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Hope Of Bernanke Ex Machina Drives Low Volume Equity Surge As Gold Defies QE Dream

Tyler Durden's picture





 

S&P 500 e-mini futures managed to get back above their 50DMA, fill the gap back to the 5/4 ugly-NFP print levels, and retrace 61.8% of the recent swing high-to-low ahead of tomorrow's hope-laden FOMC-print-fest. As we noted here, credit markets do not agree that QE is coming anytime soon and today's Gold deterioration suggests expectations for anything more than a twist extension are overblown (which we suspect would be a huge disappointment to a market only 4% off its highs and a VIX with a 17 handle earlier in the day. As the afternoon wore on and the incredible reporting falsehoods were denied, equity markets (and EUR) reverted lower (led by financials) pulling back to VWAP (and VIX pushed back rapidly to 18.5 - ending the day higher in vol (despite a 10pt jump in the S&P). Low volume and falling average trade size suggests this was far from the start of a new trend in stocks and the push higher (and steeper) in TSY yields to Monday's opening highs seems more like QE hope fading than growth hope. Silver just underperformed Gold on the day (both leaking lower) as Oil and Copper rallied (leaving WTI in the green for the week) as USD weakened and round-tripped to Monday's opening lows (with AUD now 1.3% stronger on the week). Investment grade credit remains a considerable underperformer relative to the high beta equity and high yield markets but 'agrees' with Gold and Treasuries in its view of no LSAP tomorrow- and the surge in implied correlation into the close suggests macro overlays as opposed to a market with any conviction.

IG credit remains a notable underperformer from the 5/4 NFP print trade but high-beta credit and equity have reverted perfectly. Note tomorrow is CDS roll day and credit index options expiry which likely explains some of the squeeze today - with credit in the middle of the recent cycle meaning plenty of to-and-fro in risk...

But gold and Treasuries appear to have faded the QE hope today (as TSYs gave up their hope-gains and gold faded today)...

ES closed rather weakly - ending the day just shy of Monday's opening highs and at today's VWAP...

It would appear AUDJPY has been the whipping boy for powering ES higher as we see quite a significant divergence between AUD's 1.33% gain this week relative to USD's 'average' 0.25% loss. If we are disappointed tomorrow, we suspect AUD will get crushed...

Correlations between equities and broad risk assets faded significantly as stocks surged but increased notably as the late day weakness arrived. Most notably though into the last hour of the day was the surge in implied correlation (think systemic/crash risk) and disconnect between a higher VIX and higher stocks...

Most of the major financials gains were in the first 30 minutes of today and after that they were flat to sideways as we suspect the shorts were squeezed out in a hurry on some technical crosses.

Charts: Bloomberg

 


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Tue, 06/19/2012 - 16:29 | Link to Comment Jim in MN
Jim in MN's picture

According to RAN Squawk, the Telegraph has made something else up now:

 

Telegraph writes: EU leaders set to announce EUR 750bln Spain and Italy bailout deal

European leaders are poised to announce a 750 billion euro deal to bailout beleaguered Spain and Italy by buying the countries’ debts.

Pan-European Government funds are set to be used to buy Spanish and Italian bonds, which have recently hit record highs – in a move which will send a strong signal to financial markets that the German administration is prepared to back its weaker economic neighbours.

Full article: http://www.telegraph.co.uk/finance/financialcrisis/9342727/Debt-crisis-E...

Tue, 06/19/2012 - 16:32 | Link to Comment CIABS
CIABS's picture

"...the incredible reporting falsehoods were denied..."

I wasn't watching; what were those falsehoods?

Tue, 06/19/2012 - 16:35 | Link to Comment carbonmutant
carbonmutant's picture

Ah, but were the denials "Official"?

Tue, 06/19/2012 - 17:00 | Link to Comment Boilermaker
Boilermaker's picture

Be careful that it's not a denial of the denial.  Then it's like all true and shit.

Tue, 06/19/2012 - 17:18 | Link to Comment Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

SHORT US TECH NOW; SHORT EVERYTHING TECH ACROSS THE BOARD.

