently no one has been paying attention, the VIX expansion is a set up for a VIX crushing to vault ES to new highs, how many times do you have to witness this before it is obvious?

disabledvet's picture

"Crazy talk" from POTUS and Co is turning me cautious. Can't believe I'm saying this...I wanted to go into small caps but the "run time error" in the GDP report just didn't sit well. People who fudge that number will clearly be "dissembling" a many other thing.

bobthehorse's picture

I called my poor old mother.

I asked if there was any hope.

She called me a retard.

Final analysis?

Run to the hills.

MeMadMax's picture

I do believe this ship may actually sink.

But not until the fed stops the money train lolololol

thismarketisrigged's picture

this is prob the correction that these fools were talking about, a whopping -14 on the dow and - 3 on the s&p.


lol, nothing makes me angrier more than listening to these talking heads on tv saying how this market can not find any reason to go lower, and making it seem like this is actually real money and not fed driven money.


we will get our day.

Wilcat Dafoe's picture

Yaay Apple - still think the fundys are good, and that the tech-ignorant analysts aren't ultimately going to drive the sp down to the couch change they think... mostly because $ talks, and yeah - they're going to come out with a phablet, and yeah, it's going to take Samsung's lunch money {for a while} when it does.


That aside, do the above graphs prove that Keynesianism is not-not wrong?  I admit I am limite to one undergrad econ class, but... I dunno... the whole Keynesian spend your way out of debt because 2013 is just like how shit was according to us in the 1930s seems like... well, abject horseshit?


So is Paul K just duped by religious fervour, or is that muthafucka in on the jack?


Seems like a wealth transfer from productive labor/middle class to the same ever-consolidating mega banks to me, but then I work for a living...

falak pema's picture

Now here is a theme worth debating for a libertarian site like ZH : 

A Poster Child For The Financial Crisis Declares 'Wall Street Is Back'

Read more:

Wall Street is Back ....

and this ...But it’s no secret that our business, the financial business, is under assault from all quarters. Democrats hate Wall Street. Republicans hate Wall Street, though to a lesser extent. And even modern economic libertarians, our so-called ideological cousins, have turned on Wall Street because of bailouts, crony capitalism, and government subsidies, particularly in the form of zero interest rates....

And finally this...We want a Wall Street where finance is not an end in itself, but a means to an end; a world teeming with economic activity, with factories running at full capacity utilization. We want to celebrate a pure meritocracy, where a man with a brain and an attitude can make himself a millionaire. And most importantly, we can visualize a period of time where Wall Street and modern finance achieves that once again...

So is this halcyon vision of Wall Street back like this guy says it is...? 

This should rejoice the souls of more than one! 

Lol, I am no libertarian but gung ho logic is awesome to behold. 

You'd think the OLD model is raring to go with just more of the same old song; no changes, lets just rev up and take off! 

adr's picture

I'm not really a fiction type of guy so I've completely disconnected from this "market". If someone could explain to me any reason why the market moves the way it does, other than complete bullshit, I'm all ears.

Seriously, what the fuck is going on? The Yahoo chart says it all. I'd really like the next chart to be Netflix dropping back to $80.

Wilcat Dafoe's picture

I think it's almost, but not entirely, complete bullshit - lots of insider info, lots of deception, lots of analysts who don't really understand the product or the competition.

Basically, if you had a monkey throwing darts at a board to pick your stocks, or your hedge fund, you'd literally be doing no worse, it seems, than the average analyst or hedge fund manager.

I think it's more interesting to try to figure out what a company could do to strengthen its margins/increase profits, and let the market follow the numbers {crazy, huh - but then we live in a world where analysts, essentially, control the price of corn and gas by betting on it, not by supply and demand}

Punchline:  imagine it... Netflix Streaming Porn... even if they release under another name {like Disney with its subdivisions that make nothing but German sheisa flicks}....  not even necessarily hard core gross shit, just midnight movies and whatever it is ladies like.

Apple and Sony and Microsoft all should be racing to the tablet equivalent of a netbook - something simple and cheap for webbrowsing, movies and music, and make their nut on the product tie ins like with the Kindle Fire {by the way that carousel thing is cool and simple enough my dad is figuring it out}...

Speaking of Yahoo - if Mayer does anything to turn that clusterfuck of a company around, I will eat my hat. 





ReptilianSlaveMaster's picture

Stop trying to be a smart ass and just BTFD already...

otto skorzeny's picture

you're right- 14 pts down is now considered  a massive dip-it's the new Flash Crash

ReptilianSlaveMaster's picture

+1, long turd apples and santa beads.. and im never selling

thismarketisrigged's picture

dnt worry, tomm the fraudsters will make sure we finish at 14,000 dow.


btw, am i the only one who hopes facebook misses big time wed? i cant stand that company, and each day it seems to be up 3 plus percent on nothing.