Biggest Weekly Stock Plunge In 2012 As Financials FUBAR'd

Tyler Durden's picture


The heaviest weekly loss (down 2%) in the S&P 500 since mid-December and largest two-week drop since the rally began in November was dominated by losses in financials (and energy). The major financials most notably have been crushed from the start of April (MS -13%, Citi/BofA -11%, GS -8.5% since the European close on 4/2). Credit broadly underperformed on the day (after ripping to pre-NFP levels yesterday) but HYG (the high-yield bond ETF) outperformed surprisingly but this appears to be related to an equity-credit (SPY-HYG) convergence trade as HYG looks very rich now once again to its NAV. The dismal close in ES (S&P futures) on significantly heavier volume and block size. VIX pushed back above 19.5% and we worry that the violent swings that we saw in credit and equity markets this week are very reminiscent of the beginning of the chaos mid-Summer last year - and perhaps rightfully so given the European situation that is escalating. FX markets were much more active today with EURUSD breaking back under 1.31 and AUD leaking lower after gapping down on China GDP news last night. Interestingly the USD ended basically unchanged from last week's close while Gold managed to hold onto its gains for the week (+1.5% at $1655) despite drops in Silver and Copper also today (Silver and Gold retracing the spike highs from yesterday). Copper kept sliding -4.7% on the week. Treasuries slipped lower in yield from late last night exaggerated by China's news with the entire complex notably lower (5-9bps on the week) in yield and flatter as the long-end outperformed. Stocks pulled back towards CONTEXT with broad risk assets at the close today though it remains rich to Treasuries and credit on a medium-term basis.

Biggest weekly drop in the S&P since mid-December...

led by financials - where the majors have been crushed so far in April (with even sacred JPM -6.5% though MS managed to double that down over 13%)...

Credit underperformed after screaming tighter yesterday - seemingly on index arbitrage (as the skew between the index price and its intrinsic value collapsed) - but today's reality checkl after checking back in with pre-NFP levels was a shocker with the best compression of the year in two-days leading to the biggest decompression today. HY notably underperformed IG credit but as is clear HYG (the high-yield bond ETF) outperformed notably post-NFP...

The apparent strength in HYG appears to have been 'technical' though as is clear from the chart below, since the month began, HYG's intrinsic value has been dropping (leading HYG down) as HY saw outflows for the time this year. HYG got a little cheap to its fair-value on Tuesday (perhaps helping exaggerate the rip tighter) but it is the disconnect between HYG (red below) and SPY (green below) - which began as the month began (orange oval) that was clear and today saw HYG outperform up to the SPY level - removing that technical. The richness of HYG relative to its fair-value now (and cheapness of HY) suggest (as the dump into the close did) that HYG has room to drop here...

Equities (orange below) tried to escape the reality of broad risk assets this week, as proxied by our CONTEXT model below (black below), but by the close had pulled back close to that reality...

And with 10Y Treasuries back under 2%, near 5 week lows, equities remains little rich here - though played catch up to bond market reality today...

Gold remains the week's outperformer post-NFP and Copper the clear loser. Today saw Gold and Silver give back their spike gains from yesterday. Oil drifted ending just under $103 and marginally lower on the week - in line with Silver...

Perhaps the most worrying is the violence of the swings this week - which are very reminiscent of the start of the chaos last summer. Most specifically, in financials, for the first time since early August, we flip-flopped from a +2 standard deviation gain to a -2 standard deviation loss day after day after day...

Charts: Bloomberg and Capital Context


In summary Everyone who shorted, shorted, bought, bought, then shorted stocks this week can now take the rest of the year off. Everyone else most likely lost money.

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Fri, 04/13/2012 - 16:30 | 2342694 SumGuy
SumGuy's picture

> Stocks pulled back towards CONTEXT

What is CONTEXT ?




Fri, 04/13/2012 - 17:02 | 2342746 johnu1978
johnu1978's picture

Do yourself a favor and take a break from the Doom Porn and check this school out:

You'll be glad you did.


You're welcome,

Fri, 04/13/2012 - 17:34 | 2342791 a growing concern
a growing concern's picture

Basketry?  Really?  I mean I know stuff's gonna get rough financially, but are we really all going back to caveman living in woods shit?  I guess we shall see...

