Volatility Gets A Harding On Taper Chatter

Tyler Durden's picture

Equity markets were very much in a land of their own relative to broad risk asset classes all day until the FT's Harding "mo' Taper" memo hit and slammed reality back into the herding masses. Still convinced that the Fed will 'only' taper if the data confirms it, we suspect the broad market is missing the signals from broken markets and frothy levels that mean the Fed will use the modest improvements as a crutch upon which to jawbone tapering into our minds. Today's price action was - in the words of the great Bob Pisani, "just silly." A ramp out of the gate following Japan's lead which followed a Hilsenrath-inspired ramp-job from Friday combined with a beat for NAHB (and Empire Fed) sent all the high-beta into overdrive (builders +2.2%) - but nothing else was really moving (FX was relatively flat, bonds went sideways, commodities wriggled in a small range). The Harding hit and we gave back all the post-Hilsenrath gains, 330-ramped to VWAP and held it magically into the close (though the USD ended at its lows of the day, bond yields at their highs, and credit markets at their lows).


US equities levitated all day relative to risk assets in general (as proxied by Capital Context's CONTEXT model). The moment Harding's headlines hit, that exuberance disappeared and equities reverted perfectly (and somewhat stunningly) - giving us a very clear measure of just how much hope was priced in (for now)...


and the S&P 500 ended up perfectly at VWAP after Robin Harding talked us back off the ledge...


and while stocks limped back up to that VWAP level, credit and rates both fell to the lows of the day...


and so did the USD...


It wasn't all silver linings and unicorn farts though - Trannies had a tough day early on...


The S&P 500, Dow, and Nasdaq all closed almost perfectly unchanged to the opening print of this morning's day session. The Dow Transports -0.7%


and from the open, Healthcare and Utilities underperformed as Energy and Homebuilders outperformed...


Charts: Bloomberg and Capital Context

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EclecticParrot's picture

Once again, Dr. Seuss proves to be prescient, in his 1956 fable “If I Ran the Circus” :

Behind Mr. Sneelock's {Bernanke’s} ramshackle store, there's an empty lot. Little Morris McGurk {bankster} is convinced that if he could just clear out the rusty cans, the dead tree, and the old cars {and individual investors}, nothing would prevent him from using the lot for the amazing, world-beating, Circus McGurkus. The more elaborate Morris' dreams about the circus become, the more they depend on the sleepy-looking and innocent Sneelock, who stands outside his ramshackle store sucking on a pipe, oblivious to the fate that awaits him in the depths of Morris's imagination. He doesn't yet know that he'll have to dispense 500 gallons of lemonade {QE}, be lassoed by a Wily Walloo {Congress}, wrestle a Grizzly-Ghastly {bond market}, and ski down a slope dotted with giant cacti {Japan}. But if his performance is up to McGurkian expectations, then "Why, ladies and gentlemen, youngsters and oldsters, your heads will quite likely spin right off your shouldsters!"

NewThor's picture

Speaking of distraction Circus...

Why did Business Insider have EIGHT stories on its front page about Kanye West?


Maybe Cramer, Kanye and Krugman can all write an album and a book together.

EscapeKey's picture

Don't really care about BI, but Marketwatch for once have an interesting headline:

Dow rises in fifth straight day of triple-digit moves 


Seriously - 5 days of triple digit moves. Is that the "new thing"? After 20 weeks of "an always rising market"  on Tuesdays, we're now led to a spectacular 100-point move every day from now on?

Fucking ludicrious.

Say What Again's picture

Submit_Order('SPY', 'BUY_LIMIT', 164.40, 2000000000000000000000000000000000000000000);


That will teach me to trade on a Monday after a weekend at the ranch!

Randall Cabot's picture

Here's another one from Marketwatch:

The column, and subsequent tweet, prompted a somewhat derisive chart from Zerohedge comparing it with Jon Hilsenrath’s piece in the Wall Street Journal on June 13, suggesting that the Fed was anxious not to have investors overreact when it does start tapering.







