Equities At Lowest Close Of Week As Reversion To Reality Reappears

Tyler Durden's picture

S&P 500 e-mini futures closed at 415ET today at 1314.75 which is the lowest close of the week, with Monday's surge providing all the juice for what seemed a hope-driven rumor-ridden few days.Tough day today for recent darlings of the dumpfests FB and JPM - as the former tested back towards 31 the figure and the latter retraced all its post-Wednesday-ECB-rumor-ramp gains - before a late pop helped it out (-1.5% today). Volume was expectedly low and average trade size equally dimsally low as yesterday. Stocks repeated the same pattern today, retracing all of their late-day-ramp gains and reverting back to credit's reality but we note that HYG was a significant underperformer today - as credit markets went dead into the last hour. For the week, commodities have seemingly regrouped from mid-week dispersion but are generally lower (despite a positive last couple days for Gold and Silver) but are outperforming the implied weakness from a 1.6% gain in the USD on the week as EURUSD went out at its lows around 1.25. Slow day with only Utilities managing gains in stocks today but Gold and Silver appeared to be the beat-adjusted winners as them and the USD gain from Europe's fears. Interestingly Gold and Stocks recoupled by the close - beta-adjusted - from Wednesday's divergence, with USD and Treasuries pointing to lower risk asset prices.

Notice stocks (blue) and gold (gold) recoupled at today's close (orange oval) from Wednesday's beta. Treasury yields (red) and USD (green - inverted) strength appear to indicate lower risk asset prices as the divergences spread...


Stocks did recover to credit's reality - for the 3rd time this week - but HYG's weakness today is likely hurting a few (even if we did see YTD record outflows)...

which leaves HYG (red below) modastly cheap to its fair-value (dark red) - which is where stocks (green) appear to be holding...

and the week's large dispersion increase across commodities has reverted as gold and silver come back to life in the last few days...


and the USD just keeps chugging higher...


Four of five days this week saw ES close within a tick of 1315...


and JPM nearly touches unch to completely unfounded ECB rumor ramp from Wednesday's close...

Charts: Bloomberg


Bonus Chart: Facebook VWAP Since IPO Now $37!

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Paul Atreides's picture

Great weeks reporting Ty, time for a cold one!

The Monkey's picture

Be cautious using HYG as a proxy for anything. Last fall spreads on financials were blowing out and JNK / HYG were barely moving. Easy way to look at liquidity for the layman is to follow a handful of CUSIPS that commonly trade in the secondary market and graph the trend over time.

RobotTrader's picture

As usual, the "Glam Metrosexual" stocks like LULU and ULTA were once again unfazed from the European carnage, both are still 10% of record breaking highs after scoring 1400% runs off the 2009 lows.

No matter how bad it gets, there are always hot hookers to chase with outlandish PE ratios.


Banksters's picture

I heard you and trav broke up.    Sorry to hear that.   It doesn't seem to affect  your retarded posts, though.

slewie the pi-rat's picture


hey, RT did you check this shit out?

  • XAU + 6.82% on week
  • HUI + 7.94% on week
  • GDM + 7.78% on week

with gold - 1.17%

daBoyz R makin a new noise!


eclectic syncretist's picture

Seems like a good time to be a level headed currency trader/investor, as money should leave the euro and push other currencies up before ultimately crowding even further into gold as paper devaluation efforts go on and on towards the inevitable end that's always come to fiats.

The Monkey's picture

NASDAQ is (again) going to be one hell of a short. Investors will keep chasing beta until profits tank, which is coming up soon - regardless of any action the Fed takes.

High beta on the upside means high beta on the downside.

MeelionDollerBogus's picture


RobotTrader is back!

About time we had more than just MDB to keep us all going.

pmm009's picture

You don't have to be a market savant to look at the ES and know that there is massive manipulative support.  Market is bleeding gradually all month and the up moves are relatively instantaneous. 

The Monkey's picture

I don't buy the manipulation nonsense. Yes, the bulls bang it into the close to push up prices, they do seem to defend price levels, etc. Likewise bears attack when we see the weaknesses that we know are near certain to move prices.

Bottom line though, earnings have to this point been great as the momentum coming off the deep downturn was unbelievable. Problem is the world is slowing, earnings momentum is yesterday's news and FY 2013 earnings are WAY too optimistic. Inventory restocking is finished and then some. Recipe is for P/E multiple compression and a huge bear market. Nothing anybody can do about it at this point as it's baked in the cake.

