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S&P Fails To Hold Record Highs As Gold Outperforms

Tyler Durden's picture




 

US equities tagged new highs early in the day-session sparked by USDJPY ignition and rotating to support from AUDJPY as stops were run and exuberance over shitty data reigned. "Most shorted" stocks dramatically outperformed early on providing the sacrifice required but while bond yields rose from their open last night, they end the day practically unchanged (10Y +1bps); The USD rallied into the open but EUR and AUD strength cracked it back to practically unchanged by the close. Copper flailed (on slowing China construction fears) but oil, silver, and gold all rallied around 1% on the day (though rolled over in the afternoon). VIX dropped but held 14% and remains notably divergent. Credit rallied but remains a laggard compared to equity exuberance. Stocks tanked into the close; catching down to VIX, credit, and USDJPY - what a "market" with the S&P losing its highs and closing red for 2014 once again.

S&P futures plunged back to VWAP towards the close - then plunged at the close...

 

The S&P 500 managed to get green in 2014...before giving it back into close - the S&P has still not closed positive for 2014 so far.

 

Thanks to USDJPY then AUDJPY...

 

And another short-squeeze...

 

VIX did drop today but found support at 14% and is still notably divergent from stocks...

 

Credit rallied on the day but note that stocks fell back to their reality from the stop-running highs early on...

 

Treasuries seem unimpressed by the equity exuberance...

 

The USD closed unchanged (as Europe's EUR weakness reversed into US's EUR strength)... note AUD strength...

 

Gold and Silver gained around 1% on the day (outperforming stocks) and WTI gained... but they rolled over a stocks slipped in the afternoon...

 

It seems Bob Pisani nailed it at around 1030ET - "there's no fundamental reason why we are up 200 points today" - indeed, Bob...

 

Charts: Bloomberg

Bonus Chart: It seems BofA's earlier call to sell Nattie... worked...

 

 

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Mon, 02/24/2014 - 17:10 | 4472281 midtowng
midtowng's picture

It appears the markets are expecting the bad economic news to mean more money printing.

Good = Bad and Bad = Good

Mon, 02/24/2014 - 17:13 | 4472301 kliguy38
kliguy38's picture

Up is down  but MOAR is MOAR

Mon, 02/24/2014 - 17:14 | 4472307 Son of Loki
Son of Loki's picture

"No one saw this coming...."

Mon, 02/24/2014 - 17:15 | 4472309 flacon
flacon's picture

I am playing a SPY GLD spread trade. Long GLD, short SPY. I also picked up some PCLN puts today. We'll see how it works out. 

Mon, 02/24/2014 - 18:58 | 4472677 johngaltfla
johngaltfla's picture

Next up $1620 barring a deflationary collapse of the world. War is good for us goldbugs :)

 

A Golden Era of Breakouts and Panic Purchasing has Begun

Mon, 02/24/2014 - 20:25 | 4473086 disabledvet
disabledvet's picture

Yeah...right up there with natural gas trading.

"Leveraged long and playing the war effort."
Even better "just short the whole cuz it's all bullshit."

I want to say we have something new here but Wall Street was open from 1940-1945. So sure...you can trade "as the battlefield goes" but I wouldn't recommend it.

As a reminder "the stock market was closed for the duration of World War I."

The only "liquidity" I see here is Government.
Plan A is to make sure everyone is on the payroll.

Interestingly that may devolve into a State and local function as "the War Effort will now be run by the Banks."

So sure...gold.
But when they own the Government (can't keep that spending under control?) it's all about free cash flow discounted. The only "mean" being reverted to is on the battlefield now.

Mon, 02/24/2014 - 19:36 | 4472865 MeelionDollerBogus
MeelionDollerBogus's picture

If you're doing it in London, it's 100 trillion 5 minutes later.

Mon, 02/24/2014 - 17:11 | 4472284 Charles Nelson ...
Charles Nelson Reilly's picture

inching closer and closer to a major market selloff.

