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Fed Warning Sends Small Caps Red For 2014

Tyler Durden's picture




 

The word "volatile" comes to mind when reflecting on today's cross-asset class action. US equities dumped into and beyond the US open, decoupling entirely from JPY carry, only to reverse perfectly at the European close and recover all the way back to USDJPY right as the FOMC minutes hit. A kneejerk sent stocks higher but that quickly decoupled also and stocks fell. Small Caps underperformed and are back in the negative year-to-date. Treasury yields were volatile, ramping higher into the US open, rallying post, then whipsawing on FOMC minutes to close 3-4bps higher on the day.The USD was flat on the day despite the surge in USDJPY back above 118. Commodities were a mess with a big dump on Swiss Gold polls, rip higher on Russian buying rumors and dropped again on FOMC (oil and copper followed suit). HY Credit was "bidless" and continues to decouple from stocks (along with VIX). The Dow was levitated back into the green to close

On the day, Russell 2000 underperformed... and they tried their best to get The Dow green to prove how The Fed is right...

 

The Russell 2000 was down 1.8% this week, down 1.5% today, and had limped ungraciously back into the red for the year. before bouncing back into the FOMC Minutes release. Since then, it retreated rapidly and is now once again negative for 2014... which is odd given everyone proclaiming growth is back and the domestic economic exposure bias of small caps over big caps...

 

JPY Carry has decoupled...

 

HY Credit notably decoupling from stocks still

As Brean Capital's Peter Tchir notes:

I have said since it happened it was particularly focused on the high yield market which had gone bidless and rather than finding real clearing levels they did the QE trick (it was more about hy then stocks). Today they admit the market was right to take their reaction as stepping in when vol increased. By adding the statements about misimpressions today they are resetting the Yellen put - to a lower strike. The bad thing is hy is weak again and it isn't just shale and CCC that is going bidless - there is almost a daily blow up now whether here or in Europe.

And VIX continues to decouple...

 

 

Across the asset classes, quite a volatile day...

Commodities all broke aroun 1030ET when rumors of the Swiss poll results started...

 

Charts: Bloomberg

 

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Wed, 11/19/2014 - 17:11 | 5466993 SilverIsMoney
SilverIsMoney's picture

The Fed is fucked! When are the masses going to figure this out?

 

1) End QE/Dont Jawbone = Markets Crash

2) Keep Printing/Jawbone = Become Japan

THEY. ARE. TRAPPED.

Just keep stacking!

Wed, 11/19/2014 - 17:13 | 5467012 COSMOS
COSMOS's picture

hah hahah hahha hahha hahha haha they wont bail out stocks...hahah hahah ahhah...YEAH RIGHT

Wed, 11/19/2014 - 18:03 | 5467247 max2205
max2205's picture

THe IWM SPY ratio is testing 2009 lows!.......wow fuck wow...must be close to a bottom right? 

 

Oh wait.....

Wed, 11/19/2014 - 18:04 | 5467250 sun tzu
sun tzu's picture

I guarantee the next market crash one of those bastards will come out with a Bullardish statement that sends stocks to the moon again

Wed, 11/19/2014 - 18:30 | 5467343 LawsofPhysics
LawsofPhysics's picture

please, the people/owners behind the Fed are doing quite nicely, so are their political puppets.  The later and all the front men/women will only be "fucked" once all those paper claims start chasing after real assets  and only if someone leads the charge to prosecute the fraud as well as execute these fuckers.

Wed, 11/19/2014 - 17:13 | 5467003 Squid Viscous
Squid Viscous's picture

and the ES adds another 3 points after the bell... just because

Wed, 11/19/2014 - 18:27 | 5467332 TheRideNeverEnds
TheRideNeverEnds's picture

Cause at that point we hadn't made a new all time high in over twenty four hours so we are overdue; free Obamabux.

Wed, 11/19/2014 - 17:14 | 5467013 OW My Balls
OW My Balls's picture

How do you say 'PULL IT' in Yiddish?

Wed, 11/19/2014 - 17:19 | 5467039 Soul Glow
Soul Glow's picture

It's all downhill from here!  WEEEEEEEEE!

