Fed Doves Send Risk Soaring, Apples Dropping

Tyler Durden's picture


More jaw-boning helped squeeze shorts as equity indices, credit, and precious metals all closed their highest since the NFP dive as QE3 hope is back on the table. The best day in four months for Materials (now the only sector green from before the NFP print) and Industrials, and the best two-day gain in financials and energy in four months but the S&P 500 remains around 1% off pre-NFP levels (but managed to fill the gap to the lows of last Thursday in S&P futures). Credit (both investment grade and high-yield spreads) managed - just as in Europe - to rip up to pre-NFP levels also (outperforming stocks). Notable divergence between AAPL and SPY started at 1045ET today - as GOOG volume picked up and accelerated which was also when ES (S&P e-mini futures) broke Tuesday's opening level and ran stops. Volume was average with higher average trade size coming in as we reached post-NFP highs (suggesting again professionals selling into strength as weak shorts are squeezed out in a hurry). The dovish comments sent Gold and Silver surging (and China rumors pushed Copper up - and WTI to around $104). VIX crumbled into the close - with its largest drop in over 5 months in percentage terms - though still higher than last Thursday's close. FX markets were noisy once again through Europe but USD ebbed higher in the afternoon - still very modestly lower on the week and day (with JPY leaking weaker today helping carry support risk a little). Treasuries also leaked higher in yield but remain at the immediate spike low yields post-NFP (pretty much in line with stocks generally) but between FX and TSYs, broad risk assets were not as excited as credit and equity markets specifically as we suspect this was weak recent shorts being shaken out suddenly.


Broad risk assets (black line) did not (in general) follow through in the last few hours of today as ES (orange line) ran stops above the week's highs...

As VIX dropped its most since October, back under its 50DMA (as ES crossed back above its 50DMA) but note that the last time we saw such intraday swings and close to close swings positive and negative was early August last year (and to a lesser extent October as Europe flip-flopped)!

But credit (even more than stocks) has surged up from its wides (lows) on Tuesday - handily outperforming the S&P 500 (though on a longer-term basis this is creduit playing catch up to equity strength and we saw notes from a few dealers noting the Buy HY, Short Stocks compression arb trade which may have helped technicals a little). Note that today's absolute compression in IG and HY spreads were the largest in 4 months!

AAPL diverged from the S&P 500 and GOOG benefitted in the rotation...

But the standard high-beta QE sectors were the big performers with Materials (QE-on and China-on?) are now positive from the close last Thursday - the only sector up from pre-NFP...

But it was commodities that surged on the printfest hopes and while Silver outperformed on the day, Gold remains the best performer from pre-NFP. Once again Oil prices reflect their QE-sensitivity and surge to near $104 and copper managed decent gains on the day though remains underwater on the week...

and while TSYs leaked off today, it looks like stocks have got a little ahead of themselves again...

especially relative to TSY (2s10s30s) curve carry...

and finally for some perspective, While the S&P futures remain 0.36% from pre-NFP close, adjusted for the nominal shift in gold, the S&P in gold is down over 3% from April 5th's close...

Charts: Bloomberg

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Thu, 04/12/2012 - 16:48 | 2339348 Hansel
Hansel's picture

Step 1.  Slam stock market

Step 2.  Issue Treasuries

Step 3.  Pump stock market

Thu, 04/12/2012 - 16:52 | 2339365 GeezerGeek
GeezerGeek's picture

What happened to "Rinse. Repeat."?

Thu, 04/12/2012 - 18:16 | 2339651 johnu1978
johnu1978's picture

I'd like to see Apple's stock drop down to $5.00. That would be awesome!!!


Edible Plant Tours

Thu, 04/12/2012 - 18:25 | 2339677 I think I need ...
I think I need to buy a gun's picture

imagine being this powerful everyday, every market hangs on your every word now for years. We are already owned, how does one become a fed head? Is it a club?

Thu, 04/12/2012 - 18:51 | 2339751 AldousHuxley
AldousHuxley's picture
  1. Work as waiter at TexMex in North Carolina
  2. Become high school valedictorian and get 1590 out of 1600 on your SAT
  3. Attend Harvard
  4. Receive PhD from MIT
  5. Meet your wife on a blind date
  6. Teach at Stanford
  7. Become tenured at Princeton
  8. Become member of board of Fed Governors
  9. give a speech titled "Deflation: Making Sure It Doesn't Happen Here"


Thu, 04/12/2012 - 16:59 | 2339390 ArkansasAngie
ArkansasAngie's picture

I'm starting to take this personally.  Sooner than later I'm going to be down right pissed.

Enough of this crap.  It's redistribution of wealth time.  From the criminals on Wall Street and in Washington to thier victims -- aka the rest of us.

Neither a Republican nor Democrat be.

Thu, 04/12/2012 - 18:25 | 2339673 Spaceman Spiff
Spaceman Spiff's picture

I'd just settle for a free (of the fed/federal government manipulation) market.