Mon, 02/24/2014 - 17:18 | 4472316 skwid vacuous
skwid vacuous's picture

but...everything is macro/global bullish according to the CNBC lunch-time lizard faces and pony-tailed clowns...?

Mon, 02/24/2014 - 17:34 | 4472359 Traderone
Traderone's picture

you'll be proved right one day, let's hope you haven't blown up first.

Mon, 02/24/2014 - 20:28 | 4473098 disabledvet
disabledvet's picture

meh. "More canon fodder for the war machine." Move along.

Mon, 02/24/2014 - 17:11 | 4472292 hugovanderbubble
hugovanderbubble's picture

Buy Vix till 50%

Mon, 02/24/2014 - 17:28 | 4472347 skwid vacuous
skwid vacuous's picture

or buy VXX til 50% of what you had?

Mon, 02/24/2014 - 18:05 | 4472494 Groundhog Day
Groundhog Day's picture

Shorting VXX is the single best trading strategy their is

Mon, 02/24/2014 - 18:16 | 4472540 css1971
css1971's picture

You have not been wrong.

Mon, 02/24/2014 - 20:50 | 4472857 MeelionDollerBogus
MeelionDollerBogus's picture

Until it isn't. Those % moves up are ginormous when they happen and it's coming. UVXY, HVU even better.

http://scharts.co/1k6p3do look at all the times the 15-day rate of change % is 20, 30 or 40%. That's not something you want to short. Timing is everything

Mon, 02/24/2014 - 17:13 | 4472297 DoChenRollingBearing
DoChenRollingBearing's picture

Ahh, gold, my gold...

A new book!

"Review of Gold: The Race for the World's Most Seductive Metal"

http://tinyurl.com/mmr6dpp

Mon, 02/24/2014 - 17:16 | 4472314 world_debt_slave
Mon, 02/24/2014 - 17:33 | 4472356 OldBoy
OldBoy's picture

I still don't understand why the USDJPY is correlated to the S&P?

Mon, 02/24/2014 - 17:43 | 4472377 Dr. Engali
Dr. Engali's picture

It's the yen carry trade. As long as the USD/JPY exchange remains stable hedge funds can borrow in yen at 0 and buy U.S treasuries. With the treasuries they have a lot of options. One of which is to use as collateral to lever up and buy stocks.

Mon, 02/24/2014 - 18:22 | 4472516 css1971
css1971's picture

This is of course a highly stable situation. Leverage on top of leverage on top of leverage. Supported and approved of by your friendly local politician.

And people wonder why the world is so fucked up.

Mon, 02/24/2014 - 18:42 | 4472629 OldBoy
OldBoy's picture
  1. Hey, Thanks for the feed back!
Mon, 02/24/2014 - 17:41 | 4472384 AlaricBalth
AlaricBalth's picture

Conversion of cheaper Yen into equities. Carry trade.
Risk on/ Risk off

Mon, 02/24/2014 - 20:30 | 4473114 disabledvet
disabledvet's picture

"Everyone's got a plan until they get punched in the mouth."

Mon, 02/24/2014 - 17:39 | 4472379 yogibear
yogibear's picture

With no debt ceiling now it's money printing until the US dollar crashes,

Soon QEen Yellen will reverse the taper and print like there is no tomorrow.

Tapering was  a dog and pony show for treasury holders.

Mon, 02/24/2014 - 21:24 | 4473315 garypaul
garypaul's picture

Excellent point about it being just a dog and pony show for someone

Mon, 02/24/2014 - 17:43 | 4472395 TheRideNeverEnds
TheRideNeverEnds's picture

Well we closed 10 points off the all time high so BTFD! 

Mon, 02/24/2014 - 17:50 | 4472421 Darth Raider
Mon, 02/24/2014 - 18:12 | 4472437 fijisailor
fijisailor's picture

Physical gold is NOT returning to GLD and other ETFs despite the price rally and the MSM propaganda.  In fact it has dropped overall by 61 tons.

http://www.silverdoctors.com/the-gld-two-step/

Mon, 02/24/2014 - 17:54 | 4472446 DirtyWilly
DirtyWilly's picture

How exciting, gold stayed exactly the same compared to the dollar yet again!  Can't wait till next week when gold is worth exactly the same value it was worth 6000 years ago.

