Bad News Is Great News Again; Stocks Have Best 2 Days In 4 Months

Tyler Durden's picture

Following the 2nd dismal jobs print in a row, it would appear the market's new "common knowledge" is that the Fed will be forced to un-taper - despite Hilsenrath's "Fed stays the course" perspective. Everything is up today (apart from the USD). The disconnects from recent correlations were extreme as stocks lost the plot against FX carry, commodities, and bonds. The best 2 days in a row for stocks in 4 months sent most indices to critical technical levels and dragged all but Trannies and the Russell back into the green on the week. Oil prices surged back above $100. Bonds rallied (and bull steepened). Gold, silver, and copper all gained notably (with silver's best week in 6 months). Buy, buy it all... apart from VIX which was monkey-hammered back to 15% (down over 2 vols). So with FX carry left in the dust, what was the ammunition for the move? a 6.3% rip squeeze in the "most shorted" stocks.

 

Major US equity indices remain negative year-to-date with the NASDAQ outperforming and Dow underperforming...

 

  • The Dow has seen its best 2-day run in 4 months and regained the 100DMA.
  • The S&P has its best 2-day run in 4 months desparately trying to recover 1,800 and its 50DMA.
  • Trannies surged by their most in 4 months in the last 2 days and touched their 50DMA.

 

Stocks on the week...

 

The initial momentum ignition was our old friend USDJPY but soon enough, stocks disconnected from FX carry and Emerging Market FX...

 

Furthermore, bonds didn't buy it...

 

Though, of course, this disconnect of Gold and Bond strength suggests the QE is back on, un-taper is here trade was on.

Treasuries were mixed on the week - 5Y -2.5bps, 30Y +7.3bps - so a notable steepening...

 

Silver's best week in 6 months.. and WTI back over $100

 

VIX did disconnect into the close modestly...

 

Wondering what fueled all this exuberance? (aside from USDJPY of course)... "most shorted" stocks are up over 6% from Wednesday's lows - more than double the market's performance...

 

 

Charts: Bloomberg

Bonus Bonus Chart: Equity markets decoupled from all other risk assets today. Perhaps the following chart of the intra-asset correlation between a basket of risk assets and US stocks sums up the loss of reality - correlation went negative...