Fri, 04/13/2012 - 18:13 | 2342853 HelluvaEngineer
HelluvaEngineer's picture

If you weave a basket, you can carry smaller baskets in it.

Fri, 04/13/2012 - 17:41 | 2342802 jwoop66
jwoop66's picture

thanks.  If I'm out Montana way, I would love to attend.  However, for now its just baby oil and doom porn. 

Sat, 04/14/2012 - 09:15 | 2345176 xela2200
xela2200's picture

It is just BS spam post.

Fri, 04/13/2012 - 16:46 | 2342727 credittrader
credittrader's picture

It's a proxy for the behavior of a basket of broad risk assets. Some more details here.

Fri, 04/13/2012 - 16:48 | 2342728 LongSoupLine
LongSoupLine's picture

Let me give it a stab...


In true "context" the market is a big piece of floating sewer shit.  Hence the market "pulled back toward context"

Fri, 04/13/2012 - 17:34 | 2342789 Schmuck Raker
Schmuck Raker's picture

When Tyler mentions "CONTEXT" specifically he's referring to these guys' proprietary alchemy:


[edit: oops, as per credittrader's prior link]

Fri, 04/13/2012 - 16:34 | 2342704 blu
blu's picture

Monday should be -- interesting.

Fri, 04/13/2012 - 16:35 | 2342705 Comay Mierda
Comay Mierda's picture

heavy intraday selling on volume breaking key support levels.  next week might be ugly

Fri, 04/13/2012 - 16:45 | 2342718 max2205
max2205's picture

SPX sliced through the 4 wk ema and sits just below the 10 wk ema at 1370

Momo guys will pull the trigger and wait till the dust settles

1300 is the 40 wk ema btw

Could just be testing that 1350 ish breakout level

Fri, 04/13/2012 - 17:31 | 2342786 vast-dom
vast-dom's picture

Monday will be -- interesting.

Make sure to enjoy your weekend so that you may enjoy Monday even more...

Fri, 04/13/2012 - 19:58 | 2343022 Randall Cabot
Randall Cabot's picture

Anybody remember Fukashima? Another big temblor over the weekend could really heat things up:

Happening Now: M4.8 hits very close to location of M9 on March 11 — Plus 3 more M4.0+ quakes at Fukushima in last hour




Published: April 13th, 2012 at 12:19 pm ET



Sat, 04/14/2012 - 06:46 | 2345096 lakecity55
lakecity55's picture

Long Iodine-- if you can find it.

Fri, 04/13/2012 - 16:36 | 2342706 Conman
Conman's picture

Financials really got it going into close, wonder what leaked info someone got.

Fri, 04/13/2012 - 18:13 | 2342855 HelluvaEngineer
HelluvaEngineer's picture

It turns out that they are undercapitalized and hold a lot of bad debt.

Fri, 04/13/2012 - 19:53 | 2343018 CharlieSDT
CharlieSDT's picture

what??? What does that mean?? is it...bullish???

Fri, 04/13/2012 - 16:38 | 2342708 ebworthen
ebworthen's picture

The robots were the first out the door.

Bob Pisani was last.

"Top 'O the mornin' to ye Bob!"

Fri, 04/13/2012 - 16:38 | 2342709 Soda Popinski
Soda Popinski's picture

maybe JPM covering some more shorts before the big fall.  Nice work Blythe.  Probably got a big pat on the butt from Jamie.

Fri, 04/13/2012 - 18:14 | 2342860 HelluvaEngineer
HelluvaEngineer's picture

"Way to hustle, cupcake"

Fri, 04/13/2012 - 16:42 | 2342716 YesWeKahn
YesWeKahn's picture

The market is shaking in the rythms of Bernake's lips.

Fri, 04/13/2012 - 16:44 | 2342721 schatzi
schatzi's picture

What did papa bear tell mama bear in the morning before he left for work? I'LL BE BACK.

Fri, 04/13/2012 - 16:45 | 2342723 LongSoupLine
LongSoupLine's picture

and after hours "settling" has everything falling below low of day. (i.e.- SPY currently 136.90)

Fri, 04/13/2012 - 17:11 | 2342763 non_anon
non_anon's picture

nothing like a good fubar to set things straight

Fri, 04/13/2012 - 17:18 | 2342769 Undecided
Undecided's picture

Canadian regulators to put new 'dark order' trade rules in place this fall

wow wow wow not sure to make of this one...

