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S&P Clings To Best January Since 1989; Credit Ends Wider

Tyler Durden's picture





 

From the close on Dec 28th (pre-fiscal-cliff), the Dow is up over 7% (for its best January since 1994), the long bond is down 3.3% in price, gold is up marginally and the USD is down marginally. From around November 2012, the current in stocks is eerily reminiscent of the same run from November 2011's dip and co-ordinated easing. It would appear that if 2011/2 was the world normalizing to ZIRP, 2012/3 is the world's central banks fighting currency wars with their ever-expanding balance sheets (and while Europe won last year in stocks, the ECB's fading balance sheet is leading its stocks to underperform a renewed Fed expansion). Credit markets are notably not buying this risk-on move (and nor is VIX) in January but JPY-cross-based carry is leading the way, so the world better hope that no one doubts the BoJ's ability top unilaterally 'win' the currency wars. Energy and Healthcare are the month's winners as JPY loses 6.4% on the month and EUR gains 2.7% against the USD.

 

ES closed down for the second day in a row - clinging to VWAP...with volume rising once again on the downturn...

 

but Trannies still the big leaders on the month...

 

The world since 12/28 (pre-fiscal-cliff 'resolution')...

 

as the S&P looks very like 2011/12 again... sigh...because valuations dont matter at all...

 

Thanks to the currency wars...

 

as since 12/28/12, we have seen JPY lose 6.4% against the USD, and the EUR gain 2.7% against the USD...

 

Unfortunately, credit markets are very much not playing along with the risk-on move in stocks...

 

and nor is VIX...

 

and Treasury bonds and stocks have recoupled - but fund flows do not show the kind of rotation everyone is calling for...

 

As Sector performance is very diverse (and seemingly barbelled, with Energy and Healthcare leading the way)...

 

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: Very odd divergence in the advance decline line for HY bonds relative to IG bonds... Our take is that HY bond holders are well aware of the illiquidity in their market and unwilling to dump into it - so have used CDS to hedge (see above). This has led to HY Adv-Dec holding up as IG is pulled down on rotation to new issues and some pain (and obviously far higher liquidity)...

 

This is also evident in the price of the HY Credit index relative to its underlying value... a clear bid for protection over its intrinsic value (in equities - this is like being willing to pay 1550 to buy the S&P at 1500...)


 


Bonus Discussion...

Deutsche's uber-bullish (S&P 500 target 1600) David Bianco offers some color...

"There are 9 years since 1960 with 5%+ gains in January: 1961, 1967, 1975, 1976, 1980, 1985, 1987, 1989, 1997. The avg. whole year price gain for these years was 23%. Furthermore, in each of these years the S&P 500 climbed over 19% except for 1987 given the October crash."

 

But there are exceptions

 

Three down years despite up (but < 5%) Januaries, were 1966, 1994, 2001. The 2001 bear market came despite an up January and before 9/11/01, as Tech crashed on an IT spending collapse amidst demanding valuations. This is unlikely for 2013. However, circumstances of 1966 and 1994 are cautionary. These were poor performance years owing mostly to Fed tightening. Thus, despite a strong 2013 start, we think it critical that treasury bond yields do not surge this year. An orderly and moderate ascent in yields is fine and expected, but any surge on US rating downgrades, fiscal irresponsibility, or inflation fears is a risk that warrants watching.

 

The S&P was up in January 2011 and 1H11, but it corrected sharply on the US downgrade and European sovereign debt crisis and ended 2011 flat.

So for all those awaiting the big rotation, be careful what you wish for...

 


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Thu, 01/31/2013 - 17:23 | Link to Comment Tsar Pointless
Tsar Pointless's picture

This time, it's different.TM

Thu, 01/31/2013 - 17:51 | Link to Comment SafelyGraze
SafelyGraze's picture

Wealth effect! 

Means morer-er to bet with on the super bowlz!

total points scored > dollar value of 1 ozt silver

cost of 30-sec spot > dollar value of 3000 ozt gold

govt requests for google records > super bowl attendance

Thu, 01/31/2013 - 18:46 | Link to Comment bobthehorse
bobthehorse's picture

The markets are flying high.

I'm predcting DOW at 30,000.

The rich eat while the rest starve.

What we need is a communist revolution.

http://www.angrysinner.blogspot.kr/2013/02/thursday.html

Thu, 01/31/2013 - 17:22 | Link to Comment francis_sawyer
francis_sawyer's picture

Wasn't that the same year that POPPY BUSH was Inaugurated President?

Thu, 01/31/2013 - 17:41 | Link to Comment Freddie
Freddie's picture

Poppy, Clinton, Bush 2, ObMAO = Mena, Arkansas.  Latin drug cartels.   All CIA. 