Justin Bieber on the cover of fucking Forbes cannot be anything but the shoeshine boy moment.

http://www.forbes.com/sites/zackomalleygreenburg/2012/05/16/justin-biebe...

Tue, 06/19/2012 - 17:27 | Link to Comment Comay Mierda
Comay Mierda's picture

OMFGLOLOLOL

Beiber is a venture capitalist? BWWWWAHAHAAHAHAHAHAAHAAHAH

He probably thinks a "discount rate" is his CD sale price at Walmart

'Merica is FUCKED 

Tue, 06/19/2012 - 18:23 | Link to Comment francis_sawyer
francis_sawyer's picture

Beaver is a Canadian...

Tue, 06/19/2012 - 18:29 | Link to Comment Boilermaker
Boilermaker's picture

Why let facts get in the way of a typical and ignorant Eurotard rant against AmeriKKKa?

Tue, 06/19/2012 - 18:33 | Link to Comment michael.suede
michael.suede's picture

Mock Beiber now, for he will have the last laugh after he venture capitalizes your daughter.

None can stand before the awesome power of Beiber.  His songs are like the sweet melody of angles.  His voice commands the thunder of the gods.  His panis is capable of impregnating women through the airwaves.

Your blasphemy will be punished.

 

Wed, 06/20/2012 - 10:57 | Link to Comment CIABS
CIABS's picture

Nice proofreading.

Tue, 06/19/2012 - 16:36 | Link to Comment battle axe
battle axe's picture

Not gonna happen, or else Merkel will be joining Sarkozy.....

Tue, 06/19/2012 - 16:49 | Link to Comment Ghordius
Ghordius's picture

the Telegraph is always truthful. it has promised us the demise of the euro. it will try to do whatever is needed.

now do your muppet duty and short some euro-stuff. JPMorgan will provide you with a plentiful array of choices.

Tue, 06/19/2012 - 16:32 | Link to Comment Bastiat009
Bastiat009's picture

Gold cannot go up during a FOMC meeting. It is illegal and physically impossible. So it seems.

Tue, 06/19/2012 - 16:34 | Link to Comment Pairadimes
Pairadimes's picture

Further to fall, bitchez!

Tue, 06/19/2012 - 16:34 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

If I had to guess, I would guess tomorrow Bernanke will say, "We will ease when the time is right, but now is not the time."  Then when stocks go towards DJ 12k, then he will say, "We may ease soon."

All while banksters everywhere ask Bernanke to ease it in.

Tue, 06/19/2012 - 16:42 | Link to Comment financial apoca...
financial apocalyptic contagion's picture

oh he will, he's just out of lube atm

Tue, 06/19/2012 - 17:35 | Link to Comment you enjoy myself
you enjoy myself's picture

i've got a weird feeling that he's going to say just that, but stocks will continue rising.  if, via swaps and zirp loans, he can give every primary dealer and central bank limitless capital searching for a return, what difference does it make whether the Fed buys the assets themselves?

Tue, 06/19/2012 - 16:34 | Link to Comment junkyardjack
junkyardjack's picture

A rough few weeks for shorts, hopefully they are all out of the market by now

http://www.youtube.com/watch?v=SPyyAV8-avo

Tue, 06/19/2012 - 16:37 | Link to Comment bnbdnb
bnbdnb's picture

My timing seems to be getting better!

Tue, 06/19/2012 - 16:35 | Link to Comment lesterbegood
lesterbegood's picture

Maritime commercial liens against the BIS and all member central banks.

http://www.scribd.com/Free_Nations

Tue, 06/19/2012 - 16:36 | Link to Comment carbonmutant
carbonmutant's picture

"Gold deterioration suggests expectations for anything more than a twist extension are overblown"

 

Tue, 06/19/2012 - 17:20 | Link to Comment DosZap
DosZap's picture

"Gold deterioration suggests expectations for anything more than a twist extension are overblown"

Exactly,TWIST and more dollars to be injected into banks not lending.

What a bunch of friggin morons.They know exactly what they are doing...............and they will not be happy till 60-80% of Americans are living like third worlders.

