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Commodities Weak As Stocks Drop To Short-Term Credit Reality

Tyler Durden's picture





 

The last 90 minutes of the day dragged ES (the S&P 500 e-mini futures contract) back up to the safety of its VWAP on what seems to be some comments by Jamie Dimon on the Fed looking for much larger job creation (prompting QE3 moves) or another housing bottom-call? After what had been an ugly day in which stocks sold off (aggressively after the European close) back to the post-Bernanke reality that is the less sanguine credit markets, the USD weakened, commodities and stocks popped (led by financials), and Treasuries sold off (belly underperforming). It seems that no matter who comes on TV nowadays and says anything, the algos market will rally. By the close, Financials were the only sector in the green (as GS and JPM surged but not so much BAC or MS) but Materials, Energy, and Industrials were the worst. VIX managed to get above 17 before reversing back to unchanged and the term-structure steepened back a little. Gold (which dropped the most in 2 weeks today after Goldman's long call) remains the only metals/oil commodity higher on the week - though only marginally - as plunges in Oil and Silver bounced quite positively into the close. Stocks underperformed credit on the day in general but the low volume limp up into the close saw them even out and we note that as ES hit its VWAP - heavier negative delta volume came through somewhat suggesting this was an effort to ease institutional exit - as both NYSE and ES volume was above average. 30Y Treasuries are back to higher in yield for the week but this afternoon's selloff lifted yields 4-5bps off their earlier lows. Broad risk assets led the equity market down but quite coincidentally, the S&P ended the day almost perfectly in CONTEXT with risk assets and credit/vol (after a significant dislocation the last few days).

 

Once again equity ebullience overshoots. From Friday's comments to Monday's exuberance, equities shot away from a sense of perspective only to drop back to credit's less sanguine view of the world today (and the end of day spurt in stocks was not accompanied by our credit brethren once again)...

As if by magic, ES manages to pull up to the safety of institutional-selling-friendly VWAP (the light blue line) - which just happened to coincide with the European-close pre-dump level. The lower pane also shows the surge in volume as we sold off into lunch after the European close...

Commodities produced the most angst perhaps today as Oil lost $105 on inventories for a while but the modest USD weakness into the close dragged them higher off their 'plungey' lows...

While Gold remains just in the money for the week (after dropping its most in 2 weeks today coincidentally following our comments on the Long Gold call by Goldman), 30Y Treasuries are back in the red (as the rest of the curve remains lower in yield - despite flattening today from the belly...

It seems that all of a sudden we re-awoke in a world where macro data actually matters this morning and Europe's ugliness after overnight weakness seemed to confirm that.However, that reality was soon glossed over this after once again...

VIX (along with credit) was the first sign that the rally was faltering yesterday but as is clear in the chart above, it appeared VIX overshot a little with the selloff - people scrambled for protection as the S&P started to fall - which implicitly slowed the sell-off and then the rapid reversion in VIX as the rally began ended with VIX and stocks back more in line with one another (though as is clear in the lower left below - from a credit/vol/stock perspective, vol remains cheap here at the close).

Then this afternoon's surge seems more like 'Its On again'. The convergence of ES with VWAP, the round-trip in VIX (from cheap to 'fair' and back to cheap - lower left), and the convergence of SPY with our capital structure model (upper left) and ES in the CONTEXT of global risk assets (upper right) suggests this was more of a brief pause in the downdraft (as correlations caught up to equity's slight overshoot) as certainly there was no volume in the upswing. But perhaps this is the pause that refreshes once again as funds prepare to ride the biggest winners to their biggest gains once again in this momentum race to infinity (or 3700 ES by 2020 anyway!). Whether this was pre-buying for the next China rescue or bigger-bailout, or potentially terrible data point that 'enables' QE3, who knows?

 

Charts: Bloomberg and Capital Context

 


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Wed, 03/28/2012 - 16:45 | Link to Comment ZeroPower
ZeroPower's picture

More VIX games today. Saw some paper come in and buy back month vol before someone decided fuck that and volatility was being sold as if it wasn't in style anymore.

Contango still very high, nice chart here showing the diff in VIX curves w/r/t time:

http://av.r.ftdata.co.uk/files/2012/03/Vix-term-structure-Artemis.jpg

Wed, 03/28/2012 - 17:11 | Link to Comment Cdad
Cdad's picture

The "management" of the $VIX by various mysterious and invisible hands always ends the same way...with the $VIX going entirely ballistic.  With the recent skew/imbalance created by the TVIX rip off now in the rear view mirror, and almost all VIX ETFs having been reset below NAV, the time to lift off is at hand.

Unless, of course, you are a fan of "it's different this time."  

The last 90 minutes of today's nonmarket session was just sad, vapory...a patently transparent attempt to replicate technical joy joy by the TBTF co located computer fuckwads who are responsible for utterly destroying the market.  To the "it's different this time camp"...you have fun for the fantaseconds that it lasts.

 

Wed, 03/28/2012 - 17:35 | Link to Comment CvlDobd
CvlDobd's picture

You have a way with words.

I always look forward to a Cdad description of market action. I agree with your commentary BTW.

