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Another Late Day Dumpfest Ends Worst Thanksgiving Week Ever For Stocks

Tyler Durden's picture




 

Stocks plunged at the close for the third day in a row to cap the worst Thanksgiving week ever. US equities seemed in a world of their own for much of the day - especially financials - as all the hope and rumors faded and clearly a large number wanted to be flat or short into the weekend. Across a broad basket of risk assets (CONTEXT), today's equity rally and selloff was pure emotional overshoot and correction as we closed back at reality. HYG once again led the derisking way and credit underperformed equity until the late-day equity sell-off converged them once again. What has been most notable this week - particularly the last day or so, has been the sell-off in Treasuries. The concerns that European entities are repatriating anything and everything should be very worrisome and the volume into the ES close suggests that fear is growing.

CONTEXT was less ebullient though was bid today as broad risk assets moved up on hope and then rolled over on reality once again. The factors were much less correlated than normal - especially treasuries - but the incredible correction back to sanity into the close was quite surprising nevertheless in its relative exactness. We think the lower correlation is also a factor of technical flows and worry that we are heading towards some break that could lead to significant outflows from seemingly low risk trades - something to watch.

Treasury performance today was entirely odd given the sell-off of the afternoon and the relative strength until the last day downgrade of Belgium in EURUSD also suggests that there was heavy repatriation of foreign assets.

Equity and Credit were generally in sync today but HYG led the way once again. The 4th day in a row where HYG was the clear beta leader (red ovals) which fits with the thesis of ETF-stuffing that we have been effusively discussing for a few weeks. Given high-yield credit's further deterioration, we have adjusted our S&P 500 cash index fair-value to 1135 and while we are as close to fair between equity and credit (as equity has snapped back to reality) as we have been in over a month, we suspect if sustained pressure from HYG pushes into secondary HY bonds, credit and equity will repeat the pattern on 2008 and tumble together as if riding an illiquid slip'n'slide.

Its admittedly thin trading after-hours but the major US financials have given up all of their gains with MS, WFC, AMEX, and GE all practically unch and GS and BofA dropping off.

FX markets were a one way street this week as EUR-based flows drove USD strength in almost a straight line - admittedly with some vol - with DXY up over 2.1% on the week and AUD down over 3% against the USD. Finally, into the close, commodities generally sold off quite hard - fully retracing the SNB/Greece 'good-news-silliness' chatter - with Oil and Silver the craziest. What was very notable was the last minute rally in Oil into the close - war premia? Gold modestly underperformed the USD on the week while liquidation appeared more the moves for Silver and Copper.

The week in Europe was clearly the main driver (and rightly so) and is evident in the disconnects this week in European credit and equity. Financials closed just of their wides of the week while the rally into the EU close (well before today's ugliness in US) was led by Main (not XOver) suggesting it was much less risk-on than it might appear. Equities outperformed today - once again seemingly in a world of their own - and given the weak close in the US, we would expect this gap to fill on Sunday's open (as we have seen again and again).

Pete Tchir, of TF Market Advisors, sums the day's headlines in Europe up nicely:

The only logical conclusion is that we are further away from a solution or agreement in Europe than we have been in a long time.  The "Grand Plan" has failed and this time, it is not a matter of creating "bigger and better" versions of prior plans, they need to do something new.  Germany in particular will not relent on "printing" until a real, credible, and implementable plan is on the table.  I think they are weeks away from that.  In the meantime expect support for European sovereign debt to erode.  Italian and Spanish debt are dangerous, but as shorts take some profit there at these yields, they will step up positions in Belgium, France, and probably Germany.

 

The best thing Europe could do is impose some old school "children" rules on the politicians, finance ministers, and various government employees.  They should be told 1) Children are meant to be seen, not heard, and 2) If you have nothing good to say, then don't say anything.  There is enough bad news out there without people like Mersch taking the time to speak.  Would it be that hard to say Draghi is only one allowed to comment on ECB at this stage?  I'm bearish and thankful to Mersch, but really, what was the point of that?