Tue, 06/19/2012 - 16:37 | Link to Comment BlueStreet
BlueStreet's picture

S&P closed below 100DMA.  Nice reversal in the VIX also to close positive.  1200 here we come!

 

 

Tue, 06/19/2012 - 16:38 | Link to Comment razorthin
razorthin's picture

I think the Fed is backed into a corner here.  They must ease or at least talk one up very strongly or the bottom falls out.  They can't waste such momentum and technical improvement in market conditions with the election so close.  Accordingly, PMs will rocket like they never have.

Tue, 06/19/2012 - 16:55 | Link to Comment RoadKill
RoadKill's picture

Benny cant print for a number of reasons.

1. SPX at 1,360. Where exactly is the pain? Is Ben going to start printing after every 5% drop in stocks? Last summer stocks dropped 20% and Ben didnt print. And Ben cant afford to have the market buy into the Bernake put. It emasculates him and limits the potency of his policies.

2. Interest rates are already at record lows. The treasury has people lining up to buy its debt for <3%. Previous QE happened to coincide with big buyers getting out of treasuries, potentially causing a funding issue. He cant make an arguement how printing here will help the economy. Unlike last summer their is no freeze up in interbank lending. Nothing.

3. Mitt CLEARLY said no money for Europe. Perry was on CNBC saying no printing to bailout Obama or Europe. Ben has to take into account how close we are to the election. If he prints and it doesnt work (or worse backfires) he will be the first fed cheif in history to be fired and investigated by Congress and his legacy will be trash

Tue, 06/19/2012 - 16:58 | Link to Comment RoadKill
RoadKill's picture

Furthermore, the only thing this economy has going for it is falling oil. Print and you mess that up.

Finally Ben has to keep some powder dry for a real crisis in Europe.

Tue, 06/19/2012 - 18:27 | Link to Comment francis_sawyer
francis_sawyer's picture

Is there some kind of fucking CB 'textbook' or decision flowchart that I'm not aware of? If there is, please point me to the page where LOGIC tells you to get as much gold into your vaults as you can...

Tue, 06/19/2012 - 17:23 | Link to Comment you enjoy myself
you enjoy myself's picture

i think #3 is the primary concern right now.  if he prints while SPX is within spitting distance of all-time highs and before EUR has actually fallen apart then he's inviting way too much scrutiny of the Fed as an institution.  i doubt its so much a concern about personally getting fired (Romney has already said as much), more the fact that a full audit and more congressional control/oversight will almost certainly result.  Ben doesn't want to be known as the man who destroyed the independence of Fed (or even possibly got it abolished).

Tue, 06/19/2012 - 17:43 | Link to Comment Sophist Economicus
Sophist Economicus's picture

..."destroyed the independence of the FED..."

 

Ha!   That started under FDR and became cemented under Truman.    The Fed hasn't been independent since.   It has purchased nothing but Treasury crap and underpinned the bond market for over 60 years....

Tue, 06/19/2012 - 20:02 | Link to Comment lotsoffun
lotsoffun's picture

bennies legacy is sealed.  he hung himself.  even timmie boy knows he's getting out and keeping a low profile.  bennies only defense is 'it could have been worse'.  the question is when.  no more no less.

right now, bennies bosses want to milk another 2012 record bonus.  so he does what they think will work.  if they all position short, that works also (except nobody is playing except them, so nobody is buying in cash at the top).  they may very well sell the stock markets out totally, if that is there best option.

 

 

Tue, 06/19/2012 - 16:59 | Link to Comment Quinvarius
Quinvarius's picture

The Fed must absolutely buy Treasuries in an ever increasing amount.  The Fed must absolutely continue to loan banks money at zero percent.

The Fed must absolutely not say the initials QE or in any way shine a light on the incredibly massive amount of printing and loans they are making.  The fact that anyone needs to hear the initials "QE" is amazing to me.  What can the Fed possibly buy that they are not giving away free money to the banks and government to buy already?  We don't need the initials "QE".  The concept is meaningless compared to what is already happening. 

