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The Russell Is Red, The Dow Is Green, And The Steepening In Bonds Just Has To Be Seen

Tyler Durden's picture




 

Every day this week saw early weakness (the dump) succumb to a rampathon (pump) but as those dump-and-pumps progressed the gap between small-cap/high-beta and large-cap/blue-chip widened and widened. The Russell (and the S&P) had its worst week in a month but the Dow (and just Trannies) managed to close the week green and new record highs. Homebuilders were the worst sector on the week (-2.5%) and Staples best with a modest gain. Away from stocks, the USD surged 0.55% on the week (its biggest jump in 7 weeks) led by EUR weakness (250 pips on Draghi promise). The biggest news was in bond-land where the 30Y yields exploded post-Yellen (+10bps on the week) and the short-end rallied (-4bps) for the biggest steepening in 20 months. Gold closed the week at its lowest in 3 months. Much was made of the shift lower in VIX today (back under 13) - especially ahead of the Donetsk referendum - but given the market's relative underperformance it would appear hedges were lifted and positions derisked simultaneously.

 

Courtesy of the JPY (and VIX see below)...

 

 

 

The Dow closed at all time record high close - and made it perfectly unchanged on the year...

 

The week in stocks - dominated by dump-and-pumps and high- versus low-beta

 

As growth and value are stuck at six-month lows relative to one another...

 

This was not a short-squeeze... in fact this was the worst week for "most shorted" stocks in 2 years... (and they are now down almost 13% from their highs)...

 

VIX did not do the job it was supposed to do - as it seems 'real' sellers dominated the pumpers for change as they unwound hedges and underlying risks...

 

Which leaves the VIX term structure near its steepest in months...i.e. most complacent!!

 

The USD had its best week in the last 7 as EUR dumped 250 pips on Draghi's promise of next time...

 

But bonds were the most active...

 

with 5s30s steepening the most in 20 months...

 

Gold closed at its lowest weekly close in 3 months...

 

Charts: Bloomberg

Bonus Chart: The Flow is not your friend...

 

Bonus Bonus Chart: Either we re-pump this credit bubble or stocks are gonna blow...

 

Summing it All Up...

 

 

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Fri, 05/09/2014 - 16:08 | 4744673 NOTaREALmerican
NOTaREALmerican's picture

A steeped bond never boils.

Fri, 05/09/2014 - 16:14 | 4744698 flacon
flacon's picture

I see value in silver at the moment. I bought some July call options today. 

Fri, 05/09/2014 - 16:22 | 4744716 Headbanger
Headbanger's picture

I see value in the bottle of tequila in front of me at the momento.

Remember.. Tis far better to have a bottle in front of me than a frontal lobotomy!

 

Fri, 05/09/2014 - 17:54 | 4744930 knukles
knukles's picture

This just in...
Breaking News:

Fellas at the SEC elated over Trannies rising

Fri, 05/09/2014 - 18:48 | 4745043 cifo
cifo's picture
The Russell Is Red, The Dow Is Green, and the gold is yellow forever.
Fri, 05/09/2014 - 16:09 | 4744677 The_Ungrateful_Yid
The_Ungrateful_Yid's picture

93+ million not working Dow at ATH.....hope and motherfuckin change  yo!

Fri, 05/09/2014 - 16:53 | 4744794 Squid Viscous
Squid Viscous's picture

Good Headline for USA Today reading sheeple, DOW CLOSES AT ALL TIME HIGH! (hint:everything is great so go out and buy that 50" teevee at Walmart! and dont forget to buy some worthless crap for Mom)

Fri, 05/09/2014 - 17:56 | 4744934 knukles
knukles's picture

Hi Mom,

I gotcha our old 38" TV, mom.
Sorry the Burger Kings are a bit cold, but we had to stop at the Jazz Bar on the way home.
Now go back downstairs.

Fri, 05/09/2014 - 17:51 | 4744923 Kaiser Sousa
Kaiser Sousa's picture

NEW YORK, May 8 (Reuters) - Investors in U.S.-based funds pulled more than
$7 billion out of stock funds in the week ended May 7, more than the two previous weeks' worth of net inflows, data from Thomson Reuters' Lipper service showed on Thursday.  That was the largest such outflow since early February, turning the four-week moving average to outflows for the first time since mid-February.

