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Stocks Tumble And Bonds Grumble Despite Dovish Hawks
The 100-day moving average (100DMA) and VWAP (as usual) appeared to be the key pivots today as equity markets plunged lower on the open after drifting lower overnight as the liquidity-suck-out circles the global market's drain. At their worst, the S&P 500 was 7.5% off its recent highs but the Fed hawks came out in full dovish mode and provided just enough headline-fodder to slam VIX lower (as it appeared to over-react to the upside at the open) and drag the S&P back above its 100DMA. Some (prematurely) proclaimed the day a victory for the bulls as we didn't close at the lows but the last few minutes of the day saw equities roll back over, VIX rising, credit widening, and commodities fading (even as the USD closed the day unchanged from Friday). Treasuries - the center of most people's attention in recent days - had an interesting day (30Y -1.5bps, belly +3-4bps), especially into the close as stocks sold off (bonds rallied in safe-haven mode as opposed to un-taper mode). The S&P 500 faded and closed below its 100DMA for the first time in 2013... as it seems the time for jawboning os over.
The S&P 500 futures closed perfectly at VWAP... (it seems based on on-balance volume that there were serious sellers as we ramped above VWAP)...
What saved us the last few times we crossed the 100DMA?
The clear bounce was driven by first Kocherlakota and then uber-hawk Fisher sounding the all-clear and shifting dovish... but as is clear, the time for jawboning is over...
and homebuilders can't get a break...
VIX appeared to overshoot the open and then overshoot the bounce but recovered into the close - smells like hedging piling in and then covering underlying exposures into the ramp...
Despite the USD ending unchanged...
gold and silver were down 2% or so...
Charts: Bloomberg and Capital Context
Bonus Chart: AAPL had a tough day; heavy volume and rested below $400 - seems like th MSFT analog is playing out perfectly for now...
Bonus Bonus Chart: Performance of major asset classes from the day that Gold and Silver crashed...
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What happened to the 3:30pm ramp??? WAAAHHHHH !! MOAR !!!!!!!!
POMO Tuesday. Can;t wait to buy, buy, buy tomorrow.
Just be VERY careful and hedge as you buy, the FOMC is now in a bind and MUST tighten their teeth and bear the market correction, if they don't they would just be proving that they won't be able to ever taper, since they'd be demonstrating that they can't even bear the market reaction to just the announcement that they may taper in the future... That would be BAD for them, very BAD, since it'd be showing that they are loosing control of the markets.
Until next time,
Engineer
Could see a short term bounce to test 1600 if China doesn't explode and data is in line in US tomorrow. Also end of Q could mark it up a bit. Then it's time to sell again.
Aren't we suppose to BTFD???
yes not more ramps seen lately, its like they run out of VIAGRA. WOW.
The weekly charts on the SPX here => http://bit.ly/11JmsfA looks like doggy doo doo on toast really.
I do however think its a great time to be trading these markets, this BS fed news has the market swinging wilder than a teenager drinking at a party.
Bukaki. Fucking. Theater.
Its the Fed, stupid.
http://www.youtube.com/watch?v=UwB9m4FslO4
There are no markets; there are only interventions.
This is why there is no economy...it is all fake and manipulated.
This is why there is no hiring; everyone knows it's all fake, and therefore temporary.
The motherfucking politicians know it, and they're doing nothing.
I was worried about interest rates until Joe Lasagna came on and proclaimed that the 10yr is heading to 4.5% and that is a good thing. If we go above 6% however, that could start to dampen the mood.
He said to go long homebuilders. Idiots everywhere.
Well, hell who benefits more from higher rates than homebuilders (I mean, other than insolvent governments with unpayable debts and untenable deficits)?
Joe must not be aware of the interest rate derviative positions of his employer. They would be done at 4.5%. As a matter of fact they will be done before that.
2.5% on the 10yrs was the word
Do you know the details?
