Equities In World Of Their Own Again

Tyler Durden's picture

While volumes have been very low the last couple of days, as one would expect given the seasonals, market schizophrenia has been very surprising. Financials went from worst to first and managed to pull out a rather edifying 1.2% rally in the last 20 minutes of today - now up almost 3% since Friday's close.

Meanwhile, over in credit-land, financial spreads have barely compressed in 5Y and even less so in 3Y and today saw a dramatic shift in sentiment towards investment grade credit as it was dramatically net sold (notable even with some high quality issuance offering modest concessions and therefore driving switches). In the chart the Net column is net selling from the buy-side to the sell-side with green indicating more net-selling.

Drilling down into this, we see highest volumes and largest net-selling from the buy-side in JPM, GE, GS, BNP (with BAC and WFC also net sold on high volumes). Looking across maturities, buy-side managers were shortening duration - net-selling longer-dated corporates (7-12Y, 3-7Y, and >12Y in order) while 1-3Y saw net buying.

At the broad index-level, credit markets are looking very different from the euphoria of the stock market with only 5Y HY spreads tighter since Friday's close - but this seems more driven by curve flatteners and index arbitrage. IG credit is wider, 3Y HY is wider, Europe is wider everywhere, and single-names are underperforming the indices suggesting professional investors are using the strength in risk assets to rotate from their macro overlays into name-specific hedges as the market offers them some room.

HY cash volumes were relatively low but it seems investors were using HYG (and JNK) to hedge late in the day as the typically highly SPY-correlated high-yield ETFs disconnected notably:

As we have often heard said, credit anticipates and equity confirms - but unicorn tears and phoenix farts may yet prove credit wrong as ES closed within a tick of the magical 1200 level.

Charts: Bloomberg

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oogs66's picture

hopium ruled supreme today

Racer's picture

Ah yes, it is all the Hopium Fixing Trader'S driving it high...er

redpill's picture

I wonder if it will crash as swiftly as it did after the little bender they had in late August.

Id fight Gandhi's picture

Greek bonds are where da yield is at man! I'm sure they'll ok with Germany being their sugar daddy. Game some 97% yield oh ya...

sun tzu's picture

ECB will print and buy the toxic debt to save the banks. They are different from the Fed. Monetize away, baby. That is the reason behind the attack on gold. There will be no crash, just monetary debasement. Some of the PIIGS will likely be expelled from the EU, most likely Greece and Italy

TwelfthVulture's picture

Welcome to the United States of Germany.

virgilcaine's picture

So much for my call on a selloff and why I stay with the LT trading and trends..the Bots will chew you up short term but not LT.


Something must be coming for the ws gang to paint a rally like today. The Macro and credit markets say something Big is on the way.. think Leh x 

JW n FL's picture




“We can’t have a bottom until Europe gets worked out.”

how much over time will the algo's have to put in to keep the market from dropping to 6,000 now that the smart money is parked along with all the other non-compliant types?

on too more upbeat news!

A former vice president for Citigroup pleaded guilty Tuesday to embezzling more than $22 million from the company and funneling the money to his personal bank account.



Racer's picture

"unicorn tears and phoenix farts may yet prove credit wrong"

a classic ZH term to describe the 'market'

razorthin's picture

50% of individual stocks, as well as indices, that I have been scanning are showing clear inverse head and shoulders.  Expect those to play out for a 12-18% market runup.  For what fundamental reason beside hopium? None.

YesWeKahn's picture

inverse HS? I only see a large stair.

razorthin's picture

Yes, actually most of the indices are stairs patterns.  But take a look at XLF, XLK, PHM, CAT, X, BAC, IBM to name a few.

YesWeKahn's picture

Need some confirmation on XLF. it could very well be a regular HS. It will depends on what  Obama would say tomorrow, lol.

Cursive's picture


HS and IHS are two of the most inaccurately recognized patterns and, thus, very unreliable.  If I had a $100 for every RS that didn't happen, I'd be rich.

sun tzu's picture

I agree. I was short SPY and got out with a small loss today. Evertything is showing a bottom and uptrend. Either go long or stay out of the casino. Find some strong non-financials with little to no debt and plenty of cash. Make sure they aren't in an industry that will suffer too much from high oil prices and tighter consumer credit. 

There's still a chance of a catastrophe, but very slight. The Germans will be forced to bear the burden for the EU. Both the German left and right are on board. Merkel is for the bailout and Gerhard Schroeder was on Bloomberg the other day and basically said the same thing as Merkel. The German people must sacrifice to save the banks. It's for their own good. They will be dragged kicking and screaming

Qa's picture

Looking at a flag formation in SPX, INDU, COMPX. P&F chart gave a 1100 horizontal downside target which is considered reached. High pole count gives next downside target at 830. Really looking for 880. If final move to the 1250-1260 range is on low volume & breadth and sentiment returns to bullish levels... look out below!