Thu, 04/12/2012 - 21:05 | 2340088 T-Bond
T-Bond's picture

The ripple effect is spreading into all of the markets now. Nobody knows where to price anything at the moment which leaves traders vulnerable to having their face ripped off at any moment for absolutely no reason. The Fed is destroying the free market system and right now it is getting to a dangerous level. Excellent veteran traders are packing it in.

What is amazing is Bernanke never saw the crisis coming and when it arrived, he was in complete denial. When it about ran him over, he said it was contained and now, since he studied the depression, he is 100% certian he is the man for the job. Nice job Ben......anything but the free market. END THE FED!!!

Thu, 04/12/2012 - 20:23 | 2340025 stocktivity
stocktivity's picture

It's all Bullshit!

Thu, 04/12/2012 - 16:53 | 2339358 SheepDog-One
SheepDog-One's picture

So confirmation that the economy is definitely getting worse is now worth 2 down days at most, -3% or so, before more 'Hopium' is smoked faster and everything is OK again.

Yea, this is real great....like playing chess with fucking lunatics.

Thu, 04/12/2012 - 17:32 | 2339510 Caviar Emptor
Caviar Emptor's picture

Yup! We dun need no steenkin' Konomeee! 


Remember: In the game known as crony capitalism, you keep playing until one person has a quintillion dollars and everyone else has no dollars. That's a win! 

Thu, 04/12/2012 - 17:43 | 2339551 Arnold Ziffel
Arnold Ziffel's picture

Fear is a precious commodity in and of itself.

Thu, 04/12/2012 - 17:43 | 2339552 flacon
flacon's picture

Take a look at this animated image, depicting exactly what you are saying:


http://oi39.tinypic.com/ nmzugx.jpg


Thu, 04/12/2012 - 18:10 | 2339622 Caviar Emptor
Caviar Emptor's picture

True. Once capital reaches critical mass, the strategy changes to anti-competitive.

The idea is to starve anyone else out and start acting like my buddy, Big Al Cpaone, and charge protection and extortion from every business within your sphere. Until they die. Then you can truly control all the wealth

Thu, 04/12/2012 - 18:26 | 2339679 flacon
flacon's picture

The big question is this: Can the parasite live long enough to kill the host and continue sucking the blood after death, OR can the parasite kill the host and the parasite dies, and the host comes back to life without the parasite?



Thu, 04/12/2012 - 18:42 | 2339710 Caviar Emptor
Caviar Emptor's picture

The cynic inside says "live and let die" is the way of the ever changing world in which we live in. 

But a new day may dawn, for those who stand long, and the forests might echo with laughter. 

Thu, 04/12/2012 - 16:54 | 2339370 czarangelus
czarangelus's picture

What does that mean?

Thu, 04/12/2012 - 16:57 | 2339382 SheepDog-One
SheepDog-One's picture

Nothing. Tomorrow is a different trading day, and therefore an entirely different reality.

Thu, 04/12/2012 - 18:49 | 2339743 HD
HD's picture

 That was a great line mate.

Thu, 04/12/2012 - 16:59 | 2339389 Kurpak
Kurpak's picture

shut the fuck up doves

Thu, 04/12/2012 - 17:43 | 2339541 DormRoom
DormRoom's picture

Fed doves speaks about QE.  Net effect on the stock market is as though QE has occured.  Doves get wealth effect without printing.


Fisher is right.  Investors who concentrate on fundamental analysis will be fine. Traders flipping in this market will get crushed, once the economic reality sinks in.  2013 is still a fiscal cliff. Government cuts will be a huge drag on the economy.  But everyone forgets this point.


It's uplifting to know retail isn't getting suckered in.  And it's institutional sharks that will be mawled in 2013.  If the market is a 6 month discount mechanism.  The mawling should occur around July.  But god knows what news is going to come out @ Jackson Hole.

Thu, 04/12/2012 - 18:11 | 2339638 HelluvaEngineer
HelluvaEngineer's picture

Yeah.  2013, 2014, 2024...sometime the shit is really gonna hit the fan.  Maybe.

Thu, 04/12/2012 - 20:29 | 2340044 SmoothCoolSmoke
SmoothCoolSmoke's picture

No offense, but I've read your post before.  Only differnce was 2013 was 2012, or was it 2011,,,or 2010...or....

Thu, 04/12/2012 - 17:08 | 2339422 l1b3rty
l1b3rty's picture

oh man thank god for those greenshoots! Or at least just marijuana

Silver Vigilante

Thu, 04/12/2012 - 17:18 | 2339450 Mugatu
Mugatu's picture

They are running out of rumors now!  We are down to Chinese GDP rumors?  That's pretty lame.  Everytime the Bulls run out some wild ass rumor, it tends to come right before a shitstorm.

Bat down the hatches bitches - trouble is coming!


BTW - how did that Hansel get top billing again?  He's hot right now. 

Thu, 04/12/2012 - 17:23 | 2339477 css1971
css1971's picture

No, they can just use the same rumour again next week. Algos and day traders have no memories.