Tue, 06/19/2012 - 16:41 | Link to Comment Herbman
Herbman's picture

Isn't the gold people buy fiat gold? Cos i believe the amount of paper cold being sold is not representative of the physical gold available. What if i want my yellow metal in hand? or if there is a run on the gold market?

Tue, 06/19/2012 - 16:52 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Something many people have been wondering since 1971.

Tue, 06/19/2012 - 17:02 | Link to Comment Ghordius
Ghordius's picture

yes. still wondering. 50% of all gold of the planet seems to be in the USA. the question is only: to whom does it belong?

Tue, 06/19/2012 - 19:39 | Link to Comment francis_sawyer
francis_sawyer's picture

Davy Jones

Wed, 06/20/2012 - 06:49 | Link to Comment Ghordius
Ghordius's picture

lol, am I supposed to know who Davy Jones is?

Tue, 06/19/2012 - 16:41 | Link to Comment Mark123
Mark123's picture

Market thinking:

 

Central Banks will devalue the currency.  Paper Gold and gold mining shares fall or at best stay flat.

 

Soooo....I guess there is no safe place to hide other than paper assets.  It is getting too confusing to even be contrarian in this so called market.

Tue, 06/19/2012 - 16:46 | Link to Comment JustObserving
JustObserving's picture

Gold defies QE dream?  Skip the euphemisms and call a spade a spade, Tyler - manipulation. 

Tue, 06/19/2012 - 17:13 | Link to Comment kito
kito's picture

should read "ben defies golds dream"......because without any lsap, gold lingers where it is.................not to see the other side of 2000.....asset deflation is a bitch...............

Tue, 06/19/2012 - 19:13 | Link to Comment CPL
CPL's picture

It is, but when 80% of your entire capital market is directly tied to extremely under performing equities, bonds, and other IOU instruments there is no hedge other than the firewall that's worked so well against govenrment that slip printing under the radar in a long steady roll from every central bank on the planet.

 

Sprinkle in massive shortfalls in every pension scheme from public to private sectors, the government is printing right now.  Never stopped.  Announcements like QE 1-2-3 whatever don't mean a hell of a lot other than lip service to people that really don't give a shit what any of us say or do because they are going to do it anyways.

 

All those poor long bagholders though.  Asset deflation is one thing...imagine an Asset that appreciates so high it has no buyer.  Either way the world is in simply awful shape and it's all in that strange ponzi scheme universe.  Let's hope there are enough people to tell the tale on the otherside of the mess after the fact.  Money and printing is only a tool as long as it's useful.  When it ceases to be useful, just make sure you are out of town and make like a small town local.

 

 

Tue, 06/19/2012 - 16:50 | Link to Comment Quinvarius
Quinvarius's picture

Paper gold is waiting until Bernanke is done talking.  Only someone who does not follow the paper gold market at all would say otherwise.

Tue, 06/19/2012 - 16:56 | Link to Comment Ghordius
Ghordius's picture

+1 bingo. the golden calf has to bow before Moses.

shopping time! weeee!!!

Tue, 06/19/2012 - 16:53 | Link to Comment RichardENixon
RichardENixon's picture

Market analysis--er, I mean manipulation analysis--suggests to me that gasoline prices are the main focus at this point, not stock prices. QE3 = higher gasoline prices. Therefore I expect no QE3 until at least the end of summer, perhaps not even until after the election.

Tue, 06/19/2012 - 17:05 | Link to Comment midgetrannyporn
midgetrannyporn's picture

They had to get oil prices lower to pave the way for QE#. They have done that. the bernank has his byrini ruler and the only thing he cares about are bank bonuses and balance sheets.

Tue, 06/19/2012 - 17:41 | Link to Comment you enjoy myself
you enjoy myself's picture

They had to get oil prices lower to pave the way for QE

or rather, they had to get SPX up to ludicrous speed so any resulting 200-300 point sell-off wouldn't be so bad in absolute terms.  oil is still too pricey, especially with the ME preparing for war.

