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Gold/FX/TSYs Signal QE-Off, Equities Still Believe

Tyler Durden's picture





 

The inevitable headline-driven algo-kneejerk reaction to retail sales and inflation coming hotter than expected was a 4-5pts pop in S&P 500 futures (testing the magical 1410 line). But almost immediately, gold, silver, FX, and TSYs all reacted in a decidedly QE-off manner and are extending QE-unwind-type moves. For now, S&P 500 futures still believe in miracles...

 

 

EURUSD cracked 30 pips lower to unchanged on the day and Treasuries jumped up 4bps or so in yield.

Chart: Bloomberg

 


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Tue, 08/14/2012 - 09:00 | Link to Comment aleph0
aleph0's picture

 

 

i.e. Any excuse !

 

Tue, 08/14/2012 - 09:52 | Link to Comment spastic_colon
spastic_colon's picture

yawn.....europe is up today....no US selloff

Tue, 08/14/2012 - 09:01 | Link to Comment Colombian Gringo
Colombian Gringo's picture

I believe in the great god Bernank, giving us all money without work, income without pain. All hail the great Bernank!!

Tue, 08/14/2012 - 10:05 | Link to Comment Vince Clortho
Vince Clortho's picture

"Us"?

Meaning the financial/corporate elite.

for everyone else, its just a black hole of debt.

Tue, 08/14/2012 - 09:03 | Link to Comment DavidC
DavidC's picture

Everyone knows that stocks never go down now...

Until they do.
DavidC

Tue, 08/14/2012 - 09:05 | Link to Comment Crimedog
Crimedog's picture

Everyone doesn't know DavidC is a douchenozzle...Until they do

Tue, 08/14/2012 - 09:02 | Link to Comment hugovanderbubble
hugovanderbubble's picture

There wont be QE3 with DOW at these levels...Period

Tue, 08/14/2012 - 09:50 | Link to Comment PeeramidIdeologies
PeeramidIdeologies's picture

Your going to miss the bus

Tue, 08/14/2012 - 10:07 | Link to Comment TWSceptic
TWSceptic's picture

Or avoid the cliff ...

Tue, 08/14/2012 - 09:02 | Link to Comment fonzannoon
fonzannoon's picture

4bps!!! 4bps!!! Inflation!!! Look out!!!

Tue, 08/14/2012 - 09:02 | Link to Comment tocointhephrase
tocointhephrase's picture

Qe or no Qe I HAVE LOST FAITH IN PAPER CURRENCY PERIOD! FUCK YOU BEN! FUCK YOU MARIO! AND FUCK YOU MERVIN!

 

Tue, 08/14/2012 - 09:03 | Link to Comment BeetleBailey
BeetleBailey's picture

USD/JPY breaching 79......USD stronger.....in other words...goofy

Tue, 08/14/2012 - 09:22 | Link to Comment Orly
Orly's picture

Yeah.  Still scratching my head over that ginormous move.  Either they still believe that we believe or this was the greatest stop-hunt ever known to man.

I tend to believe it was a vicious stop-hunt with major positions being taken on the other side by some heavy players.

If I had a bell, I'd ring it when that happened!

Best of luck trading!  See y'all on the other side of this fandango...

:D

 

Tue, 08/14/2012 - 09:50 | Link to Comment pazmaker
pazmaker's picture

Could this have anything to do with  the usd/jpy move?

Economic growth in Japan slowed to an annualized pace of 1.4% in the second quarter, well below expectations for 2.7% growth and down from a revised 5.5% pace in the first quarter.

A lack of supportive policy changes in China also put a damper on sentiment. Weak Chinese trade data last week had raised expectations that the People's Bank of China might act to stimulate growth, but as of Monday, those actions had failed to materialize.

The Asian index fell 0.7% to 120.12 as energy stocks ended broadly weaker. PetroChina Co. (PTR, K3OD.SG, 0857.HK, 601857.SH) fell 1.6% to $125.58 while Sinopec Shanghai Petrochemical Co. (SHI, K3DD.SG, 600688.SH, 0338.HK) slumped 2.1% to $27.27.

Tue, 08/14/2012 - 21:16 | Link to Comment Orly
Orly's picture

"Could this have anything to do with  the usd/jpy move?"

In short, I don't think so.  The news out of the East has been really, really bad already and is only getting worse.  The Chinese have released grain stores to feed her people in the face of rapidly rising food prices, where food prices really mean something to your monthly budget.  Coal consumption for power plants, concrete, steel... all the things needed to drive an economy going forward... are way off of record highs, indicating that the Chinese economy has hit stall speed and may soon fall into a pattern that would not produce the number of jobs necessary to keep the central government in power very long if it were allowed to continue.  The people need jobs and there ain't none coming any time soon.