Midasking's picture

What good are all these charts and analysis.. the powers that be can do whatever they want and sadly the majority of the people want and expect them to do it..  Nobody is waking up from anything! If it does crash we will have more political moves to bring it right back up.  This is pointless.  http://tinyurl.com/mem7o7x

rack's picture

Reminds me of Rove


[Rove] said that guys like [the reporter, Ron Suskind] were ''in what we call the reality-based community,'' which he defined as people who ''believe that solutions emerge from your judicious study of discernible reality.'' I nodded and murmured something about enlightenment principles and empiricism. He cut me off. ''That's not the way the world really works anymore,'' he continued. ''We're an empire now, and when we act, we create our own reality. And while you're studying that reality -- judiciously, as you will -- we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors . . . and you, all of you, will be left to just study what we do.''

scaleindependent's picture

awesome quote.


"hubris b4 the fall"

Cdad's picture

Today was wildly damaging for market credibility...if there was any left.  Just ridonculous...taper, not taper, leaks to journos, wild hairs pulled out of arses, surging no volume levitation that was glaring for all to see...liquidation into VWAP magic...on and on...

It just gets worse and worse...

Mark Cdad down for...It's over!

And someone should just talk to Ben...about whether or not he EVER wants capital to form in US markets.  If not..well, then booyah Ben.

The Master's picture

Pisani thought the price action was "just silly" only because there was an early afternoon sell-off.  Had we closed up 2%, he would have thought the price action was "totally substantiated by fundamentals."

Cdad's picture

I'm closely watching Maria Bartiromo tonight...for any signs, however subtle, that she has literally....ANY idea what is going on right there all around her.  Now, mind you, I've been on watch for this for years....but thinking....just MAYBE she finally figures out....something...anything really.

As for the Pisani factor, I hear his wife has the whole housing recovery thing figured out...so all good there.

Way to go COMCAST...for doing absolutely NOTHING to restore even an ounce of credibility to The BlowHorn [CNBC].  Now there is a stock to short to zero.

RockyRacoon's picture

Had to grin when Pisani said that the market used to move on what the Fed was going to do, but now it moves on what reporters speculate about what the Fed is speculating.  Talk about yer derivatives....

otto skorzeny's picture

Thanks for the Pissonme clarification- I knew that fucking tool has never uttered a useful word - why would today be any exception.

q99x2's picture

It is a violation of the laws of existence to use "Great" and "Bob Pisani" in the same sentence.

the not so mighty maximiza's picture

i just found some nose hairs, there will be no taper.

buzzsaw99's picture

fed owners want trading volume, that's it. yak up, yak down. ssdd

riskon.then.riskoff's picture

Be ready for Action in USDJPY,Big stop below 94.00.....

Colonel Klink's picture

Only chatter I look forward to hearing is Ben's teeth when people with boiled rope are coming for him.

adr's picture

The taper means the free money train might come to an end. That scares every primary dealer pumping up stocks with free momo money from Ben. Taper means they might have to put some of their own money in the game instead of funny Fed cash. MY GOD THE HORROR!!!!!!! Primary Dealers taking on risk, NOOOOOOOOOOOOOOOOO!!!!!

If you can borrow money for almost nothing to buy stocks, you really don't care about the underlying value of the stock. 18k P/E, who cares if someone else is willing to buy it later with more Monopoly notes. All that matters is the percentage gain you get.

Borrow $100 million, buy Netflix at $230, wait for your lap dog Cramer to spew positive propaganda. Sell NFLX for a 10% gain a few days later. Pay back the borrowed $100 million and miniscule interest and pocket nearly $10 million in profit for doing absolutely nothing.

It might even be one of the other PDs buying Netflix at $250. They'll buy because they know you will buy it at $275 per share with more Benny Bux. Again, just pocketing the profit off the loan.

This is the market now. A bullshit rigged casino game. A few high rollers have been tipped off that a couple tables have loaded dice switched on every sixth roll.