When does the swap take place, quarterly, or gets set daily?
http://www.dailyfinance.com/2013/06/17/as-interest-rates-rise-banks-face-new-stress-tests/
thx a lot
"Last week, at an investor conference, Bank of America's CFO Bruce Thompson indicated that the bank could lose as much as $11 billion in its bond and loan portfolio if interest rates were to rise 1 percent. He said that was as much as three times what Bank of America (BAC) would gain from higher rates in its lending business. But the bank might not have to realize those losses immediately, or ever if it holds the debt and borrowers end up paying. Still, the bank's capital could fall, which is something both investors and regulators have watched closely since the financial crisis, and something that would show up on the bank's stress test."
This part made me lol. He did an excellent job of obfuscation, I'll give him that. They have probably lost $250 bln on their total book in June (so far).
THX
I am expecting a derivative resignation soon on the interest rate swaps
Primary Dealers would be on the floating side and "hedgers" would be on the fixed side.
That works if interest rate stay low forever, but they're not.
Not sure whether the swap occurs quarterly or gets marked to market daily.
Coming soon.......
IRS structures vary greatly. Could be a quarterly fixed rate payment against a quarterly float (on the 3 month Labor fiix) with a term of just 1 year. Could be a 10 year fixed rate against a string of 20 6 month libor fixings.
There is room for all parties to loose if the curve moves against them, or if part of the hedge comes unglued. Lots of the fixed side will be hedged with T bills,notes :& bonds.the floating side with Eurodollar futures (3 month labor) So while those are liquid the problem for swap dealers is.....are his counterparties good?
Some corporate tressurers and finance guys in municipalities will have been dime hunting in front of the steamroller -- they. Always do. Possibly a hedge fund. Or two?
For the big book runners their known unknowns are contarparty risks. We should see the basis over the underlying ( 5 year note yield being the underlying for the fixed side of a 5 yr swap) start to get a lot wider before any corpses surface. For that you need a big desks morning counterparty report!!
That's if everybody is doing their jobs by the. Book, which is a big IF. A bank could blow up also if it had flawed assumptions in its hedge book, noticed late, failed to act, hoped it would come good etc! Personally I don't think it will be a bank first...may bee an insurance company?
Try picturing an insurance company with a huge variable annuity unit. One that did a ton of business in those VA's from 2005-2010. The account values got wrecked. The fees ate up a lot of the balances along the way. They owe income distrubution rates in the 5-6% range. Their interest rate hedges are getting whacked now and the account values may get whacked again in both bonds and stocks.
I could name 5-6 off the top of my head.
I'm thinking of a French one right off the top of my head.
I think you are right. I am surprised Reggie Middleton is not all over this.
thx a million
Yeah I'm sure all those fixed income investors left holding the bag on bonds will think its a good thing too.
It appears that the robots couldn't get a reaction out of the shorts today.
Yeah, a 6% 10-yr could be a bit of a problem.
IMO 4.5% = apocalypse
Shows what a catch 22 mess bernanke has gotten us into.
6%? The damage done to debt saddled US homeowners and consumers would be like a JFK head shot.
PMs can't be seen to be safe havens. Beaten down with lots of paper...
SELL EVERY RALLY!
BTFD is DEAD!
where is that faggot ANALyst that predictet AAPL to hit 1111 by now?
I cannot believe they get paid for such bs. lmao
money honey now in panic mode T_T
AAPL...I think I am goind to start shorting it until it gets down to about $200!
if not for that douchebag pumping markets today at around 2 pm i believe, we would have finished -400 pts.
anyways, i still believe selling will continue, china's banks will collapse shortly, and the market will crash between now and the next year and a half.
someone on cnbc during closing bell had the nerve to laugh in someones face and say'' how does the fed effect the stock market, whether they are in it or not, the market is moving based on earnings''.
that guy is a fucking clown.
Yeah, saw that dunce as well. Obviously an old-timer on the verge of croaking who was privileged to make his millions in the most epic bull market of all time when a fucking monkey throwing darts at a dart board could have achieved the same or better returns. I doubt he knows about the internet much less Zerohedge so he's clearly in the dark when it comes to the Fed's impact on asset value distortion.
talkin' 'bout Warren?
Haha pretty much. Same peer group: Dying cult of "Buy and Hold"
These guys are loooooong.