What happened last night was the culmination of greed-think by traders that really took advantage of the mistaken belief that some sort of quantitative easing is coming soon.  It's not.  When the numbers from Europe came in real, real bad (albeit despite the fact that they were "better than expected..."), the 4X boyz took the greedsters to the woodshed by forcing a long move in the USDJPY, which directly affected all yen crosses.  There is no doubt in my mind that they took up shorts on the other side of that line and are, in fact, quietly building shorts in the yen pairs even as we speak.

The most unnatural movement can be found in the yen crosses lately, indicating that there is a conceived plan at work and that there are some people with deep, deep pockets involved.  Three-hundred pip moves just don't fall off the turnip truck but there have been many of them lately and it makes sense that these are co-ordinated moves that hunt short-stops and allow a set-up for a position moving the other way. 

The British are notorious for this manoeuvre, as can be witnessed at 0545 London time on every "normal" 4X trading day.  The boyz come in stop-hunting and run the opposite pair (usually the USD...) in the opposite direction of expectations so that they can take advantage of more movement, while ripping the home-gamers a new one every morning before they're even out of bed.  The British certainly have the deepest pockets in the world, though I cannot recall contrary movements so large, precise and co-ordinated as these.

Or, as has become a fascinating phenomenon for me, every day at 0000 GMT (prolly about seven p.m. your time...), our friends ramp the yen crosses into the sky and let it rain all night.  In the end, the pair has essentially gone nowhere by the overnight.  Their luck will only last so long.

As an aside, I watched the GDP reports live and in real time.  There was about a seven minute delay between what was essentially yawn-inducing data out of Europe into a massive "better-than-expected" meme that, frankly, just floored me when it crossed the wires.  Ramp...engage.

_____________________

That having been said, it is curious as to what they are trying to protect or defend.  As it turns out, the ramifications here are enormous:

First, there can be no doubt that this "someone" has help from the BoJ.  Anything the Japanese can do to get the yen out of the stratosphere suits them just fine, though there is no way they could affect these movements by themselves.  This idea probably accounts for the- shall I say- professionalism of these moves; quick, decisive and precise.

Second, the movement in the yen crosses, particularly the USDJPY (with all others being a reflection of the King pair...) are directly tied and connected with the movements in the yield of the US 10-year note.  The yield lately has spiked to 1.7- not at all high by a long-shot, but one the bond traders know is unsustainable over the medium term because of the erosion of the global economic climate.  Really, France?  Zero-point-zero q/q GDP growth is "better than expected"?  The yield in the US 10-year goes down (as would be expected here...) and the yields in the bonds of other sovereigns go up.  Not a good thing for them.

Third, the movement in the 10-year Treasury is inversely related to stock prices.  Bond prices up (yields down...), stock prices down.  Again, not a good thing.

So what we have run into is the global economy sitting on the razor's edge, as illustrated by a simple graph of the USDJPY pair.  There are many reasons that "someone" is terrified of the USDJPY falling precipitously.  Unfortunately for them, there is very little they can do about it but ramp and pray.

And pray ain't gonna work.

:D

Tue, 08/14/2012 - 09:50 | Link to Comment Howdan
Howdan's picture

Great point Orly - I was wondering what the bleep just happened to my Long US 10yr position?!

It was up yesterday (modestly) and I just checked it an hour ago and I was deep in the red and have now closed out my position at a loss.

Sickening but what can you do?

I know the retail sales & inflation came in better than expected (surprisingly) but for Treasuries to plunge like that was somewhat shocking.

Tue, 08/14/2012 - 09:05 | Link to Comment fuu
fuu's picture

SALE!

Tue, 08/14/2012 - 09:06 | Link to Comment Quinvarius
Quinvarius's picture

Gold signals someone wants you to ignore the inflation in the latest report. 

Tue, 08/14/2012 - 09:06 | Link to Comment Meesohaawnee
Meesohaawnee's picture

i have lost faith in anything "market" david c you said it last night. this is beyond broke. Peoples Republic of Amerika.

Tue, 08/14/2012 - 09:08 | Link to Comment GERxit
GERxit's picture

If you got bloomberg, check comex gold with QR around the selloff! again another HFT-attack...

buy gold as long as they keep the price cheap for us :-)

Tue, 08/14/2012 - 12:06 | Link to Comment Paul Atreides
Paul Atreides's picture

Buy physical only, stay away from crimex or any paper holdings.

P.S. Your avatar is a dead giveaway, you should stick to your zionist trolling over at the National Post, this is fight club bitch.

