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Russell 2000 Hits New All-Time Highs But Longer-Dated Hedging Picks Up

Submitted by Tyler Durden on 10/14/2013 16:11 -0400

High-beta growth-hoping Russell 2000 stocks managed to gain 5.2% from last week's lows and make new all-time highs - sure why not. The S&P and Nasdaq regained Friday's highs on moar hopes of a deal (and held them even on the meeting postponement) giving a little back into the close. Spot VIX hugged stocks all day long and as with EURJPY (carry) provided the ammunition on a day bereft of real news and strewn with rumors. With Cash Treasuries closed, futures indicated early modest strength which gave way to selling across the complex in the afternoon. The shortest-dated Treasury futures underperformed (we suspect on some liquidity premia given Bills were closed). Gold and Silver recovered to solid gains before the US equity exuberance began, then leaked lower all day long (gold unch, silver -0.35%). It wasn't all ponies and unicorn farts for the bulls though as December VIX futures went well bid this afternoon - notably divergent from equity's exuberance.

Russell 2000 hits new all time high and volume grows increasingly divergent...

The postponement took a little shine off the day but was soon aggressively bid back to the highs...

and it really is not a short squeeze game as "most shorted" did not really appear to outperform so aggressively...

but was all about carry FX lifting us tick by tick back to the highs...

Bonds were offered with the short-end underperforming...

and while Spot VIX hugged stocks, Dec VIX was well bid as protectionwas sought more aggressively past the new potential deal date...

Gold and Silver recovered their overnight losses and rallied back to pre-dump levels from Friday but as Europe closed today... so PMs were sold...

Based on Bonds (futures), PMs, commodities, credit, FX, and swap markets, Capital Context's CONTEXT model shows a very similar pattern to Friday.. very little interest in uber-risk-on from aything but the stock market....

Charts: Bloomberg

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Mon, 10/14/2013 - 16:13 | 4053794 Tsar Pointless

Funny shit.

Mon, 10/14/2013 - 16:17 | 4053806 fonzannoon

I've been buying the shit out of this "dip". It almost does not even feel icky anymore.

Mon, 10/14/2013 - 16:18 | 4053828 Cursive

@fonz

Good luck, brother.

Mon, 10/14/2013 - 16:27 | 4053852 fonzannoon

Every morning before I go to work I practice saying to my wife "No one could have seen this coming". So far the best she gives me a 6 out of 10.

Mon, 10/14/2013 - 16:29 | 4053864 NoDebt

My wife once asked me what I REALLY thought of things like the market, the direction of the country, what kind of future I thought our children would face. So I told her.

She never asked again.

Mon, 10/14/2013 - 17:10 | 4053978 GaryNeville

I got short half way up when DJ was flat on the day - was over the moon with my position - thought there was noway it'd keep going - maww maawww mawwww - what a mug was I! Bernanke but raped again!

Mon, 10/14/2013 - 16:49 | 4053926 Oldwood

So as an investor, you can finally abandon the concept of fundamentals and accept that it is nothing but gambling, and that as you are in it, you can't get out. I mean sure you can physically get out but will your mind let you? You can accept it is a false and rigged market, yet stay in. You see easy money just lying there right? BTFD right? Just BTFD. No consequences as everyone else is doing it.

Mon, 10/14/2013 - 16:28 | 4053861 LetThemEatRand

If history is any guide, they will suddenly shift the other way once they have even the hard-core shorts playing long. Of course history is not much of a guide because we are truly in uncharted waters with QE so who knows.

Mon, 10/14/2013 - 16:39 | 4053885 fonzannoon

Ben said he loves me. He said this time he is going to make it work.

Mon, 10/14/2013 - 17:59 | 4054096 greatbeard

>> once they have even the hard-core shorts playing long.

They have an awful lot of folks playing chicken with the traffic right now. I was road kill back in the day and I've no hankerin' to relive that one, but it does look like the only play right now. Just what they intend for it to look like. Widows, orphans, survivalists, everybody, into the safety of the stock market, quick.

Mon, 10/14/2013 - 16:26 | 4053855 razorthin

If you were once a serious trader, you should be worrying yourself.

Mon, 10/14/2013 - 16:45 | 4053916 fonzannoon

I would never do this with my own money. You would have to be crazy to do that.

Mon, 10/14/2013 - 17:02 | 4053958 Oldwood

Forgive me as I'm not a market guy, but in order for prices to go up in the stock market, that requires new money coming in, right? I mean people aren't selling stocks cheaply so they can buy stocks that are going up, right? It seems to depend on people spending their savings on stocks or government pumping cash into it, or as we see, both. I understand the need for yield as I have had my savings at 1/2% for the last four years. It has been expensive to stay out but I believe the system is worse than corrupt and by participating in it I am enabling it to do more harm in the longer run. Further, as someone who is not knowledgeable about specific stocks I am left dealing with advisors, who as you suggest, never gamble with their own money. I win they win. I lose they win less. Until I can find an investment advisor that shares in my risk, they will never see a dime I hold.