I'm absolutely certain the smart managers know they are on borrowed time. Bulls will retreat. Bears are now in control of the market.

dcb's picture

I respectfullly disagree. I see manipulation because all of a sudden the market behavior changes. Now I knew after three weeks on down with really no overlap the easy shorting would be done with. But this late afternoon ramp fest is manipulation. alas they don't give us trading prop desk data anymore so we can't figure out who is doing it.

I know the euro is back to oversold, so I took some profits there, I also know the markets based on the whole euro correlation thing didn't drop the way htye "should". So I suspect what the "markets" are doing is going to use the oversold condition of the euro to bounce higher when it corrects back for a few days, then will drop with the euro again, but maybe not to a lower low.

if you plot vgk (vanguard european etf) the bit boys clearly don't want ti dropping below a certain line. I can also say I'd guess at or a bit below we will see big time intervention.


I can't say how far stuff will drop, but I can say for the "long term value proposition that etf for me seems to be at least the closest to being able to make some long term gains with,

I know the s and p is still way overvalued.

MY evidence of manipulation and I feel it really show it is that if you take the emerging markets, and the euro etf, they never broke last summers high. the s and p did. HUH? no reason at all that should have happened. The one market in the world that doesn't recognoze our largest trading partner is essentially in a depression> makes no sense.

dcb's picture

Oh, I used to use udn/uup for my trend lines, and now I'm thinking of using vgk, not sure?

The Monkey's picture

The market is in a sideways correction.  It hasn't been able to get off the mat from it's oversold condition.  Whoever is manipulating it is doing a terrible job.

The way I see it, we've been in a sideways consolidation with a huge investor complacency.  Pain train is on the way.


MeelionDollerBogus's picture

um, no.


That's a pretty upward curving, though dying, "sideways correction" long-term.

Short-term that's a pretty sharp-diving "sidways correction"

Call me Ishmael's picture

Sailors take warning.

junkyardjack's picture

Looks like ES is trying to set up a bear trap for Tuesday..

Conman's picture

Bears? The heck you say, what are those?

The Monkey's picture

We've been in hibernation, practicing, analyzing and waiting for this moment in time. Many of us recognized this point would come and have grown quite sophisticated and defensive. We are here to help correct what is clearly an overpriced market so that buyers can again find value.

We are the bears. We are the good guys. Sell your equities at a profit and take the year off. When you return, everything will be on sale.

Ljoot's picture

Reyka on the rocks with a splash of diatonic. Long SKF over the weekend...


eclectic syncretist's picture

The time decay on leveraged ETFs like SKF and FAS/FAZ makes them too high risk to go long at any time.  Far in the money put options on XLF can be utilized more safely and can provide plenty of leverage.


Safest would be far in the money long-term put pairs for FAS/FAZ in order to get paid for the time decay.  Just sit back and watch the money come in LOL.

FreeMktFisherMN's picture

Still trying to learn how these leveraged ETFs like FAZ and TZA work. So are they designed to go to zero, or is it a matter of 'diminishing returns' in the decay? For instance, is the 30  mark for TZA practically permanently not going to happen, barring a huge drop in the russell 2k? 

The Monkey's picture

The leveraged shorts seem to decay at a much faster rate during an uptrend. Go back and study the charts and see how they look versus movement in the market. Personally, I find them to be so volatile that I only use them when it's obvious the market is going to tank and to ride them out moving the stops down, setting the stop just above the last peak (resistance).

It's going to be difficult to short after the market has taken a beating, but I think this one is eventually going to prove to be a grizzley bear. Patience.

FreeMktFisherMN's picture

I agree with what you're saying. I wasn't even aware that the volatilities like TVIX, UVXY, don't all move together always. Today was a pretty red day on the Dow but nada happening with TZA. I think it was the lack of volume. Brand new to the stock game so picking up insights quick. 


I guess I'm just wondering if, say the TZA, for instance, will remain range bound between say, at extremes of 15 and 30. If you have your stops you should be okay. 


The Monkey's picture

If you can deal with the volatiliy, I would set the stop at the 52 week low for now and wait for the market to take it's next leg down. It may take a little while. Then, when it makes it's move, start moving the stop on a daily basis to lock in profits. Just follow the charts and see where the last solid resistance line is and set your stop a few ticks higher (lower in price).