Tue, 08/14/2012 - 09:08 | Link to Comment timbo_em
timbo_em's picture

OT: In Spain mark to mystery or mark to long-term market value as officials call it is now officially done under the supervision of the central planners in Brussels and Washnington. Simply hilarious!

http://en.elconfidencial.com/economy-business/2012/08/14/overprice-on-toxic-assets-part-of-rescue-252/

Tue, 08/14/2012 - 09:08 | Link to Comment Bastiat009
Bastiat009's picture

Two days ago, we were all doomed and gold was going to explode in August.

Today, things are not that bad and gold is actually exploding.

Who to believe? :-)

Tue, 08/14/2012 - 09:16 | Link to Comment fuu
fuu's picture

Did you mean imploding?

Tue, 08/14/2012 - 09:09 | Link to Comment Lost Wages
Lost Wages's picture

I forgot. What do we invest in when there is NO QE?

Tue, 08/14/2012 - 09:10 | Link to Comment buzzsaw99
buzzsaw99's picture

Purple Haze was in my brain,
lately things don't seem the same,
actin' funny but I don't know why
'scuse me while I kiss the sky.

[/Hendrix]

Tue, 08/14/2012 - 09:12 | Link to Comment GERxit
GERxit's picture

It's definitely better to listen to Jimi than watching the screens :-)

Tue, 08/14/2012 - 09:19 | Link to Comment nathan1234
nathan1234's picture

To those who prefer the printed paper called currency please keep it, worship it and say your prayers each day. For these are IOU's issued by your Government. You have seen how they have performed. It's your decision.

To those who keep precious metals like gold and silver, never fear as history has always protected them. They are no one's liability and is a genuine asset with backing of 5000 years.

To those who believe in equity is these terrible times, at least please put your shares in the DRS system.

To those who still trade with brokers in NYSE etc and the CME , goodluck with your money as you may as well kiss it goobye.

 

 

 

Tue, 08/14/2012 - 09:20 | Link to Comment Croatian Patriot
Croatian Patriot's picture

Why platinum and paladium are 1% up and gold is 1% down?

Tue, 08/14/2012 - 11:34 | Link to Comment Ratscam
Ratscam's picture

because it still trades at a USD 200 discount to gold and 70% is produced in South Africa, talking about country risk for this metall. in addition many producers closed mines due to production costs and decreasing mining grades.
If you,re loaded up on gold already but want to buy more, consider platinum and silver. great discounts compared to gold

Tue, 08/14/2012 - 09:22 | Link to Comment waldocktrades
waldocktrades's picture

I would add to that that we are seeing a top in commodity based currencies as well. Especially in the Aussie. The RBA rate decision appears to have triggered a technical and fundamental top among commercial traders as they unwind one of the largest positions they've held in years.

http://commitmentoftradersanalysis.blogspot.com/2012/08/rba-caps-commerc...

 

Tue, 08/14/2012 - 09:22 | Link to Comment monopoly
monopoly's picture

What a lame excuse for gold to move lower. We buy more clothes and we cherish the.....dollar. Oh my. It just gets more surreal every day.

Tue, 08/14/2012 - 09:26 | Link to Comment MFLTucson
MFLTucson's picture

This is the 10th time the gansters destroyed Gold once it was over 1600.  This my friend is the work of Bernake by and through the sewer called JP Morgan.

Tue, 08/14/2012 - 09:25 | Link to Comment MFLTucson
MFLTucson's picture

The US markets are a fucking game by the Jewsih elite to destroy people and capitalize on stupidity.  Get out now, equites are a joke.

Tue, 08/14/2012 - 09:30 | Link to Comment Hetty Green
Hetty Green's picture

"Stock prices have reached what looks like a permanently high plateau." Irving Fisher, October 21, 1929

Tue, 08/14/2012 - 09:31 | Link to Comment Confundido
Confundido's picture

Guys, gold will be manipulated as long as the repo market remains liquid. Until then...just swallow it and shut up!

Tue, 08/14/2012 - 09:37 | Link to Comment Let The Wurlitz...
Let The Wurlitzer Play's picture

Long dated US treasuries are going to junk.

 

 

Tue, 08/14/2012 - 09:54 | Link to Comment PeeramidIdeologies
PeeramidIdeologies's picture

Where the hell did that ship come from?! Haha bullshit. I mean bullish.

http://www.cnn.com/2012/08/12/world/us-japan-navy-ship-collision/index.html

Tue, 08/14/2012 - 10:14 | Link to Comment Phat Stax
Phat Stax's picture

Time for the headline:  "What does gold know that smart, sexy stocks don't?"  HA!

Tue, 08/14/2012 - 12:45 | Link to Comment mind_imminst
mind_imminst's picture

QE or no QE no longer matters. Everything is bullish. Central planners are in control of the equity markets now. Don't get caught with big short positions. Small declines in the market will be met with liquidity pumps. Algo crash-trades will be cancelled and the market will be reset higher again.

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