The Cost Of Recoupling: 235 S&P Points

Tyler Durden's picture

Since late November and more so mid-December, the US equity market (and broad risk drivers) have decoupled from Europe's woes. The fundamental unreality (as we discussed here, here, and here) of this lagging performance and over-enthusiastic economist extrapolations has pushed the S&P to over 235 points over a 'fair-value' of 1050 (based on EURUSD's price). Even on a conservative basis - from the last real-decoupling point on 12/21, the S&P still stands almost 150 points 'rich' to a global-slowing European recession-dragging USD-based-earnings crushing 1.27 EURUSD.

Medium-term dislocation...

and short-term dislocation...

Charts: Bloomberg

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The Axe's picture

Purge  at Goldman    heads are rolling baby.......

tempo's picture

Why only 91 day analysis?? What about 6 and 12 months, 1 and 2 year?? Maybe there has been a lot of noise over the past couple of months.

French Frog's picture

Whoever junked you has obviously lost the ability to think for himself...

I'm not saying that ZH is wrong on this because over the last year we have seen many instances of decoupling between the ES and the more general 'risk-on Context' and there have been many really good trades to be had on the narrowing of the spread.

But simply asking for an even longer-term picture makes sense, even if only to confirm the scenario. 

clones2's picture

Euro showing a bit oversold and at major support of 1.25 (support in '09 and '10) - what will happen to markets if the Euro bounces back into the low 1.30's?

S&P up another 5% - 10%???

Eireann go Brach's picture

It's called the Obama re election Hail Mary fake pump print to infinity at all costs fuck reality BLS number fudging Obamanomics plan!

BlueStreet's picture

Higher they rise, harder they fall. 

Cognitive Dissonance's picture

But...but...but this time it's different.


Mr Lennon Hendrix's picture

It has been.  The floor under US equtie is much easier to control when vol is low.  The PWG is having a field day with this.  This is the Fiat Ponzi at its best:  USTs selling to PDs and flipped to Direct.  Check.  Money fleeing the euro into the dollar.  Check.  Nation-States destroyed across Africa-ME-Asia.  Check.  Just another day in the life as a Central Bankster.

Cognitive Dissonance's picture

Mission Accomplished. The CIA/NSA/Central Banking troika is plenty pleased with themselves for engineering another global financial Coup d’état.'%C3%A9tat

Mr Lennon Hendrix's picture

This is why I was horrible depressed yesterday.  They did it.  They won.  They implemented the laws, they have their Fiat Ponzi rollin', and they are destroying all of the brown people across the globe.  They will have their New World Order!!!!  Muahahahahaha!

And in the dark of night after they have drank their wine, we creep up and....


DavidPierre's picture

Jim Willie

"In my opinion, the Zero Hedge web journal is by far the most valuable and broad single source of relevant information in the global financial crisis, bar none... the intrepid indefatigable Tyler Durden (bloodied but resilient) of the Zero Hedge crew."

The USDollar Paper Tiger


LawsofPhysics's picture

This is why I monitor ZH.  I will pledge 3% of this compression trade right back at you tyler.

scatterbrains's picture

What better way to get things realigned than a break out on shitty volume and then FAIL with a bearish put/call ratio tailwind.. don't hear a peep about this possibility anywhere yet...

pods's picture

Wow, either this time is different or there is going to be one hell of a correction.


jarboejl's picture

My money's on it's not different and a BIG correction.  

Reminder, Italy auction of short term bonds tomorrow (overnight for us yanks), and long term auction Friday!!

yogibear's picture

Keep on extending the indexes.Fund managers are already planning the huge bonuses with Bernanke in the background pulling the strings.

Dapper Dan's picture


Beige Book: National Economic Activity Expanded At Modest To Moderate Pace

Archer Daniels Midland Co., world's largest grain processor, to cut about 1,000 jobs, or 3% of workforce, to reduce costs - @BloombergNews

ADM is telling their employees it is just a modest to moderate layoff.

LawsofPhysics's picture

Yes, all is well.  We are all going to be millionaires.

blu's picture

1,000 jobs lost is 1,000 families without a paycheck.

That's like, half of Nebraska.

The trend is your friend's picture

When the USD falls, the S&P will make new highs...crushing the shorts again.  In the land of make believe only your lack of imagination can hold you back

Mr Lennon Hendrix's picture

It will be the greatest day in Bernanke's life.  Issue QE X, the DXY falls, stocks rise, USTs stick.  He has his hand in his pocket just thinking about it.

Comay Mierda's picture

Bernanke openly praised Roosevelt's 40% dollar devaluation as one of the main reasons the depression ended in his speech here:

that is the next card he will play when the banks start to crumble

Comay Mierda's picture

my thoughts exactly.  you will only see the crash in spx if you price it in gold.  and it will be a legendary crash.

slaughterer's picture

"The trend is your friend" is correct:  the DXY/USD has been pushed up to nosebleed one-year highs.  While this says something about the level of TRUE belief in QE3, it also acts as a secret weapon against shorts...

