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Another Signal That The Rally Is Unsustainable

Tyler Durden's picture




 

We have discussed the broad divergences between high-yield credit and equity markets (the former not enjoying the ebullience of the latter) and noted the dismal volume and average trade size of the most recent surge to new highs. Barclays points out one more concerning factor in the rally - the very unusual underperformance of lower quality, higher beta credit. Typically, the B-rated-and-below credits will majorly outperform in any real risk-on rally (just as they did in the first quarter of the year), however, in the last 2-3 months of equity exuberance, this has not been the case at all - as it seems the rally has been used to position in higher quality names (and remain liquid). Just another glimpse of the matrix under the surface.

 

Chart: Barclays

 

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Tue, 08/21/2012 - 15:20 | 2724921 resurger
resurger's picture

 "On Plunge Volume"

Tue, 08/21/2012 - 17:13 | 2725328 mac768
mac768's picture

"The harder they charge, the harder they fail"

Tue, 08/21/2012 - 15:22 | 2724929 q99x2
q99x2's picture

Frightening.

Tue, 08/21/2012 - 15:24 | 2724932 Doubleguns
Doubleguns's picture

PPT not hitting as broad a target now that the pump money is running low. Benny needs to get back to printing.

Tue, 08/21/2012 - 15:25 | 2724938 CharliePrince
CharliePrince's picture

outside day coming   me  thinks

Tue, 08/21/2012 - 15:32 | 2724956 SMG
SMG's picture

This isn't a market, this is a mass hallucination.

Tue, 08/21/2012 - 15:39 | 2724978 Cursive
Cursive's picture

@SMG

Looks/feels like late 1999/early 2000 all over again.  Juniper Networks, baby.  Buy and hold.  What could go wrong.

Tue, 08/21/2012 - 15:50 | 2725010 NEOSERF
NEOSERF's picture

Does have a bit of that Social network, expectant euphoria vs. fundamental driven feel to it that was there in 2000.   No real one thing happened on the turn, it was just a "feeling" that snowballed when the first thousand people hit the exits...

Tue, 08/21/2012 - 15:50 | 2725013 resurger
resurger's picture

good advice

Tue, 08/21/2012 - 15:53 | 2725027 Ookspay
Ookspay's picture

Rational or irrational; exuberance is never sustainable. Sell the Top!

Tue, 08/21/2012 - 15:32 | 2724958 Dad Was Right
Dad Was Right's picture

Equities/futures spiked higher this morning and then rolled over hard. Did I miss something today?

 Of course with 30 minutes left we could still have a complete turn around and finish in the green. Jeez.

Tue, 08/21/2012 - 15:33 | 2724963 HarryM
HarryM's picture

Bingo - Market down?    Time for the Clean up crew to mop up the red ink

 

 

Tue, 08/21/2012 - 15:45 | 2724984 HarryM
HarryM's picture

They are fucking Hell-Bent on propping this piece of shit up

 

They'll pump in a trillion a day if they have to - it's all fucking make believe play money anyway

Tue, 08/21/2012 - 15:50 | 2725007 francis_sawyer
francis_sawyer's picture

1474 bitchez... francis_sawyer has been saying it since January... (Right 'Q's'? You remember that, don't u?)...

Tue, 08/21/2012 - 16:24 | 2725147 francis_sawyer
francis_sawyer's picture

In 'non-related' prediction-ville... (going 'far-out' on a limb on some picks)...

~~~francis_sawyer OFFICIAL 2012 NFL predictions~~~ (junk away)

AFC SEEDS

#1. New England Patriots

#2 Houston Texans

#3 Baltimore Ravens

#4 Kansas City Chiefs

WILDCARD #5 ~ Cincinnati Bengals

WILDCARD #6 ~ Buffalo Bills or Tennessee Titans

WILDCARD GAMES

#3 Baltimore defeats #6 Buffalo

#5 Cincinnati defeats #4 Kansas City

AFC DIVISIONAL

#3 Baltimore defeats #2 Houston

#5 Cincinnati defeats #1 New England

AFC Championship

#3 Baltimore defeats #5 Cincinnati

NFC SEEDS

#1 Green Bay Packers

#2 Philadelphia Eagles

#3 Carolina Panthers (going out on a limb here)

#4 San Francisco 49ers

WILDCARD #5 ~ Chicago Bears

WILDCARD #6 ~ (either) Atlanta Falcons or Detroit Lions

WILDCARD GAMES

#3 Carolina Panthers defeat #6 (above)

#5 Chicago Bears defeat #4 San Francisco 49ers

NFC DIVISIONAL

#1 Green Bay Packers defeat #5 Chicago Bears

#2 Philadelphia Eagles defeat #3 Carolina Panthers

NFC Championship

#2 Philadelphia Eagles defeat #1 Green Bay Packers