Investors pulled $8.6 billion out of stock exchange-traded funds while
committing $1.6 billion to stock mutual funds. ETFs are thought to represent the
institutional investor, while mutual funds are commonly purchased by retail
investors. "ETF investors were responsible for over $8.6 billion in outflows from
equity ETFs this week, which overwhelmed the $1.6 billion that equity mutual
fund investors added - a very typical figure for them recently," said Jeff
Tjornehoj, head of Lipper Americas Research.

Tjornehoj said investors have been putting an average of between $1.5
billion and $2 billion per week into equity mutual funds, which is "right in
line with what we've been seeing. For their part, ETFs are about hedge-fund
selling." Taxable bond funds attracted roughly $4.7 billion in inflows, marking their
ninth straight week of inflows. "Investors saw that interest rates are not going to spike anytime soon and they don't want to give up their bond funds since a lot of the owners are the baby boomer generation," Tjornehoj added. "There is nothing about their
generation that wants to give up on income."

http://www.reuters.com/article/2014/05/08/investing-fundflows-lipper-idU...

give up on their income....WHAT FUCKING INCOME?????

 

Fri, 05/09/2014 - 16:09 | 4744678 kliguy38
kliguy38's picture

BAAAAAAARFF

Fri, 05/09/2014 - 16:10 | 4744683 SheepDog-One
SheepDog-One's picture

Anything to close precious DOW green for the weekend, then we can phony it all up starting Monday again. Apparently it can just go on forever, I've pretty much just given up giving a shit.

Fri, 05/09/2014 - 18:17 | 4744969 Amish Hacker
Amish Hacker's picture

Really. If you're basing your investment decisions on any of the traditional metrics, forget it. Now the VIX and the dollar/yen cross (not you, Yen Cross) are driving the bus, Thelma and Louise style. Stop trading. You'll care less and less about more and more.

Fri, 05/09/2014 - 16:14 | 4744687 ebworthen
ebworthen's picture

So the smart money is getting out?

Yellen was prodding her Orcs hard.

Looks like Tyler is in the Mountain Time zone (?).

Fri, 05/09/2014 - 16:12 | 4744688 HedgeAccordingly
Fri, 05/09/2014 - 16:13 | 4744689 HedgeAccordingly
HedgeAccordingly's picture

Browser went nuts

Fri, 05/09/2014 - 17:07 | 4744771 Yen Cross
Yen Cross's picture

  Firefox 29 & Adblock Edge. (Not Adblocker+)  Then add Mozilla Lightbeam.

 http://www.mozilla.org/en-US/firefox/beta/

 https://addons.mozilla.org/en-US/firefox/addon/adblock-edge/

  Ya try to help and some douche junks ya!

Fri, 05/09/2014 - 17:25 | 4744867 CunnyFunt
CunnyFunt's picture

Always a wanker around somewhere, yc.

I would suggest ghostery. It makes zh much more readable.

Fri, 05/09/2014 - 17:40 | 4744900 Yen Cross
Yen Cross's picture

 Long time no talk my friend! Nice to hear from you.

  I have Ghostery in my arsenal, but haven't had much need for it.

   Miss your posts. Don't be a stranger. :)

 

Fri, 05/09/2014 - 18:56 | 4745067 CunnyFunt
CunnyFunt's picture

Cheers, mate. 

Fri, 05/09/2014 - 16:12 | 4744690 HedgeAccordingly
HedgeAccordingly's picture

Wtf

Fri, 05/09/2014 - 16:14 | 4744696 TheRideNeverEnds
TheRideNeverEnds's picture

VIX futures closed at the lows of the decade.  There is no fear; everyone knows the bottom is in and we are going higher.  

Fri, 05/09/2014 - 16:57 | 4744804 Squid Viscous
Squid Viscous's picture

but you said we were gonna be at 1900 SPX about 6 weeks ago, wtf? and you're still here, like a fart in a bank vault... seriously, fuck off...please? 

Fri, 05/09/2014 - 16:16 | 4744706 chubbyjjfong
chubbyjjfong's picture

But.. But.. the Omen? The Hindy Omen.. 

Fri, 05/09/2014 - 16:17 | 4744707 polo007
polo007's picture

http://uk.reuters.com/article/2014/05/05/usa-federalreserve-blinder-idUKL2N0NR01O20140505

May 4 (Reuters) - After an extended period of relative peace among members of the U.S. Federal Reserve's interest rate policy-making committee, fireworks will erupt in coming months as they debate how to reduce the central bank's multi-trillion-dollar balance sheet, a former vice-chairman of the central bank said on Sunday.