Mon, 02/24/2014 - 18:08 | 4472504 css1971
css1971's picture

S&P is rolling over. It would have to have hit 1900 by mid February to continue the trend and it wasn't able to. So down is the next direction du jour.

Next month looks like make or break. If the Fed gooses it, I dump my vix position and 'm all in silver and shitty trash stocks. If not, I remain in cash.

Mon, 02/24/2014 - 20:47 | 4472847 MeelionDollerBogus
MeelionDollerBogus's picture

Let the commencement of nonsense... beginulate!! http://flic.kr/p/enJ7Cs

Mon, 02/24/2014 - 18:10 | 4472508 ebworthen
ebworthen's picture

The whales are taking profits, rotating in and out of sectors, while maintaining the euphoria.

I pity anyone with money in a retirement account or pension fund.

Tech. bubble part two, crash/bailouts part two coming.

Mon, 02/24/2014 - 18:14 | 4472525 Soul Glow
Soul Glow's picture

Agreed.  Stock are overbought and look toppy.  A reversion to at least DJ 14k is at hand.  And I write 14k only because if that breaks I expect the Fed to Un'Taper.  If they defy my expectations, watch out below.

Mon, 02/24/2014 - 20:32 | 4473134 disabledvet
disabledvet's picture

natural gas can't hold so only gold will?
"Put on your crazy pants" dude.

Mon, 02/24/2014 - 18:10 | 4472511 Soul Glow
Soul Glow's picture

Gold continues to break from the middle of its recent range.  It will prove to be long term bullish if we get to the $1450 range, and the faster the better.

I believe we get there by March 21st.  When we do then we will have to look at the macro news to see if gold can break out of this last year's range.

Mon, 02/24/2014 - 18:45 | 4472657 Smiddywesson
Smiddywesson's picture

I don't know on what basis people make these decisions, but if gold responded to fundamentals, it would have broken through $2k and kept right on going. 

Mon, 02/24/2014 - 20:13 | 4473023 Soul Glow
Soul Glow's picture

Price is relative due to paper manipulation.  What matters is ounces available vs physical demand.  This is what will trigger a reset and prompt fundamentals to clear the leveraged debt/options in the form of naked shorts that are currently against gold.

What matters most is how one walks through the fire.

- Charles Bukowski

Due to high input costs and low output mining has stalled.  How long before demand siezes physical gold and demands delivery?  That is the question that will tell us when gold catapolts to prices not that possible by the status quo.

Mon, 02/24/2014 - 18:45 | 4472658 Smiddywesson
Smiddywesson's picture

I don't know on what basis people make these decisions, but if gold responded to fundamentals, it would have broken through $2k and kept right on going. 

Mon, 02/24/2014 - 19:21 | 4472798 MeelionDollerBogus
MeelionDollerBogus's picture

Fraud is a valid fundamental in economics, and that's why it didn't the first time. It will next time. 3500, drop to 2500 shortly after.

Mon, 02/24/2014 - 19:20 | 4472792 MeelionDollerBogus
MeelionDollerBogus's picture

Gold will continue to be long-term bullish until governments are solvent, bank accounts pay interest rates beating inflation pressures on food & energy.

Mon, 02/24/2014 - 18:13 | 4472522 Flying Wombat
Flying Wombat's picture

With the level of gearing in the global system, one would think more and more investors and traders will be moving to gold.  Alasdair Macleod wrote a great piece looking at global fiat currenices in this regard.  "Alasdair Macleod: All currencies are an inverse pyramid based on the dollar"  The Doc and I interviewed him last Friday as well, and he had some on-point analysis about global gold flows -- China in particular.  It's certainly not news to most of you, but it's worth reiterating the basic point that the ETFs, private vaults, exchange vaults have all been raided to the point that, when adding the last factor of multiple title leasing by Western central banks, there really isn't enough true, physical gold around to keep a lid on price.  It's going to be a "managed retreat" from here on out.  If you want to listen to our interview with Alasdair, click here.