AbandonShip's picture

Hmmm....Low volume melt-up?   Nothing to see here.

virgilcaine's picture

Whenever the Chairmans speech is Thur or Fri?  You can probably find a nice sell opportunity then, the mkt usually falls when he gives a long winded speech. 

bob_dabolina's picture

This is a positive sign as credit follows equities....always /sarc 

"HY cash volumes were relatively low but it seems investors were using HYG (and JNK) to hedge late in the day as the typically highly SPY-correlated high-yield ETFs disconnected notably:"

Oh yes, they were....HYG and JNK in specificity, highlighted somewhere in:


GenX Investor's picture

For sheeple to come in they need to think the bottom has been made.  You must bid it up to sell it down.

TwelfthVulture's picture

Except that by and large, the sheeple left the market in 2009.  This is like 5 whales sitting down to play high stakes poker every day but they've agreed that at the end of the day they all take their chips back and go home.  They keep waiting for the sucker to come and join the game but he never shows.  None of the five wish to be the ultimate bag holder.  This also explains why they suffer the HFT's to nibble around the edges and steal a couple pennies here and couple there.  It gives the illusion that there is some kind of action in the pits.  I think this will end badly but I believe it will end when one of the big boys finally decides to negate the "agreement" and cashes out all his chips at the end of the day before he goes home.  It's like Greece and the Eurozone.  You want to be the first one to ask for a bailout, not the last.  In this game of government manipulated markets, you want to be the first one to exit the game, not the last.

CvlDobd's picture

The part about proving credit wrong. Are you suggesting that the market could rally higher, the credit people throw in the towel, CDS rates drop, and the world is problemless?

These posts on various markets confirming or conflicting what we see in domestic equities are great. Keep them coming.

HyperLazy's picture

I honestly thought tuesday opening would be a 1% rise, something to trip the bear stops and then resume falling. Instead it was a 1% drop, a bull trap and then it rose - I unloaded my TZA on the drop and jumped into TNA. At todays close I unloaded my TNA and added to my continuing FAZ position. I have had some really good luck this past month by pretending I am a corrupt banker. Suddenly this afternoon however, I am very unsure if I have made another step up to fiat Shangri-La or if I am about to fall into a punji pit...

I really get the sense that the Market Masters are waiting for some excuse to tank the markets, but so many negatives have been unleashed lately and nothing has left a lasting indentation. Perplexing...

jm's picture

Greece's CDS implied default probability 5Y is now 90%.

The unicorns will soon be dead.

ZeroPower's picture

ISDA ready for the credit event. Or maybe someone will force their hand into saying it will NOT count as such. You know, providing some relief to the back office workload.

jm's picture

Lagarde was really saying that the banks have to be backstopped because this charade is coming to an end.


John Law Lives's picture

The DJIA is up almost 500 points from its intraday low on Tuesday. What an efficient market...

100% FUBAR.

Everybodys All American's picture

Everyone is anticipating the Bernanke to throw money to all tomorrow and the next day and the next day.

slewie the pi-rat's picture

in chris mullen's daily "closing report" [Gold Seeker Closing Report: Gold Falls Nearly 3% While Stocks Gain Over 2%], trader dan provides a nice freaking rant abt the most recent gold "take-down" and the banksters' chart-painting to try to "establish" a double top (Paste):

The attack on Gold is therefore an effort by these modern day alchemists who are attempting to achieve prosperity by magically altering slips of paper into something that might constitute value in the eyes of the beholder to discredit the yellow metal and send it careening lower.
China must be watching this with both disgust and delight. Disgust in seeing the depths of corruption that ails the Western monetary system and delight in the fact that the machinations of these conjurers is providing a discount in the price of the metal which they will be more than pleased to accept.

Take a look at the following chart    snapshot-880.png (PNG Image, 883x574 pixels)    and tell me with a straight face that this is NORMAL trading action. Any trader worth his salt knows this chart looks amazingly like a chart of a currency facing INTERVENTION PRESSURE from a Central Bank.- Dan Norcini

takedown, BiCheZ! 

hey! any romanian readers might already know this: Romania wants to double gold reserves, maybe by buying domestic production

who knowZ?

MGHJFHD's picture

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marat.spartacus's picture

can I just ask what software or website do they normally use in theirs graphs like these ones?