 

 

Tue, 06/19/2012 - 16:54 | Link to Comment Snakeeyes
Snakeeyes's picture

Ag commodities shoot up, gold down, Spain/Italy see yield declines, Greece increases. The whacky world of Central Bank manipulation.

http://confoundedinterest.wordpress.com/2012/06/19/wake-of-the-flood-investors-anticipate-central-bank-intervention-flooding-get-a-life-jacket/

Tue, 06/19/2012 - 16:55 | Link to Comment geewhiz190
geewhiz190's picture

IMO safe havens will become unsafe havens. the rally in bonds from the lows in march probably due to an unwinding of big bets against bonds by the likes of J P M, who ended up losing big as what looked like a top in bonds wasn't. after some possible near-term weakness gold may actually become a "risk-off" trade. The dollar may correct a bit more, but the rebound in the aussie,loonie,real,and euro probably are close to an end. the dollar looks to be going much higher, this will not be good for the DJIA .

Tue, 06/19/2012 - 17:02 | Link to Comment Godisanhftbot
Godisanhftbot's picture

 They count on anaylsis like this as it keeps a constant flow of short interest in place, making it every easier to ramp the market , as accounts blow up and have to cover.

Tue, 06/19/2012 - 17:04 | Link to Comment Boilermaker
Tue, 06/19/2012 - 18:06 | Link to Comment Tinky
Tinky's picture

Yes, excellent! And this was especially good...

Customers at the bar told reporters the "shitfaced" and disruptive Bernanke refused to pay for his drinks with U.S. currency, claiming it was "worthless." 

Tue, 06/19/2012 - 17:03 | Link to Comment fonzannoon
fonzannoon's picture

Bernak talks qe but announces nothing. Gold whacked fifty bucks easy. Silver maybe $2. Stocks finish flattish to up. Especially anything that pays a div. It goes on and on. Just my guess

Tue, 06/19/2012 - 17:05 | Link to Comment Bastiat009
Bastiat009's picture

How much will gold drop tomorrow if Ben says no QE?

Tue, 06/19/2012 - 17:15 | Link to Comment Quinvarius
Quinvarius's picture

It has nothing to do with QE or no QE.  It has to do with perception management.

Tue, 06/19/2012 - 17:15 | Link to Comment Bastiat
Bastiat's picture

$400 at least!  The Bernank is like a god . . . except he's mortal, fallible, corrupt, and rather than omincient, deficient.

Tue, 06/19/2012 - 17:36 | Link to Comment fuu
fuu's picture

$1617.90 since it is of no value without QE, or so I hear.

Tue, 06/19/2012 - 17:43 | Link to Comment kito
kito's picture

you hear correctly. remember gold is a hedge against stupidity. last i heard qe was stupidity............................

Tue, 06/19/2012 - 17:11 | Link to Comment hugovanderbubble
hugovanderbubble's picture

Excellent job,

Tue, 06/19/2012 - 17:12 | Link to Comment Edmund Dantes
Edmund Dantes's picture

gold is ALWAYS smashed before and after a FED meeting. To look at today's smash as some kind of an indicator of what is ahead tomorrow is pure lunacy. ... and no matter what they say... they are already printing out the back door each and every day, so they can "assign" whatever price they want to gold..... there is none is size offered at these prices in the PHYISICAL market anyway

Tue, 06/19/2012 - 20:46 | Link to Comment long-shorty
long-shorty's picture

How do you get 5 thumbs up/0 down for such wisdom as "there is none in size offered at these prices in the physical market anyway"? How much physical do you need? 2,500 contracts on the CME at 100 ounces a pop is something like $375 million. Just buy it and get it delivered. Or are you trying to say it you can't find the coins you want on EBay for within 2% of spot. Puh-leeze! No physical at these prices? Give me a break.

 

Tue, 06/19/2012 - 17:13 | Link to Comment Elliott Eldrich
Elliott Eldrich's picture

If there's no QE tomorrow, I'm guessing gold gets smacked down about $50 an ounce, but that won't last long... three weeks from now gold will be back over $1,620. This is all IMHO, of course.

OTOH, if there IS some hint of QE tomorrow, gold shorts are going to be CRUCIFIED...