The trend is your friend's picture

I'm no expert but support looks like 76 on dx/y, which would mean a 6.5% pop on the s&p at around 1370.  This would probably scare the shorts out again and push the index to 1400 before we start the sell cycle all over again.  Who knows?  I'm using logic and their lies my dilemma

SheepDog-One's picture

Nice record low levels of shorts in the markets too right now. How they pull off their next 'short squeeze' with no shorts around I'll like to see.

fonzannoon's picture

Everyone is short the euro not the market. They somehow (they always seem to) get the euro to rally and the dollar to sell off and bingo...the S&P runs and runs. A lot of people still short financials too. They will really get banged around. Then Greece tanks. The euro tanks and people rush back into treasuries and large US multinationals.....rinse...repeat.

SheepDog-One's picture

Yea everyone knows all the new normals, and how this time its different and where the S&P will definitely be in 3 months. Until the big false flag event that sets everything on its ear one morning.

fonzannoon's picture

Yeah agreed. I used to think this would be a long tug of war that just slowly bled everyone out. Now I think we just keep speeding up until we hit the wall at full speed.

SheepDog-One's picture

Depends on whats falling with the dollar....hope it isnt nuclear warheads.

spastic_colon's picture said it, the USD decoupling is a myth, ES is only decoupling on the downside courtesy of the PPT, setting everything up for "blowout", "upside surprise" headline driven JPM earnings to start the show

Stax Edwards's picture

Still BTFD, we are just getting started.  Anybody want a toke of this hopium?

Ag1761's picture

Hey Tyler, I came across this last night on my trawls, looks like you are stirring some hot debate elsewhere.

Sorry if someone else has already posted this link.


blu's picture

That's an interesting article, with equally interesting comments. If I traded silver (don't) then I might wonder what was up.

brew's picture

i just come to this blog for the sarcasm...

Tyler Durden's picture

I) Nobody pays us to post. II) we wish the best of luck to anyone who wishes to buy 10MM or more in physical silver without incurring 20%+ premiums on the order when all costs are factored III) the Sprott PSLV NAV spread has continued to leak wider, and nobody paid us to do that either.

ebworthen's picture


I posted this to the original ZH article yesterday regarding another naysayer (no, I don't get paid for posting).

The replies are stuck at an eerie 666 so someone go say something before another conspiracy is hatched.

I see no conspiracies in the ZH article, only observations.


"Regarding the Daily Capitalist article criticizing this piece:

The Daily Capitalist (DoctoRx) seems to miss the point.

Key sentence from Tyler in this article:  "In other words, someone is willing to pay up to 30% over spot for the right to be closer to the physical metal than merely have a paper claim on a paper claim (pre hyper rehypothecation and what not)."

The Sprott PSLV is not holding physical, but it gives a measure of what people are willing to pay to be closer to actually owning physical than MF Global "possession" of silver.

If people are willing to pay a 30% premium using the PSLV versus a certificate owned by Cede & Co. (DTCC), it gives a measure of the price strength (demand) for physical.

Do you trust Sprott to hold enough physical silver to back the ETF versus owning a certificate owned by DTCC?  That is what makes a market.

Daily Capitalist article:

ZH Article on Backwardation (this one):

ZH Article on DTCC:"

Bron Suchecki's picture

Perth Mint does not incur any premium when it pulls physical out of London. Whoever is feeding you that is making a fool out of you. If you really are independent and after the truth, more than happy to chat with you anytime - you have access to my email in my profile.

Cdad's picture doesn't matter a wit that no one is left involved in the markets...according to all the failed pitch men on Wall Street.  In fact, you might say that the failure in capital formation IS the reason the market has been able to drift up.  Why not?  After all, in the non market market, selling causes equities to rise, and buying causes declines.

It will take generations for any stitch of credibility to be restored to US markets.  And so the Greater American will just roll on and on specifically because of this perversion of markets and the missallocation of capital.

Way to go...criminal syndicate known as Wall Street!

Mr Lennon Hendrix's picture


The banksters think they are firmly in control now.  So now is the time to go balls to the wall.  How about everyone that is able retires, buys lovally, buys silver, and sits in on their capital building once a week?  Yeah?  What say you "hippies" of ol'?  Remember, the times they are a' changin'.

Cdad's picture

They just keep bashing precious medals...while pitching that burritos have unlimited pricing power, or that the death of the Euro union is "priced in."

And despite the megaphone of their fraud networks....crickets from Average Joe.

Yen Cross's picture

It's a reality show! Starring " Timmah, Ben , & Jimmah Cramer" ... Dancing with the traders of "Wall Street". 

 RSVP, PLATFORM SHOES, for cramers table...

Dick Darlington's picture

Check Bobl vs Dax. Nice "decoupling" there too.

Nothing real here's picture

I was just running that correlation, or lack thereof. 

We've gained back 1 point since the posting.  The Fed cannot print after that Beige Book, oil above 100, and the S&P approaching 1300.  Caveat emptor. 

The Axe's picture

i wonder how that joke show's ratings are doing CNBC......