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Dow Closes At Highest Since 2007 As High Yield Outperforms

Tyler Durden's picture





 

Retirement must be on again as the Dow creeps up to close at its highest since 12/28/2007 - no more reassuring sign that we need QE stat!! The high-yield bond ETF (HYG) also pushed to new highs - amid heavy volume - as it left its credit-spread and equity risk reality in the dust (as well as its intrinsic value) but who cares - QE/ESM/OMT/WTF - it's on like donkey kong. At least VIX kept some sense of rationality as it closed near its highs on the day, pricing in somewhat the binary concerns of the next 24-36 hours. Volume was nothing to write home about - nor was average trade size - as S&P futures rolled well off their highs to fall back below VWAP into the close and after-hours (when volume picked up). Commodities were mixed with Oil and Copper up, Gold flat and Silver down as the USD dropped (down 0.3% on the week) and stabilized after Europe's close. Treasuries leaked higher in yield (despite a record-breaking 3Y) but remain below Friday's peak-yield levels.

 

S&P futures did not enjoy the whole day - despite rallying up to yesterday's closing VWAP - though of course Green is green...

 

But The Dow closed at its highest since 2007...

 

as S&P/Russell tread water and Trannies surge...

 

but HYG (the high-yield bond ETF) had a day - which we can't help feel looks like some index arb efforts given how dislocated it is from intrinsics (lower pane)...

 

and the afternoon saw HYG on its own... (forget about call constraints and convexity - yield is yield bitches)...

 

though with rates low - it seems the pull of the technicals in the CDS market (black) for HY credit is strong for HYG...

 

though perhaps VIX showed some the way - as its short-dated hedge-ness does provide some sense of reality that there is a chance that the Holy Grail is not delivered unto us tomorrow...

 

Correlations in general improved today - but stocks (like yesterday) were leading risk-assets lower. The exuberance in HYG dislocated from SPY/TLT/VXX into the close (left chart) and the weakness in Treasuries and stability in JPY crosses this afternoon did not encourage risk-off like we saw in ES (right chart)...

 

Charts: Bloomberg

 


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Tue, 09/11/2012 - 16:39 | Link to Comment TruthInSunshine
TruthInSunshine's picture

The QE is dead !

Long live the QE !

Tue, 09/11/2012 - 16:41 | Link to Comment camaro68ss
camaro68ss's picture

the higher they are the harder they fall.

Tue, 09/11/2012 - 16:54 | Link to Comment TruthInSunshine
TruthInSunshine's picture

- Bruce Krasting reports on how the New York Branch of the Federal Reserve, itself, tears a hole in The Bernank's (mis)management of monetary policy.

 

The Federal Reserve Bank of NY put out a research paper that must have pissed off Bernanke and the other Fed doves. Here is a Link to the Fed report, and another Link to a Bloomberg article with a good discussion.

 

The report looks at the consequences of structural issues that have impeded the return to “full employment” in the economy. The analysis identifies structural impediments as “misalignments.”

 

Fed Report: No More Monetary Gas Needed
Tue, 09/11/2012 - 17:13 | Link to Comment pasco35
pasco35's picture

BUY GOLD, IT'S ON SALE NOW!!!

 

 

-Frank
https://www.youtube.com/watch?v=6M8zzXFa918

Tue, 09/11/2012 - 17:31 | Link to Comment Silver Bug
Tue, 09/11/2012 - 16:38 | Link to Comment Vincent Vega
Vincent Vega's picture

We're rich!

Tue, 09/11/2012 - 16:43 | Link to Comment camaro68ss
camaro68ss's picture

Dont you know it! the DOW is so high now, im going to open up another credit card and buy me a few Iphone 5!. After that ill do some internet shopping and buy myself a some kindles

Tue, 09/11/2012 - 16:40 | Link to Comment Tsar Pointless
Tsar Pointless's picture

The non-announcement of QEWhatever isn't tomorrow, 'tis Thursday.

http://mam.econoday.com/byweek.asp?cust=mam

For those who still believe crime doesn't pay, you need only look at our equity markets for your last piece of evidence.

And our electoral system, too. But, I digress.

Tue, 09/11/2012 - 16:44 | Link to Comment Cdad
Cdad's picture

The market has reached such a level of perversion as to be laughable once again.

Recovery bitchez!

Tue, 09/11/2012 - 16:49 | Link to Comment edifice
edifice's picture

Long unicorns and pixie dust.