Thu, 06/21/2012 - 15:21 | Link to Comment Elliott Eldrich
Elliott Eldrich's picture

No QE mentioned... and gold is now down to $1567, or almost exactly $50 down from where it was two days ago. And now, IMHO, it will go back up to $1,620 in the next three weeks. We'll see how the next part of this plays out. 

Tue, 06/19/2012 - 17:29 | Link to Comment LongSoupLine
LongSoupLine's picture

 

 

 

I just stocked up on thingamajigs...the crash is coming afterall

Tue, 06/19/2012 - 17:37 | Link to Comment deerhunter
deerhunter's picture

soybeans up 45 cents a bushel today,,,,, woohooo,,,, food prices in future??? nothing to see here ,  move along

Tue, 06/19/2012 - 18:01 | Link to Comment DosZap
DosZap's picture

soybeans up 45 cents a bushel today,,,,, woohooo,,,, food prices in future??? nothing to see here ,  move along

FedEx raising rates to 6.9%.

Tue, 06/19/2012 - 17:43 | Link to Comment ZeroAvatar
ZeroAvatar's picture

Let's see:  Gold down, yields at all-time lows, stock market 4% from 2012 high.  Which one is wrong?   Hmmmmmm.......Stocks getting ready to crash, tomorrow @2:20PM.

Tue, 06/19/2012 - 18:09 | Link to Comment jimmyjames
jimmyjames's picture

But gold and Treasuries appear to have faded the QE hope today (as TSYs gave up their hope-gains and gold faded today)...

************

So why was the $ down all day and oil up?

The $ fell more than gold %

No QE should be dollar positive-

The micro move in gold and treasuries was hardly indicative of anything-other than maybe a bit of relief from the so called euro fix-

 

Tue, 06/19/2012 - 18:22 | Link to Comment ebworthen
ebworthen's picture

Today my dentist's billing secretary perked up when I suggested paying in GOLD versus cash for a procedure down the road (10% discount); smiled and said "Now THAT is a definite possibility".

"Barbarous relic" in a world of barbarians ;-)

Tue, 06/19/2012 - 18:27 | Link to Comment jimmyjames
jimmyjames's picture

For all the experts here that were pointing to the HUI dropping below the 200 wma as proof the gold game was finished--guess what?

It closed above it today-

Miners up-gold down = bullish divergence-

Look out shorts-

Tue, 06/19/2012 - 19:56 | Link to Comment michigan independant
michigan independant's picture

Thank you for the reality we face.

Translated: when it comes to what is announced on June 20 at 2:15:01 pm (assuming there are no more Federal Reserve Xerox machine snags), bonds are bracing for the worst: which under the current circumstances is the Venn diagram intersection between full blown LSAP-based QE, which would at least send stocks soaring, and no QE at all, which would at least preserve the illusion that a virtuous cycle is still possible if only on paper.

Tue, 06/19/2012 - 20:52 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

the implied correlation gets skied at the curtain

so much for that irrational exuberance  L0L!!!

tomorrow should be fun

this is interesting: Note tomorrow is CDS roll day and credit index options expiry but index options do not have underlying (securities to actually be put and called) do they?   hewever, even a small event could be lotsa fun

plus, i am calling for a bit more of a "crisis" in the EU than antonioSam and V-man giving angela another hot-foot b/c she was soooo strict, yesterday

i think we shall hear from marioECB tomorrow;  he was s'posed to present his plan for his zombie ECB on the 20th;  as you know, this has been like waiting for christmas for slewie

this should result in everyne pretending that the wheels are coming off

but if if he isn't quite ready, we may get another 150 on the dow...

the german court ruled earlier that the squididity and the finiminis and the banksters had been naughty just getting this far

whether someone is getting BiCh-slapped or the tribunal is suggesting what to fix first to proceed in assfuking the german people is hard to tell, but i'd bet on the latter if i could afford it

we need legal work because of what has already happened can't hurt marioECB when he starts slinging the hashola for the squididity

stay tooned!

Wed, 06/20/2012 - 06:15 | Link to Comment Bastiat009
Bastiat009's picture

Will gold finish the day closer to $1550 or $1650?

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