Commodities Crumble As Stocks Only Stumble

Tyler Durden's picture

Gold and Treasuries tipped their hands a little pre-FOMC and risk assets plunged immediately on the release's lack of an explicit and immediate print-fest gratification. But between short-squeezes (and stating the obvious news) from Europe and a dangling-chad of hope for future QE as the economy was marked down to a 'must-do-better' grade by Bernanke, we ripped higher in most risk-sensitive assets to test the day's highs. We then plunged back down to the lows of the day as the press-conference went on and left most wanting more kool-aid than Ben was willing to deliver. However, with 10 minutes to go in the day, EURUSD staged an impressive squeeze higher of shorts and that dragged stocks up to VWAP and beyong for a green close. What a shit-show - excuse our French. Gold had outperformed for much of the sell-off and recovery and Treasury yields, the USD, and stocks had stayed in sync with one another - until the last few minutes when stocks and the USD went vertical and overshot gold. Commodities were generally decimated on the day (with WTI -2.7% on the week, Silver -2%, Gold -1.2%, and Copper unch) while the USD is modestly lower -0.23% on the week ending the day practically unch having given all its gains back in the last few mins. Stocks trading very technically, stalling the sell-off at Friday's closing level, pivoting on volume around VWAP and Monday's opening highs, and closing at basically yesterday's day-session close. Despite stocks lack of excitement (though intraday bipolarism), VIX managed to drop notably - down 1.2 vols to close at almost 17.00% (its lowest in 7 weeks). Treasuries ended the day mixed with the long-end lower in yield (not participating in the selloff that dragged the rest of the curve higher by 4-5bps). EURUSD squeezed back up over 1.27 by the close and HYG outperformed (ending notably rich to stocks and its own fair-value).

ES traded on some very clear technical levels today with low average trade leading us up into the close and the bigger players capping the run at the close just above Monday's opening highs...

Financials round-tripped from the pre-FOMC levels and enjoyed their high-beta lift into the close...

Stocks also benefitted from the seeming exuberance in HYG today which pushed to notably rich levels over its intrinsics (lower pane) and also over stocks...

Gold was leading up and down for a while there but into the close the squeeze for 1.27 EURUSD dragged ES to outperform post FOMC...

It would seem that the Feds is apt to squeeze shorts wherever it can find them and that helped bring us to a perfectly UNCH close in ES.

The chaos is commodities was remarkable but more than anything is was clear that Oil was not happy about no new QE...

and Treasuries split with the long-end outperforming as the short-end sold off back into the close...

amnd the flucrum security today was...drum roll please... EURUSD where the maginot line of 1.2700 was key to defending US equities - even as correlations across the other asset classes dropped...

Charts: Bloomberg

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gjp's picture

Central planner nirvana today.  Just like yesterday and the day before that and the day before that and ...


slewie the pi-rat's picture

 <--<  paint

 <--<    paint  paint paint  paint  paint  paint  paint paint  paint  paint paint  paint paint  paint  paint  paint  paint paint  paint  paint paint  paint paint  paint  paint  paint  paint paint  paint  paint paint  paint paint  paint  paint  paint  paint paint  paint  paint...

dexter bland's picture

Has anyone yet noticed that commodities are in a long term downtrend, while stocks are not (yet anyway)?It was sort of inevitable after years of a decade of unnaturally large returns even in the face of a massive global downturn.

What's that thing about trends and companionship, or whatever? "The trend keeps you company"? no, something like that anyway.


Western's picture

It's a good thing gold and silver are considered money, not commodities.



dexter bland's picture

Gold and silver are also in downtrends and peaked around 10 months ago (in USD terms), other commodities more like 18 months to 2 years.

I'm not trying to make a political or religious point, its just a fact about the prices. Go look at some charts.



Western's picture

Oh right they're in a "downtrend" because of our measuring stick, the USD, deems they are in a downtrend? 


Nobody here introduced religion or politics until you felt like being defensive, lol?

Nid's picture

Duh, Cramer only recommends stocks.

Zgangsta's picture

Screw it.  I'm about ready to admit defeat, and accept that all of the criminals that are running things will end up muddling through for the rest of my lifespan.

slewie the pi-rat's picture

i've been day-to-day for 45 years

i figure the banksters can be month-to-month

compared to me, they're practically immortal

Memphis10's picture

A weeks worth of volatility in 1 day. Kudos to those of you who actually made money today.