 

Have a great weekend and enjoy the holiday, and get some rest, because this is likely to be a December to remember.

Charts: Bloomberg

 

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Fri, 11/25/2011 - 21:49 | 1914325 Schmuck Raker
Schmuck Raker's picture

THAT will show those Terrorists not to mess with US.

G. Dub would be proud.

Fri, 11/25/2011 - 16:07 | 1913728 marcusfenix
marcusfenix's picture

black friday, another year, another holiday corporate cattle drive, mass herd consumerism gone insane. 50% off everything for one day only, but be sure to check your dignity, common sense and humanity at the door. otherwise you might miss out and not get that flat screen for that family member that you only talk to three times a year and don't really give a shit about, but if you don't buy them something during this magical time of year, well you're just a waste of air aren't you?

so get out there and graze in those green discount cow pastures, empty that wallet, burn that credit cause that's what a good citizen does in the service of USA inc. that is the American dream, the ability to buy shit, as brought to by Wal Mart, JPM, Phizer, exxon mobil, american airlines, GM, the MSM, google, Washington, DC and everybody else who you rely on to tell you what to eat, what to drive, what to think, who to hate, where to go, how to get there, what illnesses you have, what meds to take for them, what to watch, who to listen to, who to ignore, who to vote for, what you can do on the internet, what books to read, what books to burn, what you need to allow the government to do to you in order to be safe and secure in the home land and well, you get the point.

next year it will be black thanksgiving day and our journey toward the dark side will be complete.

sad really.

Fri, 11/25/2011 - 16:12 | 1913742 JPM Hater001
JPM Hater001's picture

I bought January 21, 2012 SPX 980 at 10.80 when the market was actally up.  It closed basically at the buy.

However, my losses on December Puts at 970 came back 25% (I'm not convinced just yet those are a loss at maturity).

AND my June 2012 Puts are up 58% since I bought it a few weeks ago at 4.40.

I am up 10% overall since entering in Early October.  I suck at investing but this just feels too easy.

Anyway- All hail the mighty Turkey Week.  Franklin would cry for what it has become.

Fri, 11/25/2011 - 17:25 | 1913926 lotsoffun
lotsoffun's picture

jpm hater - i started playing dow puts (and sometime even calls) back in the middle 90's right into 2007.  i was objective and NEVER lost money. in 2009 july end i bought puts 2 days before the big ben rang the qe.  i got crushed.  i've been watching mostly ever since, and in every way in every day, i would have got crushed.  most people would.  one can't predict it, unless you are on the real inside, and know what rumor they are going to leak the previous day.

i wish you luck.  what happens sunday afternoon when ecb announces lowering rates to .5?  or bennie announces buying esfs bonds.  or eu has a new plan.  monday - stocks go to the moon.  it's the bottom...  all the genie will be in thinking they caught the bottom.

my bottom got the message already.... :)

 

Fri, 11/25/2011 - 17:25 | 1913927 lotsoffun
lotsoffun's picture

jpm hater - i started playing dow puts (and sometime even calls) back in the middle 90's right into 2007.  i was objective and NEVER lost money. in 2009 july end i bought puts 2 days before the big ben rang the qe.  i got crushed.  i've been watching mostly ever since, and in every way in every day, i would have got crushed.  most people would.  one can't predict it, unless you are on the real inside, and know what rumor they are going to leak the previous day.

i wish you luck.  what happens sunday afternoon when ecb announces lowering rates to .5?  or bennie announces buying esfs bonds.  or eu has a new plan.  monday - stocks go to the moon.  it's the bottom...  all the genie will be in thinking they caught the bottom.

my bottom got the message already.... :)

 

Fri, 11/25/2011 - 16:12 | 1913744 zittau
zittau's picture

spx,  the unhinkable:  475 by dec 2012?