The equivalent of the real estate bubble in every stock. You'll take a $400k loan to buy if house if you know there will be a buyer at $500k next week. Even if you have no cash and a 450 credit score. The bank is giving you the money anyway. When you sell the home for $500k you might even walk into six banks and get six loans to buy six homes. YOU'LL BE RICH!!!!!!

What a fucked up crooked society we have become. There is absolutely nothing right and honest going on anywhere. Please if you can find something, let me know. I can't find a single thing.

RockyRacoon's picture

Speculating on the bigger fool theory is the foundation of bubbles.   I see one... or more.

otto skorzeny's picture

Some guy was on CNBC this morning explaining why he was shorting NFLX( like the content they just bought from Dreamworks was basically some old Tom and Jerry cartoons) and they were all sitting around mocking the guy.

ebworthen's picture

Well, your comment is honest ;-)

Well said BTW.

"Pay back the borrowed $100 million and miniscule interest and pocket nearly $10 million in profit for doing absolutely nothing."

And for producing absolutely nothing, other than another bubble and the wailing and gnashing of teeth for regular folks.

otto skorzeny's picture

A lot of liquidity in this market if it can get bounced around like a yoyo on no actual real news.

ebworthen's picture

If by "liquidity" you mean monetary heroin you would be absolutley correct.

Clowns on Acid's picture

FT's Harding just had to get some copy out there. Y'know "filler" to keep the FT relevant while HIlsenWrath appears to be the Fed mouthpiece. Harding just essentially repated what a few of the Fe34d Gov's had been saying.

BUt thats all it took to get the HFT bids to go away. Geez....think this maket is jittery ?

ebworthen's picture

+10 for the headline alone.

Bartiromo is chirping in her "Observation" that $37 Billion going out of bond funds is going to go into stocks.  Hey Maria, maybe it will go into cash, or Gold and Silver?

breakyoself's picture

Ahhh, the Great Rotation.

disabledvet's picture

equities ALWAYS "trade in their own world." I understand "until they don't"...but if you're being paid to do this job for a living (and for the record i am not) then obviously "the trend line remains intact...and you're long." that's ESPECIALLY true for the folks who have missed this entire trade since 2009 (and they are LEGION.) in other words "the only way out of your performance gap is to bid this thing higher." everything else is just...sensitivity training. Taper Talk is all about FIXED INCOME. To me THAT is where the bubble is...and that is clearly shown by the charts above. In other words "first you get the massive sell off in junk bonds" THEN you get the "Taper talk" because the folks long that space have lost a TON of money in a VERY short period of time. They want answers...and the answer is "the Fed is/can not be as friendly going forwardd" (whatever that means.) i reiterate my view that there is a rotation that has been going on for YEARS (if not decades) now...namely AWAY from income and TOWARDS capital appreciation. rallies in Treasuries to me are a form of capital appreciation and reflect that reality. a good argument has been made that there is a rotation out of treasuries and into equities because there is real growth "coming" in the economy...but a better argument in my view is that this is a "dead cat bounce" in treasuries and those yields start moving down again thus causing AGAIN people to question their risk assumptions vis a vis growth at large and how it relates to profits and revenues going forward vis a vis the equity space. Simply put "Canada is looking good here." But that's about it.

Oldwood's picture

Its seems such a strange world where we can simultaneously be broke, yet so awash in liquidity that the holders of such funds appear desperate to spend it. I have never been smart enough to see the big picture. I continue to try and educate myself but the farther I go down this path the more I must resist my inclination to rationalize what is going on. I have no idea what will happen or when. The only thing I can see that makes sense is to do exactly the opposite of what my brain is telling me. I held off buying any silver until one week before the bottom fell out. I have never bought stocks unless they were at the top of a market that never returned. While I see no way that this economy can hold together for another week, this tells me now must be the time to buy. But it doesn't really matter for as they say, you never hear the bullet that gets you. 

 For all of you that just can't wait for the whole thing to come crashing down, if each of you send me five dollars. I will invest it in the most conservative, safe, sure thing that exists and within 30 days the market will crash. Based on my past experience, I guarantee it.