CvlDobd's picture

Dem STAWKS iz hawt!

With stock performance like this Rick Ross should be rapping about fucking bitches in piles of stock certificates soon.

CvlDobd's picture

"Ever seen a million GE stock certificates? Gotta count em carefully! Have you ever made love to the woman of your dreams in a room full of Apple dividends out in London and Iskil screams?"

That will be Rick's part in the Dj Khaled on one remix edition. I can't wait for the shit to drop.

BlueStreet's picture

2nd day S&P failed at 100DMA.  

Village Smithy's picture

The fact that oil was so unhappy with no QE should have sent a message to Bernanke that it would have been extremely happy with QE, and therefore "sorry about your failed re-election plans Mr. President". Also, I think we need to talk about this short squeeze routine a little more because it seems to be the only market driver these days. Perhaps we could organize a "short boycott day" and see what happens.  

mjk0259's picture

People notice gas prices more than the stock market. Low oil prices probably good for Obama. Regardless that the president of the US can't do much about them either way.

bankruptcylawyer's picture

Oil may also be dropping because of Sino-Russian cooperation on the Syrian question---meaning on the Iran question. 

Oil is going down because Russia and China have effectively made the U.S. understand that soverign nations like Syria are going to get a chance to kill every SYRIAN they need to kill to stabilize the country against foreign fighters , mercenaries, and Syrian rebels equipped with american arms. 

there's little chance of a war with Iran without Syria first out of the way. and without a war, hormuz is open. so oil is dropping. 

I think the attempt of the U.S. to mess with Iran will fail because the Chinese hold too many U.S. treasuries. I think the 'end' of U.S. hegemony is going to be marked by the failure of the U.S. to strike Iran or cause a revolution in Iran because China has the trump card. This will mark a new era in geopolitics and soon---I believe it is approaching. The day the U.S. military met a stop sign and was publicly forced to admit it. 


Randall Cabot's picture

And Saudi Arabia is secretly producing more oil to keep the price low according to something I read a while back.

skepticCarl's picture

Today's trading was uneventful.  The takeaway from this is that traders and money managers are content with the on-going Fed easy money policy.

Fiscal policy will take center stage this summer in the U.S., as it is in Europe right now.  That's what the candidates will be debating (demagoguery, actually).  Fed policy will hardly be discussed, as Bernanke is steering a very neutral course.

DavidPierre's picture


So simple a caveman understands it.

Today of course is as CNBC calls it "Fed magic day". Will they or won't they ease with more QE?

They do have a small problem however, the markets are not down enough and there seems to be no fear running about. Were the Dow 1,000+ points lower, then today would be a no brainer because the Fed could justify further QE by telling us they have done their "magic" again and saved us. Even though the economy looks to be again contracting, does the Fed have room to really move? So but apparently 70% of analysts disagree and believe that more QE is on it's way, today.

In their favor is the fact that oil and commodities in general are down and Gold has been well contained but conversely financial assets have rallied and are floating on "hope" (the vestige of fools). But one must ask and for sure the Fed itself is factoring this into their decision, what if they were to announce more QE and investors actually sold the markets off? They essentially would have used what little ammo they have left and it turned out to be worse than a "blank". Then what?

The better course of action and what they will do is probably leave the "threat" of further giant sized QE on the table and promise to use it "if necessary". This way the markets may sell off a only little bit in disappointment and they can keep the little bit of dry powder (credibility) that they have left. The Fed would love for the economy to have reacted with more correlation to their past QE's, they know that it hasn't worked but the economy is not their primary concern, the banks, are though they will tell you differently.

 THE day will come where the Fed eases yet the markets respond negatively. This happened to some extent in 2008 and 2009 but the "easing" was so massive and so much liquidity was added that the markets were able to right themselves. Here we are 3 years later at 0% with $ Trillions already injected into the markets (supposedly the economy) and the problems are still here, only bigger, MUCH bigger. Interest rates cannot go negative ( they already are in Switzerland) and stay there on a systemic basis because the wherewithal does not exist for this to happen.

