Commodities Crumble As Stocks Ignore Treasury Selling

Tyler Durden's picture


While most of the talk will be about the drop in precious metals today, the sell-off in Treasuries is of a much larger relative magnitude and yet equities broadly ignored this re-risking 'signal'. At almost 2.5 standard deviations, today's 10Y rate jump (closing it above the 200DMA for the first time in eight months) trumps the 1.3 standard deviation drop in Gold prices - taking prices back to mid-January levels. According to our data (h/t JL) for only the 14th time in the last five years (and not seen for 16 months) Treasury yields rose significantly and stocks fell as the broad gains in yesterday's financials (on the JPM rip) were held on to at the ETF level but not for Morgan Stanley, Goldman Sachs, or Citigroup (who gave all the knee-jerk reaction back). Tech led the way as AAPL surged once again (though faltered a few times intraday) having now completed back-to-back unfilled gap-up-openings. Credit and equity were generally in sync until mid afternoon when the up-in-quality rotation took over and stocks and high-yield sold off (notably HYG - the high-yield bond ETF underperformed all day long) while investment grade credit rallied to multi-month tights. VIX bounced higher (notably more than the S&P would have implied) recovering to Monday's closing levels and back above 15%. The Treasury sell-off was 'balanced' in terms of risk-on/-off by the strength in the USD (and modest weakness in FX carry pairs as JPY's weakness was largely in sync with the rest of the majors - hinting its was a USD story). Oil and Copper both lost ground (as did Silver - the most on the day) though they tracked more in line with USD strength than the PMs.

Post the JPM News yesterday, it appears that BofA seems the most loved (?) - up almost 9%, Amex and JPM are equally loved at around +5.5% but GS, MS, and C are all down 0.25-1.0% from pre-JPM news having lost notably from last night's close...


Towards the latter part of the afternoon, there was the start of a modest risk-off sentiment as ES (the e-mini S&P future) couldn't get back up to VWAP and drifted lower along with high-yield credit as it appears the 'safety' trade is re-appearing for now as up-in-quality rotation into investment grade was clear...



The 10Y broke above key technical levels and while we are uncertain given the corporate supply calendar ahead, this was a dramatic absolute and relative shock to most traders...


The last two days have seen a rise in 10Y yields the likes of which we haven't seen in five months and the second largest in 16 months. In the last six months alone we have seen nine similar magnitude (percentage)drops in spot gold...

...but it was much more fun to talk about the huge USD-based drop in Gold today - as opposed to the relative change - but it is clear that Gold found some support back at pre-NFP levels from mid-January and Silver eventually gave way too and fell back to similar period levels...




FX markets were a one way street in general today with USD buying relatively similar across all the majors (in a mildly risk-off manner given JPY crosses)...



To put these divergences in CONTEXT, we can see from the lower chart that a) upper left shows the late-day recovery in HYG (and drop in VXX) that juiced relative risk model compared to the slow drop in SPY, b) the three charts on the right hand side shows the total disconnect between empirical correlation-driven risk models and today's price action as Treasuries (and 2s10s30s) dislocated, and c) lower left shows that VIX limped quietly up to what is more of a fair-value given the current levels of equities and credit.

Whatever the reason for the disconnect - QE unwinds or individual market technicals (flows) - it is unusual to see this kind of break-down which makes us think the picture is much less rosy than the S&P 1400ish headlines would suggest and the late-day rotation into IG credit also suggests less risk-appetite than the herd would like.

Charts: Bloomberg and Capital Context

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Wed, 03/14/2012 - 16:52 | 2255742 Motorhead
Motorhead's picture

Charts, bitchez!

Wed, 03/14/2012 - 17:04 | 2255800 FlyoverCountryS...
FlyoverCountrySchmuck's picture

Who needs commodities whan AAPL id $700???


(Just don't be the last one off the carousel when the ride stops)

Wed, 03/14/2012 - 17:08 | 2255814 mayhem_korner
mayhem_korner's picture



Well, a long time ago the apple was a commodity...

Wed, 03/14/2012 - 17:18 | 2255846 Sudden Debt
Sudden Debt's picture

And a bit longer ago, apples where used to test and prove gravity

Wed, 03/14/2012 - 18:59 | 2256137 Stanwick
Stanwick's picture

Priced in Apple, gold is ripping.

Thu, 03/15/2012 - 09:48 | 2257459 fnord88
fnord88's picture

and a few years before that, a slut ate an apple and fucked all of us

Wed, 03/14/2012 - 19:02 | 2256140 markmotive
markmotive's picture

GDX got hammered worse than gold. Meanwhile these gold miners can dig up an ounce for $400...what gives?