Fri, 04/13/2012 - 17:27 | 2342784 banksterhater
banksterhater's picture

when Goldmansacksyou runs their market?

Fri, 04/13/2012 - 17:26 | 2342782 banksterhater
banksterhater's picture

Smart money IS DUMPING AAPL- IT'S OVER, look>;

Sat, 04/14/2012 - 06:45 | 2345094 lakecity55
lakecity55's picture

Are they not under investigationn by the "Justice Brothers Dept?"

A nice bag o' cash to Barry might solve this.

Fri, 04/13/2012 - 17:28 | 2342783 headless blogger
headless blogger's picture

Can someone comment on Jim Roger's saying he is no longer buying gold? Please help some of us little people understand what that is all about and how silver is coming along too. thanks. (I hope he is wrong:)

I read this at the Daily crux:

Fri, 04/13/2012 - 17:38 | 2342796 a growing concern
a growing concern's picture

I haven't read the article there, but you've got to expect a nice sell-off in the stock market at any time now.  It's so overbought that it needs to correct.  Not sure if this is what he's talking about, but if you get a 10% correction in stocks, gold will be sold off substantially in the process, if only for a little while.  May be more of a matter of keeping powder dry for a lower entry point in the nearish future, but what the hell do I know?  

Sat, 04/14/2012 - 07:43 | 2345118 Bay of Pigs
Bay of Pigs's picture

gold and silver and the miners say YES to a selloff, and have for weeks


Sat, 04/14/2012 - 10:14 | 2345240 xela2200
xela2200's picture

Gold up 1.5% and S&P 500 down 2.0%. Not happening so far.

Fri, 04/13/2012 - 17:39 | 2342799 Undecided
Fri, 04/13/2012 - 18:00 | 2342827 panda
panda's picture

It's sad my generation must live through a world that is FUBAR.

I just don't see this generation has the elegance nor the character comparing to the WWII generation.

Sat, 04/14/2012 - 04:49 | 2344539 Themarcus00
Themarcus00's picture

Don't need it (elegance and character that is). We're busy developing a new technology.

Fri, 04/13/2012 - 18:10 | 2342846 bnbdnb
bnbdnb's picture

Made 30% this week in Forex. Love me some volatility.

Fri, 04/13/2012 - 18:59 | 2342949 smiler03
smiler03's picture

Alex Hope, is that you?

Fri, 04/13/2012 - 19:02 | 2342953 Problem Is
Problem Is's picture

"Biggest Weekly Stock Plunge In 2012 As Financials FUBAR'd"

Courtesy of Jamie "FUBAR n' Thief" Dimon and Lloyd "SNAFU" Blank-dick-fein...

Two more mediocre incompetents running JPM and Goldman could not be found...

Fri, 04/13/2012 - 19:31 | 2342991 ebworthen
ebworthen's picture

So the funny headline on the CNBC splash screen this afternoon was:

"Stocks down for the first time in three days."

Instead of:

"Stocks down for third time in five days."

Talk about spin.

Fri, 04/13/2012 - 20:16 | 2343046 jomama
jomama's picture


Fri, 04/13/2012 - 20:18 | 2343048 chump666
chump666's picture

50 ma support on the S&P busted.   

Sat, 04/14/2012 - 08:07 | 2345128 orangegeek
orangegeek's picture

For all you Elliott Wave followers, the indexes have turned - should see a bounce up - wave (ii) - before the downturn continues - this is a primary count.


With the pending Facebook IPO, the NASDAQ primary count is still down, but we would see new highs and a divergence from the SP500 / DOW.


First down week for the NASDAQ in 2012.  Sign of things to come?

Sat, 04/14/2012 - 09:58 | 2345225 xela2200
xela2200's picture

S&P down and Gold up. The world is starting to make sense again.

Sat, 04/14/2012 - 12:53 | 2345395 JW n FL
JW n FL's picture



2% down! another 18% to go!! QE-3 here we come!!

Sun, 04/15/2012 - 12:43 | 2346690 Grand Supercycle
Grand Supercycle's picture

The Big Picture Wile E. Coyote Equity Top.

Prepare for a substantial USD rally.

Wed, 06/27/2012 - 06:25 | 2564353 nobelboy
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