Equities Smash Back To Risk-Asset Reality

Tyler Durden's picture

After surging away from risk-assets into Friday's close (only to revert yesterday) and once again surging into yesterday's close, broad derisking among most risk-assets finally saw US equities catching-down to that reality in the short-term today - as they broke the EU-Summit/Spain-Bailout/Greek-Election shoulder and ended comfortably below the 50DMA. Short-end Treasury yields made new record lows as belly to long-end all fell notably close to those record lows (with 10Y back under 1.50% and 30Y under 2.60%). The USD rallied back from a 0.3% loss on the week to a 0.1% gain - thanks mostly to EUR's new 2Y low at 1.2235 intraday and AUD weakness (as JPY remains better on the week - more carry unwinds). Commodities plunged - far exceeding the USD-implied moves - with WTI down over 3% from yesterday's highs and Gold and Silver in sync down around 1% on the week. Staples and Utilities were the only sectors holding green today (marginally) as Industrials, Materials, and Energy (all the high beta QE-sensitive sectors) took a dive. It seems the message that no NEW QE without a market plunge is getting through and the reality of a global slowdown looms large. Credit outperformed (though was very quiet flow-wise) but HYG underperformed  - cracking into the close - as it just seems like the most yield-chasing 'technicals-driven' market there is currently. Slightly below average volume and above average trade size offers little insight here but a pop back above 19% in VIX (and a 2-month flat in term structure), a rise in implied correlation, a rise in systemic cross-asset class correlation, and the leaking negatives of broad risk assets suggest there is more to come here (especially given the BUBA's comments this morning and a lack of real progress in Europe). The ubiquitous late-day ramp saw aggressive trade size and volume (with a delta bias to selling) as it remained far below VWAP.

HYG and VXX were actually outperforming (relatively speaking) SPY (upper left) until SPY ramped a little into the close (as the VIX term structure flattened to two-month lows). VIX did push higher towards fair (lower left) but remains cheap in our view. Carrying on from yesterday, S&P 500 e-mini futures (ES) remained rich (upper right) to CONTEXT (our broad risk asset proxy) but as the day wore on and cross asset-class correlations picked up (lower right) so ES converged down to CONTEXT's reality and stalled the sell-off for now.

We will need to see USD extend gains here for some follow through...

and even though Treasury yields are at or near record lows, 2s10s30s continues to flatten and drag risk off...

and HYG snapped lower into the close today (while HY/IG remained very quiet and outperformed)...

but SPY remains rich to credit overall still by around 20 S&P equivalent points for now (given current levels)...

and while today was weak for commodities (especially WTI) and even Corn lost a little - we note WTI is still up over 8% from pre-EU-Summit (perhaps Iran embargo premium or just hope?) while Copper/Silver/Gold are up between 1 and 2%...

Charts: Bloomberg and Capital Context

Bonus Chart: CRAAPL had a high volume reversal day at the post-massive-gap-after-earnings level - allowing a few more out...


Bonus Bonus Chart: Today's move In ES (the 24-hour session version) closes perfectly at the 50% retracement of the March to June swing lower...

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Conman's picture

Oh PPT, it gives me a warm fuzzy feeling every weekday around 3:30 pm to know you are there so we can all BTFD.

Stock Tips Investment's picture

The market is showing signs of weakness and fell again today. Some important technical indicators like MACD and Stochastics are showing a decline. Most likely the market will continue falling.

A82EBA's picture

looks like GDXJ just completed head & shoulders over the last 60 days

slaughterer's picture

China cuts RRR overnight tonight.  

RobotTrader's picture

Gold Bugs Nightmare continues.


Treasuries and U.S. Dollar continue blowing out to new highs

Retail stocks and REITs relatively unfazed.

Regional banking stocks well bid.

Looks like the "Black Swan" has arrived for the "Hard Asset" fanatics and the "Stackers"

Mr Lennon Hendrix's picture

I would like to see the dollar go as high as possible.  That means I am buying as much PM as I can get for the bang of my buck.

adr's picture

When 90% of what is supposed to be replaced in August is still sitting on retail shelves, the situation isn't going to be pretty.

There aren't supposed to be swimsuits and flip flops on shelves in the middle of July. Winter coats come out in September.

But you don't focus on reality, you just regurgitate stock charts based on fantasy.

grid-b-gone's picture

Got my 30% Kohl's discount sticker and there was no shortage of carts or crowded isles. Good shopping, but treacherous investing.

kito's picture

good ole robo, always smug because he is so smart to clarify the obvious......too bad he has no real analytical skills that could provide us with the machinations the lie beyond the veneer of the market...............................

MeelionDollerBogus's picture

So long as real rates are negative gold can not lose. Gold will for sure be over 5000/oz soon and will for sure hit 10,000 / oz without any doubt. US dollars will devalue so much it will send the Dow to 20,000 at the precise same moment a hamburger costs $20 and so is a gallon of gas.