Wed, 11/19/2014 - 18:11 | 5467267 sun tzu
sun tzu's picture

Tesla missing 12,000 cars. Accounting gimmicks?

http://finance.yahoo.com/video/where-tesla-12-000-missing-183417047.html

Wed, 11/19/2014 - 17:22 | 5467052 Keltner Channel Surf
Keltner Channel Surf's picture

Regardless of post hoc Fed word-parsing, it’s important to realize the absolute pre-planned control from bank computers today:  

The oft-mentioned Russell, which still hadn’t filled the Japan “moar” gap, spending the past few weeks in suspended animation, like a foamy-mouthed Rottweiler stuck at the apex of a broken Ferris wheel, did an astonishing bungee drop at the open to precisely tag it’s 20 DMA by 9:36, then flirted with the 200 DMA by 11:00, only to rise pre-FOMC to cut 90% of those losses, before ending the day precisely at the 20 DMA.   

Thus, the daily candle has the lower wick just above the 200 DMA, and the ending red body exactly at the 20 MA.  Perhaps a quant type can calculate the odds of millions of ‘market participants’ playing the ‘price discovery’ game reading every word of the Finnegans Wake FOMC statement and collectively hitting those levels by chance, but safe to bet the % is lower than Dimon’s salary to the nearest $million.

Wed, 11/19/2014 - 19:13 | 5467498 Think Like A Crook
Think Like A Crook's picture

KCS, one couldve made a killing on the weekly options on IWM, if timing was proper. I fully see the candles pinging the dma's as you describe. But how do u account for the timing? As you mentioned, it wandered assed around for awhile. Just looking for clues.

I do better on individual names (for example short via puts netflix dec $375's as of last thursday as it was in a "next move wins" scenario after its cliff dive response to the fact that business is waning) but looking to improve my forecasting of the most manipulated etf's.

Thu, 11/20/2014 - 08:06 | 5468960 Keltner Channel Surf
Keltner Channel Surf's picture

Nearly impossible for a pure daytrader to get it all early from the Russell on Wednesday, given we had several days of frustrating, nonsense action, then a vertical plunge in the first 3 minutes on a Fed day, when algos normally trace out a slow, lazy pattern of possibilities prior to 2:00.  I did jump in short early after the first profit-taking retrace and did OK in the initial plunge, but kicked myself for stopping early, missing a much easier, much larger rebound trade.  On FOMC days "savvy" can play a bigger role, and unless the minutes were leaked overnight, it stood to reason we'd retrace smartly.  "Usually" the machines trace out a pattern of best/worst case scenarios, end in the middle by 1:45, then take off at 2:30 based on consensus minutes parsing.  "Usually" in quotes, as complex hedging on Fed days often confounds even the best pros.  I've noticed that on about 25% of FOMC days, we get a large surprise early move to tag key level, perhaps because many standard players are hedged and out of the picture, so a few strong hands can get a reaction.  Hardest yest most potentially rewarding day to trade, the FOMC releases, lately I prefer to try mornings only, then read about their comments the next day.

Wed, 11/19/2014 - 17:37 | 5467118 Billy Shears
Billy Shears's picture

I just had a "funny" déjà vu. I was wondering why, with so much wealth being created in the stock market my exposure to same has been nothing short of dismal and then it occured to me that I felt this same way just before the sub-prime meltdown (and why I hadn'd participated in that credit bonanza, poor me) so I'm thinking we are getting close.

Wed, 11/19/2014 - 17:42 | 5467150 Withdrawn Sanction
Withdrawn Sanction's picture

Acording to the last 5 of the Fed's H.4.1 reports (Oct 16, 23, 30 and Nov 6 and 13--it may go back farther, I just stopped at 5), they reported zero Repo activity (adds liquidity), while there was $254 Billion, $225 Billion, $219 Billion, $256 Billion, and $206 Billion in Reverse Repo activity respectively.  Whether they will or wont raise rates, the fact is they have been draining liquidity (reserves) from the banking system for at least a month....draw your own conclusions.

Wed, 11/19/2014 - 18:22 | 5467312 disabledvet
disabledvet's picture

Something big is about to blow up. Sure looks like Japan but why not throw in the Chinese property bubble and a 37-38 for Europe just for shits and giggles.

Wed, 11/19/2014 - 18:36 | 5467369 LawsofPhysics
LawsofPhysics's picture

Optimist.

Wed, 11/19/2014 - 18:33 | 5467358 LawsofPhysics
LawsofPhysics's picture

my conclusion is simple, all those paper claims are starting to chase real assets.

Wed, 11/19/2014 - 18:02 | 5467238 Maplehood
Wed, 11/19/2014 - 19:34 | 5467558 ShortDebt
ShortDebt's picture

Rut has been signaling trouble by not making new highs. Get some TZA. This is gonna be fun.

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