Think about it, this would mean that the more money a government borrowed, the faster their debt would be paid down as they "get paid" to borrow. The financial system NEEDS capital and cash flow, negative rates would effectively drain cash from the system as investors would "pay" to lend money.

The Fed will not ease more until they are forced the markets themselves. It is as if the markets rallying over the last few weeks has thrown a monkey wrench into the equation. Playing devil's advocate on my own thought process, it is possible that something really has broken in the derivatives chain, we do get massive QE and the plan is to ramp the equity markets in a last "haymaker" effort to create "confidence". This of course would only buy some time because if it's broke (and it truly is), mathematically, long term, it cannot be fixed in fiat system. It all goes back to the "money", in a system that uses fake money, printing more fake money doesn't, won't and can't make assets that are valueless...valuable.

So... "it doesn't matter". Ease, don't ease, whatever, it makes no difference.

The end of the road ends in new currencies being issued that have some sort of real backing, how we get there doesn't really matter. But, the timing you ask (as in will more QE prolong the final date?), does it really matter?

No, the final outcome is so easy that caveman understands it! As long as you don't trade yourself out of position and understand that your net worth will be calculated in ounces controlled, you will be fine. Stocks go up, stocks go down, same with bonds and everything else that is "counted" in Dollars. This is the way the "road winds". The end of the road, the final destination will be a counting of the ounces, whether the Fed eases or not only determines the "road" to an outcome that we know, mathematically, comes to an end.

As long as you know the road ends, be a "caveman", hold on to your ounces (physical and mining stocks), go into your cave and pull a rock over the opening!

So...will the Fed do more QE? Of course they will, they mathematically have to.

Will they ease today? Tomorrow? Next month? WHO CARES!

By the time they are "done" easing, your "ounces" will be worth some ridiculous numbers of Dollars, Euros, Yen or Pounds. What will then matter is how many Amero's, Nordic Euro's, Yuan, South Amero's and whatever other currencies have been newly created, will be required to purchase your "ounces".

Today's Fed meeting doesn't matter, the road they choose doesn't matter, nothing matters.

The only thing that DOES MATTER is whether or not you have enough "ounces" to carry you past "the end of the fiat road"!




hammy62's picture

 "Here we are 3 years later at 0% with $ Trillions already injected into the markets (supposedly the economy)... "

I have seen this statement (or something similar) many times on posts here at ZH and suggested in articles.  I have been unable to figure out the path that the Fed's injections make it into the stock market.  Who holds the certificates, etc..  Can anyone shed light on how the money makes it to the market.  Thx

slewie the pi-rat's picture

gasoline futures $2.59

WTI $81.08

this is the most goldilocksCrisisTM i have ever called!  what crisis? 

THIS CRISIS : antonioSam and V-man get to soccer game friday and ask angela if they can stay with her b/c they don't have enough EUR0s to get home crisis!  L0L!!!

adr's picture

Facebook ripped 15% after being added to the Russell index on the hopes QE would cause a bunch of index basket momo buyers to drive the shares past $100.

Now what?

When does every CEO of every trading house get held in contempt? Fast and furious is nothing compared to the financial crimes that go on every single day.

I have never seen more than one person shopping at any Zumiez store on any given day. I have seen the two employees stand in front of the store begging people to come in. That is supposed to be the fastest growing mall store?

I guess the market is working on the "Cheat till you get caught principle". Since the Obama SEC and justice dept has given all the criminals a pass, there is no fear of getting caught, so the cheating has become the normal operation of business.

Venerability's picture

ZH pretending to be against Computer Game Markets when it is a main promoter of them is a bit smarmy, don't you think?

Not that I think The Script, in whatever form, is gaining ground. It continues to lose ground minute by minute.

Still, it's frustrating that whenever we attempt to get a strong Make JPM Behave campaign going, they manage to stop it in its tracks.





Venerability's picture

So you give it three down votes?

Doesn't that prove what I'm saying?

When it's all "by rote," it's pretty certain it's all Bots. 

Humans think. Bots can only react as they are programmed to react.

And most human believe that is not a good thing.


RobotTrader's picture

John "Big Mac" Williams has been harping on hyperinflation. The last 3 years, the guy has basically been talking to himself.