"The Fed may get more raucous about what to do next as tapering draws to a close," Alan Blinder, a banking industry consultant and economics professor at Princeton University said in a speech to the Investment Management Consultants Association in Boston.

The cacophony is likely to "rattle the markets" beginning in late summer as traders debate how precipitously the Fed will turn from reducing its purchases of U.S. government debt and mortgage securities to actively selling it.

The Open Market Committee will announce its strategy in October or December, he said, but traders will begin focusing earlier on what will happen with rates as some members of the rate-setting panel begin openly contradicting Fed Chair Janet Yellen, he said.

The Fed built up its balance sheet over the last five-and-a-half years as it bought securities to lower interest rates in attempts to stimulate the weak economy.

But hawkish members of the Federal Open Market Committee who worry about inflation, such as Federal Reserve Bank of Dallas President Richard Fisher and Philadelphia Fed Bank President Charles Plosser, are likely to call for aggressive sales and contradict plans by Yellen and other doves in the majority who want to keep rates low as long as unemployment continues at high levels, Blinder told the group of stockbrokers and investment advisers.

Blinder, a supporter of Yellen who served on President Bill Clinton's Council of Economic Advisers in the mid-90s, said the "perils of a big balance sheet are not so horrible."

The Fed held only about $900 million on its balance sheet before Lehman Brothers' collapse in 2008 triggered the financial crisis, but will "never go back there" from its current level of about $4.25 trillion, Blinder said.

A balance sheet of $1.5 to $2 trillion will likely be the new normal, he said.

He congratulated Yellen on artfully backing away from former Fed Chairman Ben Bernanke's assertion that rates can begin rising once the U.S. unemployment rate hits about 6.5 percent.

The Federal Funds rate that determines short-term interest rate will not rise anytime soon, Blinder said, noting guidance from Yellen that she is watching several indicators of the economy.

The housing market, consumer spending and other parts of the U.S. economy are still recovering very slowly, said Blinder, adding that it will be six to 12 months after the Fed completely stops purchasing securities before rates start to rise.

Fri, 05/09/2014 - 17:10 | 4744719 Yen Cross
Yen Cross's picture

  I hope I don't regret this, but I bought a decent long position in usd/jpy yesterday @ 101.50.  Yields(10s) and the DXY are creeping higher so I pulled the trigger. I chose to keep them open over the w/e with t/p just above opening prices.

 I think Asia might squeeze the shorts up to 102.00 Sunday.

 Already in the $ dipshit junkster!

Fri, 05/09/2014 - 17:14 | 4744847 disabledvet
disabledvet's picture

Interesting trade. Dollar had a "big baddddda boom" today and if Putin is getting rolled here that will be an unmitigated positive for paper assets.

Still think the correction meme remains normative and equity bulls will have to justify here...I would hardly call today's steepening in the curve of note...but we'll see.

If the Banks can't borrow short to lend long (2008 Total Annihilation of Wall Street) the "Houston, we have a problem."

Fri, 05/09/2014 - 17:47 | 4744864 Yen Cross
Yen Cross's picture

    @ disabledvet

  You'll love this guy.  Yen at 85 Seen by Tokai Predicting BOJ Policy Miss: Japan Credit - Bloomberg

  Mind you, I've been a USD bear vs Yen for quite some time, and done well.  No MAS. I said I'm buying the dips in that trade. Japan is NOT a surplus economy any more, and it's just an intraday(carryover) trade.

Fri, 05/09/2014 - 16:29 | 4744746 Kreditanstalt
Kreditanstalt's picture

Utter, unbelievable insanity...

Fri, 05/09/2014 - 16:34 | 4744752 debtor of last ...
debtor of last resort's picture

Question is, when does the smart money go back in?

Fri, 05/09/2014 - 16:38 | 4744769 chubbyjjfong
chubbyjjfong's picture

When the gap between the smart money and the sheeple money gets to extremes. Then the trigger is pulled, market tanks, then smart money piles in again.

Fri, 05/09/2014 - 16:39 | 4744776 Winston Churchill
Winston Churchill's picture

S + P = 666, although I 'm not convinced this isn't the terminal melt up of von Mises.
We are all Zimbabweans now.

Fri, 05/09/2014 - 16:40 | 4744777 mrdenis
mrdenis's picture

You don't really want to know the answer to that ..........