When the stock market is down 80- 90% like Japan, Greece, Ireland, Italy then they'll wonder what the hell happened.
The drop from 1550 to 666 in the S&P took like 18 months. There were serious bear rallies along the way. This is regular market behavior. Nothing especially unusual today.
Lots of sign wave, stop-flirting horseshit today, more difficult to trade than it looked, though I suspect many daytraders abstained from riding the 12:30 ramp to its fullest, believing such behavior was now suddenly out of favor, and in truth old habits die hard.
In the last hour, it was: "Go to VWAP. Go directly to VWAP. Do NOT pass "Go" (or your profit taking limit order). Do not collect $200."
In the new Monopoly it's $2,000,000 when you pass GO. No joke.
I noticed they had a contest to vote out a current token (to be replaced with a cat), and the wheelbarrow was saved. If you're correct about the "GO" inflation, this makes sense, as we're taking a cue from the Venezuela edition, needing something to carry all that cash to the grocery store. Perhaps a bond selloff not so crazy ? . . .
HYG showed an after-market with a close at 4:01. I haven't seen that before, just wondering if this is the long awaited liquidity issue.
A 4.5% 10 year would normalize rates again.
The market clearly wants to test the 200-day MA, which it has done only briefly in passing since the latter half of last year. This would be around 1500 and 14000 in the S&p and Dow respectively.
The systematic run-up in recent months is eerily reminiscent of the rally leading up to the big S&P crash to 666 that we remember all too well. The market has crashed twice by 50% in the last decade and perhaps the frequency of crashes of this magnitude will increase in coming years. Only time will tell. Expect turbulence.
The Fed can easily manipulate equity markets up and Comex futures down. Eventually, their bullshit will blow up as everyone turns their backs on monetization.
Speaking of hawks and doves: Rovio just released a game called Angry Turds in which enraged Fed governors launch themselves at jackals disguised as bond traders, who apparently stole both their ammunition and thunder.
In a bit of a role-reversal, Rovio depicts the Hawks as creamy-white, bumbling and slow to react, talons filed off to mere stubs, clownishly dropping “aerial surprises” onto their foes; while the Doves are unusually fleet & svelte, dark & deadly – damn near Hitchcockian -- able to accelerate (and/or inflate) quickly when gamers tap the “Q” and “E’ keys sequentially.
How is there any physical Gold left at this level ?????
Tulving's bullion page is getting sparse again. Either running out or pulling inventory due to low prices.
It's being sold off from GLD daily. End of the year we in the west should finally be rid of the last remnants of this dangerous 'barbarous relic' and will be all set to assume our mantle of servitude under the re-revealed global elite. For now, though, just accept the wisdom of their media lackeys and remember that massive physical buying in the face of rapidly increasing global financial chaos doesn't change the fact that 'gold is in a bear market'. If you can dumb yourself down to the point where this makes sense, it will make your future servitude more palatable. I expect many in North America won't even notice the transition.
for treasuries this is a massive move in a very short period time. "there will be blood." doesn't have to be a market moving event but it is and can be. I'll be watching China of course. if their interbank lending has seized up then you're talking total chaos and not just in the financial sense. I'm sure we have our own shadow banking system here as well but the system in China strikes me as highly dedicated towards real estate as modernization...among many other demands I imagine as well. could get crazy so we'll see how the traders above screaming buy and hold is dead get to play with everything macro flying all over the place. the irony that equities are at or near record highs and everyone is terrified of 2.5 percent interest isn't lost on me.
Well, it doesn´t make any sense at all to go into debt to chase falling prices in a world that is drowning in stuff and overcapacity. I guess this becomes the more painfully obvious the more interest rates rise.
NOT a single mention on MSM Nightly News (ABC and NBC) in regards to todays volatility and China markets last night!!!!
Just a bunch of FLUFF stories---irrelevant dead people....irreverent tight rope walkers...and the search for a Chinese/Russian/Cuban/ Spy:):)......................This is going to be EPIC!!!!!:):):)
FUCK YOU BRIAN WILLIAMS
FUCK YOU DIANE SAWYER