Reagan may have been the last real sort of election.  Poppy probably tried to whack Reagan and almost succeeded,

Thu, 01/31/2013 - 18:19 | Link to Comment francis_sawyer
francis_sawyer's picture

Freddie ~ I gotta admit that when francis_sawyer first started reading ZH, I didn't like you...

~~~

But you GET IT [on numerous issues]... This happens to be one of them...

~~~

Edit: My [6:22] comment, ABOVE, got JUNKED... I take that to mean that francis_sawyer was FACTUALLY inaccurate by questioning whether George HW Bush, was NOT, in fact, inaugurated POTUS in 1989 [January 20 ~ to be exact]... I stand corrected...

People ~ I apologize, IN ADVANCE, for all the 'non-factual' comments that I make on ZH [on a daily basis]...

Unless ~ of course... It's an ENTIRELY DIFFERENT MOTIVE [for the junk]... Like ~ 'totally' because your name is [Zero Cool, CrashOverride ~ or EscapeKey ~ or Acid Burn] & got SCHOOLED on a previous BITCOIN debate & can't HACK it]...

Like ~ CHILL Man... Row Row Row your boat... Gently down the stream...

Thu, 01/31/2013 - 17:24 | Link to Comment Motorhead
Motorhead's picture

Charts, bitchez!

Thu, 01/31/2013 - 17:24 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

This shit is fucking nuts.

Thu, 01/31/2013 - 17:33 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

The stock market is about the only things I see energized, moving up, lately.  Be careful...  Everything else seems kind of dead in the water.

 

"Stagnation"

http://tinyurl.com/ayvptbw

Thu, 01/31/2013 - 17:36 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Currencies are devaluing rapidly.

Thu, 01/31/2013 - 17:49 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Indeed.  Even the Peruvian Sol.  The euro is hanging in there pretty strong though, at least for now.  That will probably change soon.

Thu, 01/31/2013 - 17:47 | Link to Comment francis_sawyer
francis_sawyer's picture