Eric Dubin, Managing Editor, The News Doctors

Mon, 02/24/2014 - 18:14 | 4472527 Remnant_Army
Remnant_Army's picture

Leave the casino. Gest some real things.

http://www.thewarningsecondcoming.com/second-seal-world-war-3/

Mon, 02/24/2014 - 18:14 | 4472530 Remnant_Army
Remnant_Army's picture

I mean "get".

Mon, 02/24/2014 - 18:34 | 4472600 enloe creek
enloe creek's picture

lost money in stocks long time ago, been liking gold and silver from even longer time ago, never thought I would buy another stock but I bought tvix big time yesterday. 5 yr anniversary of the 2009 low! rollover beethoven

https://www.youtube.com/watch?v=Ohy4JoyThis

mountain!! bitches

Mon, 02/24/2014 - 18:52 | 4472682 OldBoy
OldBoy's picture

I'm with GroundHogDay (see above). I bought the tvix 18 mo ago and after two reverse splits I'm broke. Shorting would have proven to be a more profitable move.

Mon, 02/24/2014 - 19:18 | 4472784 MeelionDollerBogus
MeelionDollerBogus's picture

but when you short you can keep getting margin calls until you cry uncle, it can move very fast. If you use no margin, a leveraged etf like spxu, faz, vxx, hvu, uvxy, you can limit the total $ to go in (and never go in so hard you could ever go broke) and now it's all gravy (or a loss you can live with).

I was trading options between jobs with  no income & still never went broke. You just never bet it all.

Just because it's a casino doesn't mean you actually bet it all on red, even if you're sarcastically yelling 'bet it all on red!'

Mon, 02/24/2014 - 19:16 | 4472778 MeelionDollerBogus
MeelionDollerBogus's picture

+1 for awesome videocode.

I was sure it was a fake code but... it's a legit youtube video code.

Mon, 02/24/2014 - 18:42 | 4472637 Smiddywesson
Smiddywesson's picture

"Most shorted" stocks dramatically outperformed

Silly, nothing lures in the bag holders more than seeing the shorts get squeezed so they can feel smug, and earn a pat on the head for being so sensible. 

Mon, 02/24/2014 - 19:12 | 4472757 MeelionDollerBogus
MeelionDollerBogus's picture

Depends on timing. If you notice it & trade it before mentioning it, no, it's quite sensible.

Mon, 02/24/2014 - 18:42 | 4472638 Smiddywesson
Smiddywesson's picture

double post

Mon, 02/24/2014 - 19:10 | 4472648 MeelionDollerBogus
MeelionDollerBogus's picture

HVU is 11x inverse to the S&P500.
USLV is 3.92x bullish with silver.

It's been suggested to me that since USLV is 10x the price of HVU perhaps not to focus so much on USLV.
However... we can't be sure the market goes down a decent amount with silver (and gold) going up, at the same time.

Right now I'm looking at c=1/2818 (today), so silver3.92 x c=USLV
I'm seeing HVU1/11xSPY = 220 so HVU should have been lower for the SPY prices today (which is a good proxy for S&P500, it's linear though decaying slightly over time).

http://flic.kr/p/iwHcZZ is the chart showing HVU decay in the ETF with the constant involved there (which is 216 to 219 normally, 220 today, or 220x75 = 16500 as shown on the chart's scale).

For USLV I now have these slides:

flic.kr/p/kpoT2k slide 1 : regression (power) trend R2 = 0.98 USLV = silver3.92 / 2364.56
flic.kr/p/kppK2Z slide 2 : projections with & without ETF decay
flic.kr/p/kprn3f slide 3 : ETF decay on factor vs date

Looking at the ETF decay slide, showing the constant changing, let's say the 2800 number ends up being as high as perhaps 6000.
If that's the case then for silver=50 perhaps 503.92/6000 = 761.75/oz silver is a fair argument, rather than 1632.32/share.
Decay is visible in the USLV slide.