Wed, 03/14/2012 - 19:16 | 2256206 GovtMediaLiars
GovtMediaLiars's picture

Unfortunately, that seems to be the pattern these last few years and more. The miners aren't my thing but many gold bulls have been saying for years that the miners should break out and outperform any time now. And it just keeps failing to materialize. I hope you got you some of the underlying stashed away too. The thesis makes perfect sense to me but I'm no expert in the area and I feel I'm missing something and that there is a reasonable explanation for the marked underperformance of the miners.

Todays Index Charts and Summary

Fri, 03/16/2012 - 07:25 | 2261179 MeelionDollerBogus
MeelionDollerBogus's picture

probably can't find the gold. The cost is $400 for those who have it. For the miners that don't have enough & are still exploring, or hunting for juniors that explore, this costly exercise means it's not really 400 & markets probably want more than what's for delivery.

Wed, 03/14/2012 - 20:45 | 2256386 WmMcK
WmMcK's picture

Adam's apple

Wed, 03/14/2012 - 21:10 | 2256423 A Nanny Moose
A Nanny Moose's picture

..and before that snakes in trees offered humans "free" apples.

Wed, 03/14/2012 - 17:04 | 2255801 Mark Carney
Mark Carney's picture

Id like to see a chart comparing the DJIA to the TSX.  If you go back, the TSX always had aywhere from 200-800pts up on the DJIA.  Now the DJIA has ballooned past the TSX b8 800pts.



Fri, 03/16/2012 - 07:26 | 2261149 MeelionDollerBogus
MeelionDollerBogus's picture$INDU&p=D&yr=3&mn=0&dy=0&id=p15787597033

if you go to and download the CSV data you can generate a scatterplot. I haven't yet but what I imagine I'd see: DOW plotted x-axis, TSX plotted y-axis, log-scale for both axes, a line slope 0.835 ... 2010 Aug this would increase for a while in slope, 2011 May would return to 0.835, 2011 sep looks like slope = 0.376

Conclusion: cdn-dollar up-valuation vs usd hurts the TSX in such a comparison & USD devaluation vs everything else makes the Dow look better in dollars

Wed, 03/14/2012 - 17:08 | 2255811 MillionDollarBonus_
MillionDollarBonus_'s picture


After recent price action, it has become evident that the stock rally is purely due to growth and not the alleged “inflation” that we hear so commonly from doomers, ‘preppers’ and other anti-government groups. Following two fantastic NFP results and a superb bank stress test, stocks have been holding up nicely, despite a sell-off in commodities and treasuries.


Wed, 03/14/2012 - 17:11 | 2255819 mayhem_korner
mayhem_korner's picture

the stock rally is purely due to growth


MDB...please specify whether you mean growth in M2 or M3.

Wed, 03/14/2012 - 18:16 | 2255994 chump666
chump666's picture

You nut.  Your money though...

When the commodity complex collapses you short the world.  See USTs, thats China messing around with interest rates.  USD buys out of China, major USD/CNY spike.  You get the picture.  China is panicking and The Fed is irrelevant now. Obama credit boom may blow up mid yr. The stock melt-up was purely a JPM Chase play and Apple.  Banks rally while industrial commodities sink? That is a major disconnect in the markets.  I wouldn't buy into that.

Even with the FED increases money supply buys debt prints or whatever.  Rates are going up.

And we are going down...hard.  Take it.

Wed, 03/14/2012 - 18:58 | 2256129 Whoa Black Barry
Whoa Black Barry's picture

bitchin post mdb youz doin my work boy

Wed, 03/14/2012 - 20:13 | 2256327 bonderøven-farm ass
bonderøven-farm ass's picture

+1 for avatar

Wed, 03/14/2012 - 22:10 | 2256548 q99x2
q99x2's picture


It is the lack of a Government that serves instead of preys upon its citizens that is causing massive rebellion. The thing you are refering to as Government is not government it is an invading force of evil backed by stupid parasitic bankers.

and MORON.

Fri, 03/16/2012 - 06:42 | 2261155 MeelionDollerBogus
MeelionDollerBogus's picture

this corporate-governance is typically what we call "fascism".

Actually it's "factually" what we call it but not "typical" anymore.

Some blurring of socialism, fascism & capitalism has been forced on the young so that they grow up brain-washed.

