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Week Of Epic Bond Volatility Ends With A Whimper
For all the talk and feverish anticipation of today's payrolls number, which came in far stronger than expected on the headline assisted by a surge in self-employed Americans, some 370,000 to be exact, most of whom between the ages of 20 and 24 at least according to the BLS, the market reaction was largely a dud and after an initial spike lower, followed by a just as frenzied episode of BTFD, ES was locked in a trading range set by yesterday's lows and VWAP of course.
The weekly chart shows that while the three main indexes all closed modestly lower, the Russell managed to outperform but the biggest winner this week was the trannies, assisted by the recent drop in crude.
However to see the real stock action catalyst one needs to step even further back, look at the one month volume chart, which shows a tale of two (volume) tapes: a rise on declining volume, and a drop from recent all time highs on ever higher volume. As the chart below shows, something snapped on May 26 when the trendline higher was broken, and selling on every higher volume has been the norm.
And yet, today's relatively quiet stock tape masks the real tension in markets which is not so much about equities, where volatility remains artificially supressed as we showed yesterday...
... but continued to be all about China, where the manic phase, punctuated by increasingly sharper, more frequent sell offs, clearly visible to all...
... and most of all the bond market, where we either are approaching an inflationary inflection point, confirmed by the 10Y closing at the highest yield since 2014...
... or are witnessing central banks slowly losing control, as shown in the following chart of MOVE, i.e., the Merrill bond market volatility index, which has been steadily rising in the past month...
... and leading to a doubling in German Bund yields in the past week alone.
Oil, on the other hand, was in its own world, trading according to the whims of stop-hunting algos and leading to the following perplexing monthly formation.
In any event, something here has to break: either yields will finally springboard higher, leading to a dramatic end in debt-funded stock buybacks which are no longer accretive at rising yield levels, thus leading to a drop in stocks, or today's close encounter with economic growth is shown to be short-lived once again and yields resume their trek lower, cross-asset volatility normalizes, which in turn allows equities to resume their "wealth effect" climb ever higher.
Conveniently, with a number of key geopolitical events on the table, the resolution one way or another will reveal itself on very short notice.
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What do you expect when you have every CB on the planet buying all markets at every dip?
See! Steve Liesman was right! Everything is fucking awesome.
Let's all follow his lead and snort some Comet cleanser!
VWAP Algo’s theme song:
Every offer you take
Every bid you make
Every trend you break
Every step you take
I'll be watching you
Every single day
EVERY time you trade
All the games I’ll play
Every spike you fade
I'll be watching you
Oh can't you see
You belong to me?
See the market ricochet
Back to that damn orange line all day
Every move you make
Every single day …
I both salute and praise you for writing such joyful lyrics about a thing of beauty.
Would love to take credit, but given I only had to change a few words, The Police had more to do with it than me. Perhaps they traded stocks before getting into music?
THAT IS NOW MY FACEBOOK STATUS!!! FREAKIN' AWESOME!!
Epic volatility? VIX went all the way up to 15.65. That's the new normal for epic? VIX must not be volatility.
Nevermind, BOND volatility.
VIX is now not an indicator but a central bank financial weapon.
They sell the VIX futures, and viola, black scholes takes option premiums down, then this reverberates back into the underlying securities reducing their volatility.
It's all part of what we still euphemistically call the markets but in reality is Central Bank fraud.
Risk F/X looks just like that Vol chart. You can see the drift lower, but the Central banks and dark pool ALGO's keep trying to punch holes in the Oscillators to hold the house of cards up.
You can really see it when you look at MACD overlayed with a real time "back painting" indicator. The shorter term charts look like a bunch of midgets are pushing up from underneath, when the MACD is clearly getting ready to cross the "zero-line".
Methinx Durden means highest 10y yield since 2014 ........ November to be exact.
With higher mortgage rates and billions in HELOC payoffs coming due , things should get interesting in housing.
ANY ATTACK AGAINST THIS BATTLE STATION WILL BE A USELESS GESTURE NO MATTER TECHNICAL READOUTS THE REBEL ALLIANCE HAS OBTAINED!
AS FOR YOU LORD VADER...
Well gasoline is priced like oil is trading in the $80 dollar range so somethign has to break there too.
Or is $2.90 gas normal when oil is trading at $60?
I remember a two years ago when oil dropped right below $80 and I filled up for $2.10 a gallon.
It's very funny to think that these hacks didn't already know the fake jobs number, all this volatility is made up so folks think we actually have something that resembles a working market. This market no longer is a function of what a healthy economy exemplifies.
Y'all gonna get fucked for a chicken.
A few observations about today, it trapped shorts below pre-cash low , it trapped shorts below yesterday's low but what totally excited me was how they were able to actually get it back to unchanged on the day to suck in new LONGS before bringing it back to VWAP. I'm not American but I am grateful to your stock market. Thank you.
I don't know. To me it looks like the FED software has the FED software charts pretty much under control. BTFD. Stay the course.