Thu, 04/12/2012 - 18:20 | 2339662 NotApplicable
NotApplicable's picture

F5 F5 F5 F5 F5 F5 F5 F5

Thu, 04/12/2012 - 17:43 | 2339534 Caviar Emptor
Caviar Emptor's picture

Yup. Why does the market run on "bad is good"?

Simple. Stocks now are purely a stimulus barometer. And nothing to do with supply/demand or real growth.

Even the word "real" is beginning to sound sleezy these days. We dont want real anymore. We need to support the phony success story behind bailed out corpses. 

That's what happens in a totally zombified economy that can only open the doors in the morning if the Fed dispenses more Methadone. 


Thu, 04/12/2012 - 17:50 | 2339576 disabledvet
disabledvet's picture

"The Chairsatan's minions strike again!"

Thu, 04/12/2012 - 17:51 | 2339579 penexpers
penexpers's picture

Yo, dawgz, it be The Bernank... ya'll need liqui-tee? Aw, hell yea, I got that dawgz!

Thu, 04/12/2012 - 18:16 | 2339652 chump666
chump666's picture

fruitless.  Greece elections, France doomed and Nth Korea fires a missle straight into Bernanke's a-hole.  that and oil is bid Obama's nightmare

Thu, 04/12/2012 - 18:22 | 2339664 slewie the pi-rat
slewie the pi-rat's picture

more jaw-boning is the operative phrase:  three-wordDurden is back in town!

lotta FED in the news;  a bullish counter-attack, especially in dollar terms; but perhaps more importantly, a boost for the EUR

TPTB will want this EUR strength into the week-end, imo;  the banks caught on fire, just a tiny bit,  and the fireHosers are on the scene; taDa!

jaw-boning is very effective when the audience is as highly conditioned as we're seeing here? well! we can all sleep more soundly tonight

Thu, 04/12/2012 - 18:42 | 2339726 Boilermaker
Boilermaker's picture

They'll do it again tomorrow.  I was flying home from Beijing and watching the futures in the wee hours (afternoon China time) and you can just see the real-time intervention and shove-ups.  It's just not going to fucking stop.  As soon as I landed in Newark, I knew they had shoved the fucker up about 200 points. 

This so fucking scripted that it's just a ridiculous fucking joke now.  But, it's so corrupt that there's no stopping it now.

They're in the futures again, right now, treading water until sleepy time.  Then, they'll strap a Saturn V rocket to it so you'll wake up, take a dump, and see a glorious green number while sipping your sanka.

How they get away with it...for this fucking long and to this magnitude, is beyond me.  But, when someone is the sherrif and the judge as is the Bernak, who the fuck is going to stop him?


Thu, 04/12/2012 - 18:50 | 2339749 Caviar Emptor
Caviar Emptor's picture

All that extra "liquidity" which the Fed and stimulus "produced" has been funneled into the paper economy. Nothing real is working in an economy slowly circling the drain. What else is working? Real estate? Are banks gonna gamble billions on a factory in Oswego? 

They got their marching orders: buy Treasuries and stocks, with a smattering of junk bonds on the side. Suits them fine, because their buddies at the bank down the street are profiting from pushing the paper, and they return the favor so everybody gets a bonus. And a job. 

Thu, 04/12/2012 - 18:53 | 2339761 Boilermaker
Boilermaker's picture

Well, I'm been saying for awhile that this is just a way to recapitalize the banks without having to get congressional approval.  The question is how does it end?

Clearly, this is so fucking bogus it shoots beer through my nose from laughter.  But, they can and will fucking do it.  I'm quite sure the masses are sacrificial in the scheme.

Thu, 04/12/2012 - 18:49 | 2339744 luna_man
luna_man's picture



Eyeballing, some terrific, "shorts"...The higher they go...The more excited, I get...Send those suckas, to the moon!...I'll be patiently, waiting!...Don't cost nothing to watch and wait.


Ya hear me, Ben?

Thu, 04/12/2012 - 18:56 | 2339768 davhay
davhay's picture

Ain't nuttin but a maa fucker. an shit!!!!!!!!!!!

Thu, 04/12/2012 - 19:24 | 2339871 q99x2
q99x2's picture

They launched the robots today. You can always tell by the smoothness in the graphs of the markets. CONTROLLED TRADING PATTERNS

Thu, 04/12/2012 - 19:44 | 2339930 pleseus
pleseus's picture

Tomorrow the Hawks come out. No QE. Slam gold and silver. Rinse, repeat till we get QE.

Thu, 04/12/2012 - 21:15 | 2340149 chump666
chump666's picture

The crazy Chinese are about to release a lower fix on the CNY.  What does that mean?  Trying to stop mass USD buying out of Asia/China.  Why?  Inflation baby, inflation

Fri, 04/13/2012 - 01:56 | 2340807 cnhedge
cnhedge's picture

there won't be a qe this april, so this is a false rally.


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