Tue, 09/11/2012 - 16:48 | Link to Comment DUNTHAT
DUNTHAT's picture

I'm confused: What is the purpose of a market analysis if the market is entirely contrived???

Tue, 09/11/2012 - 16:51 | Link to Comment devo
devo's picture

there is no yield high enough for high yield bonds.

Tue, 09/11/2012 - 16:51 | Link to Comment lakecity55
lakecity55's picture

NO QE needed: since they've "ben" buying bondz all along.

QE3.5, 3.6, 3.7 to infinty.

PMs will slowly sneak upwards.

Tue, 09/11/2012 - 16:55 | Link to Comment Zero Govt
Zero Govt's picture

"..forget about call constraints and convexity.."

my thoughts exactly

Tue, 09/11/2012 - 16:55 | Link to Comment Meesohaawnee
Meesohaawnee's picture

and the sheeple willl turn on the 5 oclock news and go "aaah obama my savior" if the dow is 5 year high then things MUST be great

Tue, 09/11/2012 - 21:55 | Link to Comment ZeroAvatar
ZeroAvatar's picture

I can't even BEGIN to imagine the 'world' after the election.  Everything's on hold 'til then.

 

After that:  War with Iran, No access to oil/gas lines at gas stations. Martial law.  Government seizures of property, labor and commodities.

 

Additional loss of freedoms.  No groceries in the stores.  Increased domestic terrorism. Collapsed financial system.

 

Nuclear warheads flying across the American skyline.  Possible civil war.  Stock market crash. War with Russia. War with China.

 

No internet access.  Everyone hungry, unable to travel, confused, and angry.  I've only just BEGUN.

Tue, 09/11/2012 - 17:00 | Link to Comment buzzsaw99
buzzsaw99's picture

I plan to darn some socks whilst I await the massive trickle down.

Tue, 09/11/2012 - 17:17 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

"Mr. Dow, is that a soaring index in your pocket or are you just happy to see me?"

 - Mae QE

Tue, 09/11/2012 - 17:18 | Link to Comment yogibear
yogibear's picture

It's been QE to infinity for a while.  Bendover Bernanke smashed a broomstick on the QE gas pedel a while back.

Eeventually commodities are going to ramp up again and be real pricey. 

Ramps of double digits per quarter for commodities. at a time as the fed's QE gas pedal is smashed to the floor now.

Tue, 09/11/2012 - 17:34 | Link to Comment HD
HD's picture

The fact that the bulls are not scared shitless as the entire global economy rolls over and central banks make promises they can't keep - tells me the end is near.

The question is whether they can hold it together another 60 days...

Tue, 09/11/2012 - 17:46 | Link to Comment q99x2
q99x2's picture

And its one, two, three, four what are you waiting for. No reason to ask why. The world's coming to an end. Buy stocks. Yippee we're all going to die.

Tue, 09/11/2012 - 17:51 | Link to Comment ebworthen
ebworthen's picture

That bubble has a lot of hot air in it; or is it hot money?

Tue, 09/11/2012 - 17:55 | Link to Comment MillionDollarBogus_
MillionDollarBogus_'s picture

Any bets on Apple stock heading for $700, with the i-Phone 5 launch set for tomorrow...???

I say it hits 700 in short order, or I'm not a troll...

Tue, 09/11/2012 - 18:12 | Link to Comment Conman
Conman's picture

Well ya you are a troll and no wont break 700.

Tue, 09/11/2012 - 19:25 | Link to Comment TruthInSunshine
TruthInSunshine's picture

It could easily break $700.

The dilemna for holders of vaporous equities at times like these (i.e. extraordinarily propped up, broken markets, due to radical central fractional fiat bankster meddling) is knowing when to hold them and when to fold them, because there's a whole lot of air underpinning equities.

For those who walk away, there'll be time enough for counting, when the Ponzi pops.

Tue, 09/11/2012 - 18:13 | Link to Comment ekm
ekm's picture

Whoever understands the concept of a pyramid scheme, will easily come to conclusion that S&P at 400 is inevitable, VERY SOON.

Tue, 09/11/2012 - 18:20 | Link to Comment ekm
ekm's picture

We are going to have 1000 pts Dow drop in one day, NYSE will be forced to pause trading two or three times within the day.

 

But you know what? That's what NYSE wants, a collapse, so it can have some volume and make some profit, otherwise it has to fold.