I like to point those people to this video to clear it up. Too many fools refer to today's problems as "capitalism" and to tomorrow's solutions in "socialism" while actually ignoring today's problems in fact, and seeking to enshrine them in tomorrow's solution (from fascism-A to fascism-B)

Fri, 03/16/2012 - 06:38 | 2261150 MeelionDollerBogus
MeelionDollerBogus's picture

"Following two fantastic NFP results and a superb bank stress test, stocks have been holding up nicely, despite a sell-off in commodities and treasuries."

Oh really? You mean all the mark-to-fantasy fraud on the balance sheets? Or all the stealing of customer funds & assets?

Most of us don't call that "growth". Most of us call that "crime"

Wed, 03/14/2012 - 16:53 | 2255746 SHEEPFUKKER

Tiny bubbles.......Treasury bubbles that is. 

Wed, 03/14/2012 - 16:53 | 2255747 mayhem_korner
mayhem_korner's picture



Standard deviations are for normal distributions.  Nothing normal going on here...

Wed, 03/14/2012 - 17:12 | 2255826 tekhneek
tekhneek's picture

"With gold and silver still consolidating..."

Wed, 03/14/2012 - 17:28 | 2255869 YC2
YC2's picture

If you believe in them, techs seem to look like we are breaking neckline of a H&S in silver

Wed, 03/14/2012 - 16:55 | 2255754 Clockwork Orange
Clockwork Orange's picture

Nothing trumps the ChairSatan's daily ramping of Apple, and the indices along with it.

All else, easily hidden.

4% more on the top today.  Cha-chingity-choo.

Wed, 03/14/2012 - 20:42 | 2256379 WmMcK
WmMcK's picture

Chim-chim-charee or is it chitty-chitty-bang-bang?

Wed, 03/14/2012 - 16:55 | 2255756 Jim in MN
Jim in MN's picture

OT (nice charts BTW) but holy freakin' Jesus

Rocketdyne radiation is still abundant


By Susan Abram, Staff Writer  Posted:   03/05/2012 07:49:52 PM PST Updated:   03/05/2012 07:51:34 PM PST




Some levels of radioactive chemicals found on a portion of the Santa Susana Field Laboratory site were as much as 1,000 times higher than standards, according to federal data released on Monday.

Acting as an independent monitor, officials with the U.S. Environmental Protection Agency conducted radiological surveys on a portion of the land known as Area IV, where a partial meltdown of a nuclear reactor occurred in 1959.

That portion is currently overseen by the Department of Energy.

The results of the radiological survey show that of the 437 samples collected, 75 exceeded standards agreed upon by the DOE and the California Department of Toxic Substances Control in a cleanup agreement signed in December 2010.

Seven radioactive isotopes, including one known as cesium-137, measured at levels between 100 to 1,000 times higher than the standards. Other radionuclides that suggest nuclear presence include strontium-90, tritium, plutonium, and carbon-14.

The recent data is significant to residents, activists and public officials who have fought for years for the removal of radiation and chemical contaminants at the former Rocketdyne site, which is nestled in the hills between Chatsworth and Simi Valley and was purchased by the Boeing Co. in 1996.

The numbers provides hard evidence that not only do the radioactive materials exist, but that the levels are higher than expected.

Wed, 03/14/2012 - 16:57 | 2255767 Clockwork Orange
Clockwork Orange's picture

I am starting to think Prechter's call for Dow 700 could actually happen - the day Bernanke shuts off the spigot (ha!) the rush for the exits could make the flash crash look like leakage.


Wed, 03/14/2012 - 16:58 | 2255773 ZeroPower
ZeroPower's picture

Haven't noticed your VIX indicator till just now. Can you discuss what relation your vix model has to the cash vix and futures? It's related to the whole curve, or only your own indicators? With a cash around 15 and front month future still hitting 17 today, definitely looking for some convergence over the next week... Further out months even higher.

Wed, 03/14/2012 - 17:02 | 2255791 VanceEva1
VanceEva1's picture

my classmate's sister makes $82 hourly on the internet. She has been out of work for 10 months but last month her income was $17192 just working on the internet for a few hours. Read more on this site ....

Wed, 03/14/2012 - 17:36 | 2255891 viahj
viahj's picture

dirty internet whore?

Wed, 03/14/2012 - 19:10 | 2256179 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

One good porn site!!!

Wed, 03/14/2012 - 19:20 | 2256216 Manthong
Manthong's picture

my classmate's sister makes $28 hourly on her knees in an alley. She has been out of work for 10 months but last month her income was $171.92 just working the streets for a few hours. Read more on this site ....