You watch this price ratio - the Dow/burger index. When 1000 burgers buys the DOW it's game fucking over.

disabledvet's picture

If these clowns on Wall Street still don't see this as a data driven market (if not an entire economy) then clearly they truly will never understand "why I'm out 10 billion on my investment in (insert stock here.)" the fact of the matter is when even gold is underperforming you really need an advisor who at least doesn't THINK the answer is "churn the shit out of that thing(and why you should too!)." (are there any left?) anywho ZH er's have kept the faith throughout and those few bulls who have been listening CORRECTLY have been richly rewarded. Banking is not a game of Cowboy's and Indians Wall Street and all you political toadies backing them! There is no money left now! Now your STATE goes bankrupt!

Mr Lennon Hendrix's picture

King dollar! 

Because fiat has so much intrinsic value!

Mugatu's picture

This market is fucked!  At this point, even the little trader peons have realized that you fade the bailouts after a few days and we return to pre-bailout prices within a week or two.  There is no way Bernanke wants to roll out another QE at this point.  The day Bernanke rolls out a big QE with no pop is the day everyone realizes that the Fed has no control anymore.  Ben must wait for when the voices screaming for QE have given up hope and no one is expecting QE.  

RobotTrader's picture

New highs for Target today.


Retail shoppers could care less about currencies, metals, Europe turmoil, Asian trouble, etc.

whstlblwr's picture

New highs? How's that. Target high was in $70's You're an idiot, parrot.

RobotTrader's picture

I meant new 52-week highs for TGT.


XRT only $3 away from lifetime record highs, thanks to names like HD and WMT.

whstlblwr's picture

You think people are shopping at Target and that's why stock price is up, you really are an idiot.

Vincent Vega's picture

And let's see what closed down today: GE, BAC, AA, HELE, PFE, etc, etc, etc..... your posts are useless.

adr's picture

Funny, retail buyers aren't so optimistic. Traders always trade on irrational exuberance. That would be the expectation of a situation that never actually happens.

Target hasn't restocked half their stores with new fall inventory yet. Summer is stagnating on the shelves, college product is non existent. 70% off sales in the toy and sporting goods sections aren't even making a dent in product.


The problem with Wall Street traders is than 99.9% of them have no knowledge of the actual business of the corporations they invest in. Does anybody from Goldman Sachs or JP Morgan actually shop at Target? Basing your investment decisions on the words of corporate accountants is like reading Snow White and believing your godmother will turn into a dragon.


I on the other hand actually talk to buyers at Target every week. But why listen to someone who actually has real front line knowledge of the situation, when you can listen to Cramer. Wall Street is the Johnson administration during the Vietnam war.

Soldier to command, "I see three Vietcong columns coming at our base, should I attack?" "Negative our field reports received in Washington say that all the enemy is dead, enemy soldiers can't exist, attack not authorized."

Conman's picture

I love your comments. Your posts always state the obvious. It is like saying the sun is always shining, except at night. Just flapping the gums sort to speak, no substance. I think you are trying to imply that retail stocks are doing great. But wait hows JCP  and BBY doing? Is that not retail? Roboturd, once you realize that being an internet troll is a fairly sad and unfulfilling existence, you can change and maybe people will like you in real life.

DoChenRollingBearing's picture

O/T, but for anyone interested in bearings in Peru, check out what happened last week with our import company there...  We had our BIGGEST WEEK ever (sales).  Read all about it:


RobotTrader's picture

AAA ratings by Fitch re-affirmed for the mighty U.S. Treasury bond.


No wonder 35 years worth of longs are still in a winning position.  Highest quality investment on the planet.

slaughterer's picture

What do retail stock bulls think of JCP and HGG today?

RobotTrader's picture

How about your gold stocks, slaughterer?


Metals and mining is currently in a depression.  Retail spending is in boom mode.

Just compare XAU with XRT, that says it all.

MeelionDollerBogus's picture

Gold stocks? Why bother? Just hold gold and silver bullion and short-term trade GLD options from peaks and dips.

Mark123's picture

Interesting to look at the gold price chart going back 10 years....the last big hit to gold price was in spring 2008 into the end of theat same year, and is very similar to the last year's price action.  I have no explanation other than there is a lot of stress in the financial system.  If the big players were all convinced there would be endless money creation, then gold should be continuing to go up.

GernB's picture

Gold is difficult to figure out. There's clearly an important level near 1525-1530. Every time it gets near it gold shoots back up, sometimes very violently. On the other hand you can draw a downward slopping line across the highs back to the high in august of 2011. It's like there are two opposing forces (inflation and deflation?) that will converge sometime in the next 2-3 months. Whatever happens I bet it will happen very fast.

MeelionDollerBogus's picture

There's repeated cyclic behaviour. The big players have 2 to 4 modes of activity each lasting months with a longer multi-year cycle. Spot the cycle, spot the price action prediction ability: 2012 apr 17 gold ROC trends | 52week ROC gold to 2400/oz

This is what I do. 2012 06 18 277week roc 02 goldpricemodel 2011 Jan to 2012 Dec 28

permafrost's picture

They may be too busy hiding as Geithner and Bernanke are expected to testify before Senate on LIBOR:


IMA5U's picture

doom and gloom


sell everything