~~~

SUPER BOWL

Baltimore Ravens vs. Philadelphia Eagles

 

Tue, 08/21/2012 - 20:07 | 2725760 SAT 800
SAT 800's picture

Allegedly, Zero Hedge is for "Intelligent People". Intelligent people are not interested in football games; just a little hint for you.

Tue, 08/21/2012 - 15:57 | 2725047 HarryM
HarryM's picture

When was the last time the market did a nosedive into the finish?

Tue, 08/21/2012 - 16:39 | 2725233 LMAOLORI
LMAOLORI's picture

 

 

 

"HarryM When was the last time the market did a nosedive into the finish?"

Obama's been great for the banks and the markets but just crap for the middle class I don't know the last time but...

Election 2012: Obama's Odds Are Pretty Good if You Ask Mr. Market

snip

"Since 1900 whenever the market rose in the August, September and October time frame ... the incumbent has been re-elected 80% of the time," Stovall told Yahoo's Breakout earlier this month. "Whenever the market has fallen from July 31st through October 31st, the incumbent has been replaced 88% of the time."

Tue, 08/21/2012 - 15:36 | 2724971 Itch
Itch's picture

More work goes into risky bets though, so there's a good case for assuming that the bets made in the first quarter were of a "buy and hold" nature. As always, price never lies, and when its had enough everyone and they're dog will know about it, and then you are shooting fish in a barrel.

Tue, 08/21/2012 - 15:38 | 2724976 The worst trader
The worst trader's picture

Time to BTFD? Maybe not this time............ If I see one more business fail and the market go up I think I'll puke. Is this is trickle down Bernankanomics at work? it has to stop. Even the well off have stoped spending.

 

Tue, 08/21/2012 - 15:49 | 2725008 Bear
Bear's picture

Obambernomics guided by Krugmanotics and funded by Soroglomerate 

 

Tue, 08/21/2012 - 15:46 | 2725000 Hype Alert
Hype Alert's picture

Somebody has to buy at the top.

Tue, 08/21/2012 - 15:51 | 2725018 Bear
Bear's picture

I hope you mean bought at the top

Tue, 08/21/2012 - 15:47 | 2725003 ThunderingTurd
ThunderingTurd's picture

Market down .4%!  QE rumors...bring on the QE rumors!!!!  The market needs them.  We need green screens!  Imagine hysteria at the NY Fed.  People running around bat $hit crazy, running into each other, hands over their mouths, and arms flailing around.

Tue, 08/21/2012 - 15:48 | 2725005 dark pools of soros
dark pools of soros's picture

the apocalypse will arrive on a glacier

 

 

Tue, 08/21/2012 - 15:57 | 2725044 Ned Zeppelin
Ned Zeppelin's picture

And the seemingly endless anquish we are condemned to endure pending its slow arrival will have us cheering for it when it finally pulls in.

Apocalypse, a notorious no show.

Tue, 08/21/2012 - 16:26 | 2725178 viahj
viahj's picture

needs more CO2

Tue, 08/21/2012 - 17:46 | 2725424 dark pools of soros
dark pools of soros's picture

that would provide some liquidity...  ask JPM, or Al Gore.. or China

Tue, 08/21/2012 - 15:54 | 2725031 AGuy
AGuy's picture

Its been "Unsustainable" for quite sometime. The real question should be, when will it Pop? Perhaps on Sept 12, when the German Court rules on the EU Bailouts? Or how about in October (when Isreal goes to war with Iran - Assuming they pull the trigger).