There was a comment [on the other thread], from a 'Seattle [something or another], who made a comment on the January S&P performance & compared it to WEIMAR...

~~~

I thought he made a very valid point...

Thu, 01/31/2013 - 17:33 | Link to Comment LongSoupLine
LongSoupLine's picture

When you tell me Bernanke got hit by a fucking truck and the Fed has been ruled unconstitutional and burned to the fucking ground is when I'll look at fucking charts with some interest of "direction".

 

Fuck you Federal Reserve, fucking criminal sacks of hot stinking shit.

Thu, 01/31/2013 - 17:39 | Link to Comment stormsailor
stormsailor's picture

don't hold back,  tell us how you really feel.

Thu, 01/31/2013 - 17:36 | Link to Comment Whiteshadowmovement
Whiteshadowmovement's picture

Hey Tylers,

Any idea how much longer this relentless euro rally will go on? Seriously, isnt there any point where it stops. I really appreciate your attempts to fit the explanations of repatriation (which according to you should have subsided by 2013) as well as ECB loans, yet none of this really works.

Is this really all just the one gigantic short squeeze that never stops? Isnt there any point when the euro gets dangerously high as Juncker put it (I think it was the one time he wasn't lying).

Did we muppets seriously just get Stolpered?

Thu, 01/31/2013 - 17:43 | Link to Comment stormsailor
stormsailor's picture

the euro rally will continue, until they generate new bailouts for the piigs.  the funding(printing) will bring it back to normal

Thu, 01/31/2013 - 17:48 | Link to Comment Whiteshadowmovement
Whiteshadowmovement's picture

Yeah but the new bailout for the piigs only comes with a batch of "bad news" (haha I know but there would still need to be some trigger). This same catalyst would also undoubtedly bring down the euro as well. So its a catch-22 which doesnt end as long as the euro is the tool to ramp markets. Throughout all of January the euro just happens to get a cattle prod shoved up its ass at 9:30 NY time.

But seriously now, wont the exporters earnings look like absolute shit with a euro at 1.40? How can they afford that and more importantly, what the fuck for?! They will need to keep the DAX rally going somehow, a weak euro would be the path of least resistance, no?

Thu, 01/31/2013 - 18:35 | Link to Comment pappacass
Thu, 01/31/2013 - 17:39 | Link to Comment LawsofPhysics
LawsofPhysics's picture

"There are 9 years since 1960 with 5%+ gains in January: 1961, 1967, 1975, 1976, 1980, 1985, 1987, 1989, 1997. The avg. whole year price gain for these years was 23%. Furthermore, in each of these years the S&P 500 climbed over 19% except for 1987 given the October crash."  ---

 

Does congress have a fucking budget yet?  Seem to remember similar problems in 1987, hmmm.  This is nothing but the power of currency devaluation by all central bankers.  Things are definitely excellerating, but hey, physical still on sale.

Thu, 01/31/2013 - 17:39 | Link to Comment Flaming Ferrari
Flaming Ferrari's picture

I'm  with the Long Soup Line. All techinicals and any experience gained prior to these liquidity pumped markets should be abandoned. If you must be short, short the IBEX or something that might actually sell off. US indices will be rock soild just like QE2.

Thu, 01/31/2013 - 17:49 | Link to Comment IamtheREALmario
IamtheREALmario's picture

What I find interesting is how the banks have been able to print worthless paper fiat money, con people into believing that it is worth something and buy controlling interest in every single public company of value using the fiat paper they create out of thin air.

I also find it interesting how they have been able to get the population of the world to give them the entire contents of their life's savings as an interest free, unsecured loan.. and how they have been able to use the worthless fiat to buy the government and media.

... and you think we have a chance?

Thu, 01/31/2013 - 17:47 | Link to Comment buzzsaw99
buzzsaw99's picture

Sometimes I think the junk bond buyers are the smart ones. the bernank ain't gonna let anyone default ever. of course i don't get tbtf toxic dumping ground priviledges just in case so it probably wouldn't work for me.

Thu, 01/31/2013 - 17:49 | Link to Comment francis_sawyer
francis_sawyer's picture

As always... Buzz... It 'works' until it don't work no more... THANKSGIVING TURKEYS [all of 'em]...

Thu, 01/31/2013 - 17:49 | Link to Comment Dr. Engali
Dr. Engali's picture

I sure would like to know why gas went up .52c a gallon here in two days

Thu, 01/31/2013 - 18:19 | Link to Comment razorthin
razorthin's picture

Permanent

Openly

                        Manipulative

                        Operations

                        $$$$
                     $$      $$
                     $$      $$

                     $$      $$
                     $$      $$
                     $$      $$
              $$$$$$      $$$$$$
            $$     $$     $$       $$

           $$     $$      $$          $$
             $$      $$      $$      $$    $$
$$$$$$   $$     $$      $$      $$      $$
$$       $$$$                        $$      $$
$$         $$                                 $$
   $$      $$                                $$                                                          $                                          $$
      $$                                      $$ Bernanke!
Thu, 01/31/2013 - 17:54 | Link to Comment bnbdnb
bnbdnb's picture

Lets hope the indexes double this year. What an interesting thing to tell the people of the USA. Yes, the rich are now extremely more rich, yet you don't have a job.

 

You should have bought stocks.

Thu, 01/31/2013 - 18:25 | Link to Comment chump666
chump666's picture

The credit widening is an indication of liquidity tightening or lending to companies is starting to either dry up, or companies are just not borrowing (for what ever reasons: cashed up, banks not lending to risk etc).

Or, inflationary conditions are starting to kick in, more so operational costs, which means staff cut backs, profit downgrades and bonds getting cut to junk.

Great rotation is a Wall Street spin and a pile of bullsh*t.  This market is tight, over leveraged and overbought.  Major meltups took placed after the Nov 2012 low, HFTs support the liquidity providers, it''s a pure house of cards musted up by the morons at the Fed and that gangster running the ECB.

 

 

Thu, 01/31/2013 - 18:40 | Link to Comment q99x2
q99x2's picture

At least stock markets aren't recognized (as much) as being a reflection of the economy on NWO media. Woohoo.

Thu, 01/31/2013 - 19:06 | Link to Comment Racer
Racer's picture

The 'market' was given a sizeable chunk on the TV news today... classic top signal (or bottom of course)

Thu, 01/31/2013 - 19:14 | Link to Comment chump666
chump666's picture

Trimtabs keeping it real, from wires:

17:40 EST - TrimTabs has measured a whopping $78 billion of equity inflows in January, the most ever, according to the firm's data. "Extremely high inflows into equities do not bode well for the medium-term performance of the stock market," the firm says. TrimTabs found that after the previous nine largest monthly inflows, all of which came between 2000 and 2006, the S&P 500 fell an average of 0.8% in the following three months.

Tasty.

Thu, 01/31/2013 - 19:16 | Link to Comment Racer
Racer's picture

WOW they ARE pessimistic... a whopping 0.8% over 3 .... months...

Thu, 01/31/2013 - 20:14 | Link to Comment chump666
chump666's picture

Fingers crossed.  Not only do we get a good re-price of markets, but it will make the Fed look like a bunch of f*cking ass-wipes 1.  They screwed up the ecomomy 2.  They caused a market crash with bubble economics.

And the media should attack them viciously.

Thu, 01/31/2013 - 21:14 | Link to Comment Howdan
Howdan's picture

Rolllllllllllll uppppp, rollllllllllll up get yer "DOW 30k" Hats right here!

Do NOT follow this link or you will be banned from the site!