Months of hope that the economy could finally start a 'virtuous cycle' were once dashed in a puff of smoke, after the jobs report came and cemented that the economy is now rolling over and picking up speed to the downside. Only this time, in a very ominous development for the permabulls, the MORE QE IS COMING, BUY ON DIPS crowd was nowhere to be seen. Why? Because for QE to be unleashed everything has to tumble first. And in a harbinger of what is coming to the US, just look at Europe: the EuroSTOXX 50 just turned negative for the year.
ES has now retraced the entire QE hope rally:
For once equity is ahead of credit to the downside:
Elsewhere, Treasurys continue their relentless move higher, with the 10 year now under 1.88% and at a 3 month low yield. So much for "that" Goldman call:
At this pace ES and the 10 Year will soon recouple, with credit once again having been correct.
The biggest causalty of the day was oil, in the aftermath of the CME doing what we fully expected it to do when Obama became the Margin Hiker-in-Chief and last night's CME hike for member to spec levels being as we predicted back in April. WTI is now just shy of its 200 DMA. When that support, a critical threshold for more QE, is taken out, watch out below.
In fact, post the last NFP and the Bernanke hope rally, gold, silver and oil have again recoupled:
But most importantly, for the first time in along while, gold has finally recoupled from the risk trade. If this is indicative of the future, watch out gold bears:
Bottom line: unreality is once again recoupling with reality... Just like it did back in 2011, and 2010, only for the central planners to step in and put everyone in their place. Will they do it again? Does the pope no longer bank with JPM?
Bonus Chart: YTD performance of major asset classes - Oil red YTD and underperforming 30Y bonds now...