Fri, 05/09/2014 - 17:04 | 4744823 Squid Viscous
Squid Viscous's picture

when they run out of beluga caviar and nova lox in the hampsteins, the smart money will know it's time to flee to Israel

Fri, 05/09/2014 - 17:03 | 4744822 wmbz
wmbz's picture

Well as Capt Jack Yellen said..." I don't know what you would call the system we have now" "I don't like labels". She may as well have said..." What difference at this point does it make now"

It's a fucking mess!

Fri, 05/09/2014 - 18:05 | 4744833 Yen Cross
Yen Cross's picture

  That Spitzer clown that thinks the E.U. is "better off" must be reading this thread.

 I guess he missed the memo re; European banks are levered 3x U.S. banks and were never recapitalized!

  European banks however, have had an open door to the Fed. discount window via swaps and OIS agreements.

 I don't trade the euro unless it's against the yen. (usually) I'm tempted to short it vs the usd, if I see a few more indicators line up.

Fri, 05/09/2014 - 17:11 | 4744840 Thalamus
Thalamus's picture

The PPT are scratching their heads as to why they have to do all the heavy lifting due to the momo crowd backing off.  I think the current members see the writing on the wall and will be yellen for replacements before long.  

Fri, 05/09/2014 - 19:07 | 4745096 razorthin
razorthin's picture

I stick to my "the crash is nigh" thesis.

Fri, 05/09/2014 - 19:21 | 4745133 orangegeek
orangegeek's picture

Dow Jones Hourly from today show just how close we were and are to another all time high.

 

http://bullandbearmash.com/chart/dow-jones-hourly-remains-bear-channel-c...

 

Bank of America claims retailers are the bagholders at this market top - rarely do bankers speak straight - this suggests that institutions are caught at this top.  If so - nothing but ugly is on its way.

Fri, 05/09/2014 - 19:50 | 4745182 nosoeawe
nosoeawe's picture

i recall sitting at XXXXX Software in early 2000's. Our CEO had just been on the front cover of, if memory serves me correctly, Fortune. The headline was "The Billionaire Next Door".

i saw bmws, benz, ferraris all being delivered right to the parking lot. most were paying 10-15k over sticker. i saw more rolexes, fancy suits and thousand dollar shoes than a whore house in DC. our stock was sitting right at 75-80 bucks, valued in the billions on revenue in the 40-50 million dollar range and of course no profits.  everyone drank the jonestown koolaid and couldnt see straight. 

4-5 months later the company had laid off 70% of their staff, their stock crashed to over a buck, i was the only one standing in my dept that once had 30-40 members and we were taking up collections for those that had a house but no food. Yes, million dollar homes with no furniture and no food.

today, i took a walk at lunch and behold, two benzs were being delivered. the were right next to the red ferrari, two porsches and a fleet of lexus and bmws. i walk through the halls and see the same ol yuppie fucks with rolexes, suits and thousand dollar shoes. 

.01 gdp, 98 million out of work, ukraine turning into another chicago, and the markets sitting at all time highs.

so what's the moral of the story? i dont know, just dont be a fucking yuppie douche that has a mcmansion but can't afford a fucking happy meal. beside what pharrel says, that won't make you happy.

 

 

 

Fri, 05/09/2014 - 19:50 | 4745183 nosoeawe
nosoeawe's picture

i recall sitting at XXXXX Software in early 2000's. Our CEO had just been on the front cover of, if memory serves me correctly, Fortune. The headline was "The Billionaire Next Door".

i saw bmws, benz, ferraris all being delivered right to the parking lot. most were paying 10-15k over sticker. i saw more rolexes, fancy suits and thousand dollar shoes than a whore house in DC. our stock was sitting right at 75-80 bucks, valued in the billions on revenue in the 40-50 million dollar range and of course no profits.  everyone drank the jonestown koolaid and couldnt see straight. 

4-5 months later the company had laid off 70% of their staff, their stock crashed to over a buck, i was the only one standing in my dept that once had 30-40 members and we were taking up collections for those that had a house but no food. Yes, million dollar homes with no furniture and no food.

today, i took a walk at lunch and behold, two benzs were being delivered. the were right next to the red ferrari, two porsches and a fleet of lexus and bmws. i walk through the halls and see the same ol yuppie fucks with rolexes, suits and thousand dollar shoes. 

.01 gdp, 98 million out of work, ukraine turning into another chicago, and the markets sitting at all time highs.

so what's the moral of the story? i dont know, just dont be a fucking yuppie douche that has a mcmansion but can't afford a fucking happy meal. beside what pharrel says, that won't make you happy.

 

 

 

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