There is one thing and one thing only that the middleman hates: STABILITY

Tue, 09/11/2012 - 21:05 | Link to Comment chump666
chump666's picture

You are right.

Wall Street would be asking the Fed to hold of, so it can correct, add volume and resume the uptrend.

The market is overpriced and expensive to buy into.  It's heading for a correction and probably a major crash thanks to HFTs that will collapse the 20, 50 and 100 supports which momos buy longs on.  The collapse in volumes and depressed levels on the volatilities for the DVIX and VIX is a clear warning sign. 

 

Tue, 09/11/2012 - 22:09 | Link to Comment ekm
ekm's picture

chump

I do not think the market is over priced.

I think the market is way out of normal pricing range.

How can I explain this? Due to the lack of tradeable stocks, volume is abysmal.

 

People say, a lot of cash is on the sidelines. Ok, but what to do with the cash if there are no stocks available for trading.

DOW is going higher not because of demand from people holding cash, but because of the scarcity of stocks being taken away bit by bit.

It's forceful buying by Primary Dealers using Fed funds. They're stuck with DOW stocks.

Tue, 09/11/2012 - 22:25 | Link to Comment chump666
chump666's picture

It's not much different pre-lude to the last few corrections.  It's only that our market went up quicker this time, thanks to July/Mario jawbone.  The lack of volume means that longs are being held, not sold, short positions are non existent.  The buying is larger funds front running ahead of central bank/s bond buying, that is it.  It's overpriced, because the holders of these equities are not selling, yet... but are adding to already held positions.  This is a momentum market now on thin volumes, which is a danger sign for a messy correction.

The money on the sides is essentially awaiting for a dip buy, or a cheaper repricing, where ever the money comes from.  The point is the market will correct, probably end Sept, or early Oct.  Or even after the Fed meeting that may not offer QE3 at this point.

It's a frustrating market for investors waiting to buy in and others trying to short the tops.  But the larger the rally, the bigger the crash. 

"at the end of the game, the pawn and king both go back into the box."

The Fed, Mario, god, no one can stop the force of the market once it turns.  And sh*t is going to slam hard against the fan...one day.

 

Tue, 09/11/2012 - 18:07 | Link to Comment falak pema
falak pema's picture

robotrader doesn't post anymore he is too busy makig money. 

Tue, 09/11/2012 - 18:27 | Link to Comment GaryNeville
GaryNeville's picture

Bloomberg ran an article in the morning that markets have priced in 99% of QE3!

So after the market action in the afternoon I can only assume markets are now pricing in QE4....?

 

The one thing I'd like to know is how high does this sucker have to go before Bernanke's bots start unwinding some of their epic long positions.. I reckon Bernanke's holding so much stock he could flash crash this sucker 2000 points.. Better set thos stops in ultra deep    : )

Tue, 09/11/2012 - 22:01 | Link to Comment ZeroAvatar
ZeroAvatar's picture

DING!  DING!  DING!  DING!  DING!

 

Congratulations!  You're the first person I've heard actually refer to QE4 as if it is actually forthcoming.

 

QEInfinity

Tue, 09/11/2012 - 18:59 | Link to Comment GS-DickinDaMuppets
GS-DickinDaMuppets's picture

WTF, I hate to give away good info for free, but I like you guys (& gals, too), so listen up:  The markets will continue to be manipulate higher until the votes are counted.  THEN the REAL market makers will take over, and depending on how the votes are counted, the SELLING or BUYING will be TRUE, NON-MANIPULATED HEAVEN or HELL (depending on how the votes are counted), and you had better be following the leaders or be prepared to lose all....cause it is going to be a real FAST market....you can count on it.  Bitches (I hate misspelled words)

 

...doing GOD's work...GS-DickinDaMuppets

Tue, 09/11/2012 - 20:02 | Link to Comment dolph9
dolph9's picture

If you haven't already played this market, I wouldn't start now.  We are getting awfully close to a triple top.  The overall stock market has gone nowhere since 2000, and actually lost money in real terms.

Peak resources, China slowdown and Middle East shenanagans are about to get real.  Any one event could trigger the sell orders as people scramble for currency.

If this happens it may just be game over, as any further currency debasement just leads to increased costs throughout the economy.  That's when the metals will save you.

For anyone old enough remember what life was like in 1999 and how it's changed.  Now think, the coming years will make this period look like the good old days.

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