Wed, 03/28/2012 - 16:52 | Link to Comment fonzannoon
fonzannoon's picture

I think daily wrap up on here should just be "whatever dude" Until something truly fundamentally changes. No charts just "whatever dude" in every language.

Wed, 03/28/2012 - 16:53 | Link to Comment Ruffcut
Ruffcut's picture

Gold and others are weak on futs rollover.

Wed, 03/28/2012 - 17:04 | Link to Comment Tsar Pointless
Tsar Pointless's picture

Gee. A whole half-percent sell-off on the S&P 500.

Oh boy. After nearly a non-stop 350-point ramp-job, the excitement level displayed on this site for a 15-point pullback in two days' time is of epic proportions.

Wake me up when we have a seven-to-eight-percent sell-off for a few days in a row.

Until then, calm down. "American Idol" is on tonight.

Wed, 03/28/2012 - 17:07 | Link to Comment fonzannoon
fonzannoon's picture

You may be asleep for a while Tsar.

Wed, 03/28/2012 - 17:26 | Link to Comment Rainman
Rainman's picture

Joke for the day.....NY Fed predicts 6% unemployment by mid-2013....funny since Barry will have it at 5 by November.

http://www.bloomberg.com/news/2012-03-28/unemployment-may-drop-to-6-by-mid-2013-n-y-fed-study-finds.html#

 

Wed, 03/28/2012 - 17:31 | Link to Comment Zero Govt
Zero Govt's picture

probably not a joke, just another Govt number manipulated so far from reality the word delusional is an understatement

Wed, 03/28/2012 - 18:16 | Link to Comment Al Huxley
Al Huxley's picture

They should just come out with the number on the next report - "Unemployment dropped suddenly to 6%, down from 8.8% - a clear sign the economy's improving".  I mean, given the amount of other bullshit that passes unquestioned and unnoticed they'd probably get away with it, and trigger a huge rally in equities to boot.

Wed, 03/28/2012 - 21:37 | Link to Comment xtop23
xtop23's picture

Easy - Print up a cool trillion and put those people to work with half of the people digging holes and the other half filling them back up. 

Problem solved. What could possibly go wrong?

Wed, 03/28/2012 - 17:43 | Link to Comment banksterhater
banksterhater's picture

Financials up because BANKSTERS WINDOWDRESSING by buying their own stocks! And AAPL, painting the tape.

Wed, 03/28/2012 - 17:56 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

thxz, tyler

yest, the ? abt daBoyz

so they are selling with very little overall damage

the R2K = 831 (!)

whether they want to take the indices on the wildMouse the next few trading daze is anybody's guess

there are different ways to "rotate and dress the portfoilios" at quater-end/beginning

this looks pretty tame, so far, and the campers may well be happy, for now, too

Wed, 03/28/2012 - 18:09 | Link to Comment meetired
meetired's picture

Luv these posts.  Got out at 2:35pm, just before the run to VWAP.

Never paid it any attention before.

Ok, didn't know how it worked before.

These post-mortems are wonderful.  A vid with Dana Delaney would be even better.

(fricking MF drinking games)

Wed, 03/28/2012 - 18:06 | Link to Comment Rainman
Rainman's picture

TWO trading days left to shank the managed account muppets for fees and lock up those quarter-end bonuses.

Wed, 03/28/2012 - 18:12 | Link to Comment meetired
meetired's picture

By shank, you mean lift?  This pattern of sell on T-2, then ramp has been in place for 2 months.

Wed, 03/28/2012 - 18:54 | Link to Comment JohnKozac
JohnKozac's picture

I'm glad to see financials doing better...for awhile, I thought banks were mostly insolvent.  Bagholders must be happy today.

Wed, 03/28/2012 - 18:59 | Link to Comment chump666
chump666's picture

China rescue?  Come again?  Asian (creditors) was selling hard before EZ/US opens, AUD was decimated.  China is going to bail out what?  Those idiots in Europe?  Buy more USTs?  No, the commodity complex could be crashing.  So it's AUD and industrial commodity charts now.

Correlation trades finally correlate.  China sinks, Obama can kiss goodbye the debt binge.

Wed, 03/28/2012 - 19:30 | Link to Comment Zero Govt
Zero Govt's picture

"..some comments by Jamie Dimon on the Fed looking for much larger job creation... or another housing bottom-call?"

Oh good, so no need for Nanny Ben to pooper scoop anymore toxic MBS's off Jamies bankrupt balance sheet.. Ben has quite enough already and has no clue what to do with the crap anyways

The Fed is a central bank holding also toxic mortgages and a property landlord to boot?! It not only doesn't fit, the situation is a complete farce

But how would Jamie know the bottom's in? There's millions of houses being held on US bankers books to avoid flooding the already stagnant and ruined US property market... it's a pent-up deflationary force as big as a tsnumai that could flatten yet again the banker-political train wreck that is the property 'market' (cough)

Jamie bluffs but his bottom call is clearly delusional

Wed, 03/28/2012 - 20:36 | Link to Comment meetired
meetired's picture

What my man crush poster really means, but never says, is that the biggies always bring the pig back to VWAP, and when they don't, short the CIT outta this pig.

Do NOT follow this link or you will be banned from the site!