Natural gas, coal, solar, agriculture prices are now at depression-era lows.





spooncutter's picture

agreed, absolutely no inflation. time to double up on lulu

Al Huxley's picture

Fuck, do you not eat?  Heat your home?  Light your home? Drive a vehicle?  Sure, the raw commodities are down in price, but the prices for end products I use all seem to have risen a lot.  Gas was cheaper pre-2008 spike when oil was at $80 than it is now.

Silversinner's picture

I work and get payed money.The Fed,ECB etc just

produce money with no production or value(added)

behind it.It only derives it's value from mixing(laundring)

their counterfeit money with my(our) productive labour



dcb's picture

I am starting to trade more and more commodities long short. there seems to be less manipulation. stocks holding up while other stuff goes to crap?

in my experience the drop in commodities heralds a drop in stocks

Tirpitz's picture

Could well be the case. However many commodity charts look like bottoming out, so quite a few thoughts could be invested into how to profit from a renaissance of tangible values.

cosmictrainwreck's picture

Meanwhile, in a/h, some poor sap unloaded (at 16:24) 800,000 TVIX @ 4.7614 = 16.9% below comps and a whopping 18.9% off the close. The similar play in UVYX (16:25) for 350K at 10.60 was only -2% and -4%, respectively. Awesome. Plain-vanilla VXX acting "normal" 

ParaZite's picture

That one chart looks more like a pimple than a bubble. A good squeeze is all it needs to pop. 

perelmanfan's picture

Very disturbing article on HuffPo today, headlined "WEAK," expressing disgust at Benny for not printing. I was completely creeped out by the utter lack of perspective in this "news" piece - it blithely assumed that massive intervention is an unmitigated good. I guess I had not processed the strength or breadth of this idiotic notion - I naively assumed that major-media discussions of debt monetization, one of the few ideas in human history that has ALWAYS SOWN DISASTER, would at least include a few critics. Not so. Bad, bad sign. 

razorthin's picture

Coiled spring.  But to release in which direction?  Commodities through the roof or equities through the floor?  The persistence of the present negative correlation would suggest an emerging strong economy.  Could everyone but the koolaid drinkers be wrong?  Or have the manipulators gotten that good?

nickels's picture

Just do the opposite of what you think. You'll make money.

bjfish's picture

So .... they're actively manipulating VIX now also!

Reminds me of a child trying to squeeze a balloon that is too big to fit in a too small box ... and surprised that it bulges out on the side, they push in on the bulge, and the next bulge, and the next bulge ...


chump666's picture

market is heavy again, short squeeze is overdone, now overbought.  Fed is f*cking bad joke without the punchline.    Op Twist was priced in Asian trading last session.

Volatility trade should pick up now.

chump666's picture

Commodity crunch still on any bulls riding the QE3 in August trade...are going be wiped clean.  Asia/India goes QE3 won't do sh*t.

The dollar rose to INR56.41 -- a level not seen since May 31 when it strengthened to a record level of INR56.51.

Shineola's picture

I can see why "traders" would dump commodity contracts on a day like this.  They understand clearly, that The Bernake would never, ever, destroy the US dollar by printing, zirping, bailing out, back room deal making, ect.   There is just NO WAY that is ever going to happen!  

Rather than buying a real physical commodity, it is much, much, wiser to loan money to Wall Street.  You know, via stock purchases.  Some of these stocks even come solid PAPER CERTIFICATES, proving that you have loaned money to someone you have never even met! They have a good business plan, you see!   One day those loans are gonna pay off big!   You just wait and see!   Silly gold bugs!

Ted K's picture

Notice how all the gold and silver geniuses have disappeared on this site??? And with oil at $82, housing still super cheap (on a relative basis), food durables very cheap if you look around, we still have guys like Bruce Krasting telling us our cash is going to be worthless soon.  The sad thing about these jerkoffs is they want to blame stock crashes and inflation (the two are often negatively correlated, so how current policy could be blamed for BOTH only an idiot appropriately named Turd Fukson could tell you) on Bernanke/Obama to make political points like some 5 year old arguing on the playground who gets to play Luke Skywalker or Han Solo.

squexx's picture

Dissappeared?!? Hell, I'm waiting for payday so I can buy hand over fist!