I would be interest to hear if anyone has some pending schedule events that might trigger the correction.

 

 

Tue, 08/21/2012 - 20:06 | 2725758 SAT 800
SAT 800's picture

these are all good points you make.

Tue, 08/21/2012 - 15:55 | 2725036 OldE_Ant
OldE_Ant's picture

if it floats like a turd, then it must be GOLD in them thar toilets (ahem markets).  Last one reaching in the bowl gets 'flushed'.

The music resumes and all the shit handed folks reach in for another round of 'grabbing for floating gold stool' where everyone is a shit fisted winner.

Keep it up bankers, you clearly have a great recipe for drying up all cash flows and creating what you all fear.  Ben is my man, he knows how to stink up the place really well.  Lets just call him the King of Shit.

End of Line 

Tue, 08/21/2012 - 16:00 | 2725063 Hannibal
Hannibal's picture

All paper are ass wipes!

Tue, 08/21/2012 - 16:25 | 2725177 adr
adr's picture

Just like 2000 the market has become a form of entertainment.
We just watch and laugh at the absurdity of it all.

Some company tries to go for $1 trillion in market cap based on pure bullshit. Somebody with a lot of money in the game finally realizes he was an absolute moron, and pulls from the bottom of the house of cards.

Tue, 08/21/2012 - 16:35 | 2725217 Whiner
Whiner's picture

Jump in folks. We are just startin' to roll. The bots are jacking each other up, and all that hot money from EU will be flooding into EQ. Hot damn! DOW 18,000!!!! Buy! Buy! Evrything is going up, up and away. QE 3, 4 and 5. Election moves. Israel moves. Syria moves. Wall Street hyper-fraud gushing. Printing presses stoked! Barry and Ben at the controls. 100% GDP/Debt. 500% total USSA debt. Time to get on the bus! It's up, up and away!

Tue, 08/21/2012 - 18:01 | 2725468 Never One Roach
Never One Roach's picture

Add another grim statistic to the already grim economic story of today's 20-somethings. They're five times likelier to have a job folding sweaters at Old Navy than in the broad workforce.

Indeed, with diplomas in hand, the Gen Y generation (ages 18 to 29) are carrying mountains of student debt and facing chronic underemployment to boot.

 

http://finance.yahoo.com/blogs/the-exchange/state-gen-y-worker-working-r...

 

 

 

"Never been a better then then now to buy a house."...or is it a mouse?

Tue, 08/21/2012 - 20:47 | 2725869 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

I want to junk you, but it is a sad reality. One day these young people will get tired of their baby boomer masters and the shit will hit the fan. You heard that gramps. Cat food for you!

Tue, 08/21/2012 - 20:05 | 2725753 SAT 800
SAT 800's picture

I agree with the article. It is un-sustainable. I don't have a position but I would be going short right now and be a little patient.

Tue, 08/21/2012 - 20:37 | 2725837 TrulyBelieving
TrulyBelieving's picture

You want a signal that the rally is unsustainable?    How about a central planning tyrannical regime that is bent on destroying all vestages of a free market, for the purpose to steal all wealth and freedom currently owned by you. Not only is the rally unsustainable, but as long as these sociopaths are in control, so is a civil sociaty.

Tue, 08/21/2012 - 21:10 | 2725930 IMA5U
IMA5U's picture

The credit market is awash with liquidity but is not stupid

 

Bad Triple Hook credits are bad names and big PMs have no benefit for indexing purposes to own some garbage off the run 300mm issue

 

Credit has led this equity rally.  It is silly to say there is a divergence in credit vs equities.  If the techincals were not so strong in credit, we would be looking at 1250 on the S&P.

There is no new issuance for the rest of the month in high yield.  JNK and HYG can continue to enjoy their grind up until the new issue machine turns on after labor day.  Unless of course we hit that macro air pocket traders are hoping for.

Wed, 08/22/2012 - 09:50 | 2726979 Equites
Equites's picture

You don't even need Bruce Wayne's put option stroll here... The given that B-credit is significantly underperforming indeed shows there's still a convergence to risk-off. It is painful to hear people talking about 'walls of worry' bull markets 'have to climb anyway'...

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