Fri, 11/25/2011 - 16:17 | 1913760 zittau
zittau's picture

2011,  just recall this year has traded very similarly to 1973.  Down into august,  spike up into late october, then selloff into mid-dec, taking out the august lows.  Then ofcourse 1974 started off quietly then preceeded to dive into a bottom in q4 1974,  sounds like a script for 2012

 

Fri, 11/25/2011 - 16:18 | 1913762 rambler6421
rambler6421's picture

Dow is pretty much at the same level it was during the DOT Com crash.

 

Nice.

 

libertarian86.blogspot.com

Fri, 11/25/2011 - 17:27 | 1913931 lotsoffun
lotsoffun's picture

cost average.  think long term.  etc. etc.  got any more money to lose?

put c and gm and aig back in the dow today.  where is it?

 

 

Fri, 11/25/2011 - 16:43 | 1913840 Bansters-in-my-...
Bansters-in-my- feces's picture

"Liquidation for Silver "my Ass.

_ _ _ _ pulation for silver would be my guess.

We will let the people in the know,fill in the blanks.

 

Fri, 11/25/2011 - 16:50 | 1913850 Seer
Seer's picture

What do you mean that we can't stuff the books?- fucking government intervention, AGAIN!

"Fair value" accounting rule tweak raises concerns

http://finance.yahoo.com/news/fair-value-accounting-rule-tweak-111243889...

Fri, 11/25/2011 - 19:17 | 1914084 CPL
CPL's picture

Looks like the FAS rulings a couple of years ago.  Look how well that's turned out.

Fri, 11/25/2011 - 18:04 | 1914008 vegas
vegas's picture

200 up, and then 200 down.

Welcome to shortened Holiday trading everybody. Please come again!

 

 

http://vegasxau.blogspot.com

Fri, 11/25/2011 - 19:09 | 1914070 LongOfTooth
LongOfTooth's picture
duplicate.  sorry about that.
Fri, 11/25/2011 - 19:14 | 1914071 LongOfTooth
LongOfTooth's picture

Pretenders: Revolution

http://www.youtube.com/watch?v=WHJL5Eh9wZo 

As we watch the children play,
Remember, it was me and you,
So far away,
The things we got out to do.
The fond fear of danger,
That's what sets us apart,
Couldn't wait for the real world
To test the strength of the lion's heart.

Cats like me and you,
Have got laws,
That they adhere to.
Laws outside the laws,
As laid down
By those we don't subscribe to.
The world is getting stranger.
But we'll never lose heart.
We can't just wait for the old guard to die,
Before we can make a new start.

Bring on the revolution,
Keep the pressure on.
I want to die for something.
Bring on the revolution,
I want to die for something, want to die for something.
Bring on the revolution,
I want to die for something. (nothing)
Bring on the revolution,
Don't wanna die for nothing. (something, something)

For every freedom fighter,
I want to hold on tighter.
To the hope and will you gave
You were the brave, you were the brave.
And one day, when I hear your children sing,
Freedom will ring, Freedom.

When we watch the children play,
Remember how the priviliged classes grew.
And from this day, we set out
To undo what won't undo.
Looking for the grand in the minute.
Every breath justifies
Every step that we take to remove what the powers that be can't prove
And the children will understand why.

Bring on the revolution,
Keep the pressure on,
I want to die for something.
Bring on the revolution,
I want to die for something.
Bring on the revolution,
Don't want to die for nothing.
Bring on the revolution,
I want to die for something.

 

Fri, 11/25/2011 - 19:19 | 1914085 non_anon
non_anon's picture

Leftover turkey, anyone?

Fri, 11/25/2011 - 23:13 | 1914493 slewie the pi-rat
slewie the pi-rat's picture

spamming twice in two mintes?

rU a ... TROLL???

Sat, 11/26/2011 - 09:05 | 1914921 dcb
dcb's picture

we shall see if it holds, look like not, hence my new target down day is 12/1 based on charting oil. haven't looked at others

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