Looking at the ETF decay slide, showing the constant changing, let's say the 2800 number ends up being as high as perhaps 6000.
If that's the case then for silver=50 perhaps 503.92/6000 = 761.75/oz silver is a fair argument, rather than 1632.32/share.
Decay is visible in the slide.

So far decay in HVU is not visible in measuring the constant, except in the past, not right now.
That being the case let's stick with (219/SPY)11 = HVU.
Further with USLV being roughly 10x the HVU price, though one is cdn$ one is USD, let's now look at what 10x = 761.75 gets you which is 76.18 / share HVU rather than 1 share USLV using the very decayed performance (lower share price) for the projected future.
What SPY price goes with this? (219/76.181/11)= 147.696. Therefore if SPY can hit 147.70 faster than silver can hit 50 with a very decayed equation (constant 1/6000) then HVU beats out USLV.

Then again... I'd still like to have a good balance of both.
1000000 (yes, 1 MEEELYUN) = silver3.92/6000 : silver=312.195
or 1000000 = silver3.92/3000 : silver= 261.597
or 1000000 = HVU = (219/SPY)11 ; SPY=62.372

Much more reasonable:
1000 = USLV, silver = 53.59 (decayed)
1000 = USLV, silver = 44.324 (current)
1000 = HVU, SPY = 116.87, not unreasonable given this http://flic.kr/p/enJ7Cs which I interpret to mean SPY could easily slam to 80 or 100.

Mon, 02/24/2014 - 19:50 | 4472946 fijisailor
fijisailor's picture

Projections based on curve fitting to data is all fine and good but does not adequately predict FED policy and certainly does not include black swan events.

Mon, 02/24/2014 - 20:39 | 4473166 disabledvet
disabledvet's picture

"Cash on the balance sheet."

I mean it is MASSIVE right now.
With interest rates at or near zero and a simple savings account giving you one percent?

"Long the contracting division" all right...but this ain't Fed Ex.
Tesla at 400 bucks a share is more like it.

Turbine engines look good to me as well...but that's about it.

Mon, 02/24/2014 - 20:44 | 4473190 MeelionDollerBogus
MeelionDollerBogus's picture

It does when you look at what happened to other 'black swan' events. In the end it all comes down to hoocouldanode and we find out all sorts of people did.

Tue, 02/25/2014 - 00:33 | 4474077 TheRideNeverEnds
TheRideNeverEnds's picture

That looks good except for one fact, the S&P will never again trade below 1700.

Tue, 02/25/2014 - 05:25 | 4474433 MeelionDollerBogus
MeelionDollerBogus's picture

Except it certainly will and must. There is but one alternative: print so much money the currency itself ceases to exist. I understand this risk & while it means no payout on my paper it also means the physical gold & silver I have, along with every other tangible like meds, tools, weapons, food, water, will be a massive benefit relative to those who stockpiled none.

Every situation, every outcome for which the US dollar is a valid currency will and must end this way: the valuation must drop because there is no value. There is only credit in the form of margin, of printed money, of rehypothecation & there is no infinite lifespan for those activities. The only thing that ended the last period like this was world-war but the next world-war can not ever be the same. Too many aggressive & non-cooperative agents in such a game are stocked to the tits with nuclear & biological weapons, so you will never see a massive Dow spike from decades of victory over other continents. Instead it would be The Road and then the end of humanity.

That means NO SPIKE which means EPIC FAIL, and the choice is only which variation of epic fail: stock market failure or currency failure. The decision tree's been sharply pruned & one of those outcomes MUST Happen. I'm prepared for both.

Mon, 02/24/2014 - 20:02 | 4472990 RMolineaux
RMolineaux's picture

The Australian Dollar (Aussie) is not one of the currencies used in setting the US dollar index.

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