Wed, 03/14/2012 - 19:49 | 2256278 DosZap
DosZap's picture


Read more on this site ....

You go read the site!!!!!!!!!!!!!!!!!!!!, we have day jobs.


Spam Biatch........................I get 20 of these  a week, damn sure do NOT want them here.

Wed, 03/14/2012 - 17:04 | 2255794 geewhiz190
geewhiz190's picture

unpopular post coming: chart on US dollar looks like a big base with a fairly large upmove coming.  chart on GLD looks like it's forming a huge top.  can't offer any explanations, but that's how they look.  Different subject- AAPL chart seems to be in blow-off phase. how high is high? In 1989 when Nippon Tel and Tel went public, its market cap was greater than the entire west German stock market.  that was at Nikkei Dow 39,000. AAPL bigger than the entire S&P retail sector? seems like a stretch.  How much growth must AAPL produce from this day forward to double it's market cap again?  is it possible, maybe, but pretty unlikely. so what is the potential return for the new buyers at this level? something to think about.

Wed, 03/14/2012 - 18:00 | 2255946 Yardfarmer
Yardfarmer's picture

here's a great analysis of all that. time to hunker down, "roll a rock over your hole and take a long walk" Seligman Jr. 

Wed, 03/14/2012 - 17:07 | 2255808 bobola
bobola's picture

Interesting that Bernanke's starting to communicate via Twitter now.

That's a big red flag warning.  

The more he communicates using various media you can take that as a sure sign that all is not well.

What's next, Facebook..??


Wed, 03/14/2012 - 17:23 | 2255858 SHEEPFUKKER

Dude is a magician!! He can tweet and print at the same time. 

Wed, 03/14/2012 - 17:39 | 2255906 viahj
viahj's picture

well, since it seems that Tyler's tweets of possible margin changes moves the market, BB will do the same.

Wed, 03/14/2012 - 20:59 | 2256410 lotsoffun
lotsoffun's picture

sure.  how vulgar can it get.  the official uncle ben facebook fed page.  really - that's disgusting.  but - ben and goldman are pals - and they get the ipo.  so why not?

Wed, 03/14/2012 - 17:07 | 2255809 pleseus
pleseus's picture

Higher 10 year means higher mortgage rates. Maybe Bill Gross was right on his mortgage bet for QE3 after Operation Twist ends. All we need is a higher dollar and higher interest rates and QE3 seems more and more likely.

Wed, 03/14/2012 - 17:15 | 2255841 Voltaire
Voltaire's picture

That's exactly what I'm thinking. Prepare for QE in june. What I'm a bit puzzled about though is that the stock market keeps rallying at this stage. S&P should go back to at least 1300-1325

Wed, 03/14/2012 - 20:31 | 2256352 pleseus
pleseus's picture

The financial euphoria in the equity markets is propelled by HFT machines.  Look at volumes.  They are terrible.  There is no belief by the masses that we are heading to some new golden age of growth.  Something will give sooner rather than later.  If there is no Fed juice after Operation Twist it is clearly a tightening bias.  The Fed doesn't want to tighten.  They want 2% inflation.  They will stay loose.  But how?  Sterialized QE.  I think gold hits bottom around $ 1,600.00 oz in the next week completing it's final wave down and silver will hit $ 30oz before both go up. 

Wed, 03/14/2012 - 17:07 | 2255810 mayhem_korner
mayhem_korner's picture



It's interesting that any time Ag approaches that $35 mark - the one that many say is the "last" wall of defence before $60 - the whole thing somehow crashes.  I wonder if that's a coincidence...

Anyway, despite the MSM calls for abandoning ship on the PMs, we all know that the Chindos will be backing up the large trucks and overloading them with bullion over the next week or so.

Thu, 03/15/2012 - 10:26 | 2257638 trav7777
trav7777's picture

only silverbugz say that.

Silver shot past 35 decisively just a week ago or so it seems, all the way up to the 37s.  Most silverbugz proclaimed the rally on, and like 42 coming then 60 and all that shit.  And silver promptly got smashed.

The lesson to learn from all this is to ignore everything silverbugz say.

Wed, 03/14/2012 - 17:10 | 2255818 geewhiz190
geewhiz190's picture

check chart on MUB (muni bond ETF)  something wicked this way comes.

Wed, 03/14/2012 - 17:11 | 2255823 mayhem_korner
mayhem_korner's picture



Is it the ghost of Meredith Whitney?

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