FreeMktFisherMN's picture

These leveraged ETFs have lots of caveats, no doubt. I have never studied TA really until this year I started keeping track of metals, and now with looking into these bearish and volatility stocks/ETFs thta are the only trades I think I'll make, seeing the chart for TZA was an eye-opener. I really wonder if these things are ultimately going to zero. Then what, are they just going to whip up another one and start it above 100 again, haha? 


Doubt I'll be a buyer and holder of these things.  

The Monkey's picture

If I were you, I wouldn't mess with leveraged shorts unless you know what your doing and have balls of steel. If you want to learn, use the 1X short and study the action.

FreeMktFisherMN's picture

Yeah, I know it's risky business. Lots of this is new to me, but I've picked up a lot quickly. Since I opened up an account-a small one- with a brokerage, I've really looked into commentary on how vix, bears, leveraged etfs work. 


 Got a beginners question: So for after market hours, like if you're on a financial website they'll have the close price and then below it the after market price. I'm a bit confused. So if you want to buy in after hours, you basically just put a limit order in, but what exactly do you do for that?  Specifically, If the after market price has crept up .08, pretty much to get the stock/etf, do you have to put in a limit around that, or is there still a chance somebody is looking to sell the share for less, like say near where the stock closed on the regular market? I guess I'm asking if the after markets price is just a barometer, or if it really is what has to be ponied up to get the stock. And lastly, so in the pre market hours, when they open, the price will be what the after markets price ended at at 7 central? 


I want to get this down, because it sure seems like the leveraged ETFs are dictated a lot by after/pre market hour trading. 

The Monkey's picture

You can certainly get extra beta trading after hours. A bit of bearish news comes in on a bearish day and you can take risk off the table at a premium as people pile in. Same thing on the buy side, bulls slam the close and scare off shorts and you can buy at a good discount.

You should be able to see the bid, ask and sizes of shares that are on the table through your brokerage house. Set a limit order as you would with any trade.

Glad youre having some success. To be a bear in particular (trader in genral) you need to be able to deal with a lot of cognative dissonance. I learned the bear side of the trade with treasuries, which is low risk as the yield curve has been declining for years & they pay a coupon. Many of the smartest people in finance are in the US treasury market.

The Monkey's picture

I forgot to add, many of the stupidest people in finance, perhaps most, are on the equity side of the fence. A high profile equity strategist at ML named David Bernstein recomended frontier funds and emerging market bonds just as we were descending into the financial crisis. Same guy expected the 30 year treasury rate to be 6% at the end of 2011. All you had to do between 1982 and 2000 was to be a bull. 2012/13 should prove eye watering and hopefully end a few careers.

MeelionDollerBogus's picture

Use scatterplots of the data for prices for spy, fas, faz, rsw, rsu, vxx and try using spy (1x gain vs s&p500 price generally = s&p x 0.1) as the x-axis

ALL axes to log-scale.

Slope of line is 1x for 1x match, 2x for 2x gain, -3x for actual 3x inverse and so on, for each y-axis moving level of the other etf's.

For your convenience mark the real lines for these slopes and make them obviously visually different from the data you will plot for fas, faz, rsw, rsu, vxx and the picture will become CRYSTAL CLEAR.

Ljoot's picture
  • Safest would be far in the money long-term put pairs for FAS/FAZ in order to get paid for the time decay.

Agree. Theta will bite your ass.


orangegeek's picture

SP500 hourly remains bearish - USD is climbing nicely - should continue to drive markets south.



The Monkey's picture

"Safest would be far in the money long-term put pairs for FAS/FAZ in order to get paid for the time decay.  Just sit back and watch the money come in LOL."

Not a bad idea, but I haven't done options yet. I think I'll wait for this thing to fully bottom out and then attempt them on the bull side (calls).

MeelionDollerBogus's picture

I'd rather use Strangles for vxx, fas, faz depending on the price-level once things move closer to a serious dip or serious peak. My vxx call closed at 60% profit which was nice for 3 days but I didn't bother with a put. Well, that was a bit risky but it turned out OK.

Right now might still turn out OK for a short-term 30-60 day vxx strangle... just small change if you're willing to risk it, but we may very well be mid-range for the next 90 days of s&p or dow price levels.

The Monkey's picture

Wow - that's a pretty bad ass trade.  Congrats!


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