Mon, 10/14/2013 - 17:16 | 4053992 fonzannoon

You have had your savings at 1/2%? That means you are keeping your money in the bank....which is using your "savings" to fund their stock and bond purchases...ON LEVERAGE....and if the market goes to shit and your bank blows up, they have secured themselves to your deposits. So essentially you are taking all the risk and they are reaping all the reward.

Maybe you need an advisor after all?

Mon, 10/14/2013 - 16:41 | 4053898 yogibear

"I've been buying the shit out of this "dip"."

It's so easy a cave man can do it.

Mon, 10/14/2013 - 18:38 | 4054192 slaughterer

Buying a dip is great until it is no longer a dip.

Mon, 10/14/2013 - 16:27 | 4053821 tom a taxpayer

Re: Senate negotiations over debt ceiling & shutdown, no matter how it comes out...

There's gonna be a heartache tonight

Somebody's gonna hurt someone

before the night is through

Somebody's gonna come undone.

There's nothin' we can do.

Everybody wants to touch somebody

if it takes all night.

Everybody wants to take a little chance,

Make it come out right.

There's gonna be a heartache tonight,

a heartache tonight, I know.

http://www.youtube.com/watch?v=snPgFNMCXBs

Mon, 10/14/2013 - 16:19 | 4053831 Racer

So they were worried about the 'markets' reaction today? Why?

Mon, 10/14/2013 - 16:23 | 4053848 razorthin

Supid fuckers

Mon, 10/14/2013 - 16:28 | 4053854 NoDebt

Around 7:30 this morning on here I wrote "Open red, close green."

These people don't disappoint. I'm not even using any of my investing experience on this one, and certainly no fundamental analysis. I'm playing poker. Pure and simple.

NOBODY IS GETTING BLUFFED OUT OF THIS HAND. Until and unless there is an actual delay of payment on a T-Bill nobody's going to fold. NOBODY. They've seen this con too many times before to get suckerd in again. It will be "buy until default"

Mon, 10/14/2013 - 16:42 | 4053904 TrustWho

What downside risk, we have the Daddy Bernanke PUT.

...And all the gods on the federal reserve board tell us THERE IS NO BUBBLE!!!!!!

Mon, 10/14/2013 - 17:05 | 4053964 Oldwood

Everybody knows you can't get hurt on a "sure thing".

Mon, 10/14/2013 - 18:24 | 4054168 Itch

Get the address of 1000 people and some envelopes. On day one, take 500 of them and write, market will "Open red, close green". On the other 500 write, market will "Open green, close red". If the market opens red and closes green, keep the 500 addresses you called right, and throw away the others.

On day 2, write on 250 of them "market will open green and close red", and on the other 250 write the opposite.

Repeat the process 10 times and there will be at least one person who has received a daily letter 10 days in a row, a letter that has called the market precisely. He's putty in your hands, fnar fnar.

Mon, 10/14/2013 - 16:43 | 4053892 SheepDog-One

LMAO...all garbage up 5%+ since 'the crisis'...nothing but complete fraud everywhere now.

Mon, 10/14/2013 - 17:05 | 4053972 disabledvet

this is a mania...at least in certain individual names (cough, cough Netflix cough, cough.) the Fed did deflate this summer...but these things have a mind of their when going from "monetary fiction" to "monetary fact." You else get very creative "discounting" when trying to...."rationalize" this rather unique feature of market behavior. To paraphrase Charles Hugh Smith who gets quality air time on this site "Government is of two minds" with these things. First these things represent "free money" as it were in the form of massive amounts of tax revenues. Second they also represent a "form of recovery" as instead of putting mere chickens in every pot we're talking chickens, goats, wildebeasts and other exotica. In short "state tax revenues and bonding authorities" as well. In other words far from a "bi polar" view ("we need policies that will scare the market") instead Government looks at this and says "win! win!" in their own way. As now Vice President and then Senator Biden famously said back in the bubblicious 90's "sometimes the law is an ass." Does this mean a deal is coming? No idea. But that is a lot of "bubble" should this thing get "shut down" so to speak.

Mon, 10/14/2013 - 17:05 | 4053965 greatbeard

Well if anyone is still in gold they win the strong hands award.

Mon, 10/14/2013 - 17:37 | 4054040 PAWNMAN