Low Volume Equity Decoupling Becoming Farcical

Tyler Durden's picture

UPDATE: AXP (down AH) and IBM (up AH) miss top-line; QCOM misses everything and guides down (up AH - AAPL staggered a little but unch now), EBAY beat (small up AH); KMI miss (down AH)

Far be it from us to say but once again equity markets spurted far and away beyond credit, interest rates, FX carry, commodities, and reality would have expected with only good-old VIX crashing to breathe that levered life into them. Ending the day with a 15 handle, VIX closed at its lowest in over three-and-a-half months and notably beyond where equity and credit relationships would expect as the front-end of the curve remains under huge pressure. Gold, the USD, and Treasury yields all played along on the day - trading with a decent correlation in a relatively narrow range but the open of the US day-session saw the appearance of the infamous equity rally-monkey who lifted us 1% in 30 mins then extended 10 more points into the European close. A late day check with reality nipped ES back down to VWAP but not to be outdone, VIX was pressed again back below 16% and sure enough S&P 500 e-mini futures pushed up to near the highs again. Credit markets were quiet (cash busier than synthetic) as IG, HY, and HYG all underperformed for the second day. Gold and Silver limped lower on the day as WTI surged back above $90 to two month highs. Treasuries traded in a very narrow range ending the day -2bps across the curve. EUR roundtripped on the day leaving USD practically unch but -0.35% on the week. Financials underperformed as Tech and Industrials reached for the skies with a 1.75% boost today (makes perfect sense after the earnings?). Decent average trade size on the day which was more prevalent up above 1365 suggests more unwinds of blocks into strength but something has to give with VIX for this train to stop running.

Equities in a world of their own once again...

equities continue to dance in their high beta way around credit markets...

equities looked tempted to test reality but stalled at VWAP...

and VIX remains notably cheap to equities...

Just to focus briefly on the day - there are always different correlated drivers of risk markets, and today appeared to have 5 notable periods: 1) first 30 mins - everything ramping led by HYG's exuberance - being less liquid and easier to drive up; 2) VXX started to fall back (rally) and so focus was more on TLT and HYG to keep SPY moving on up; 3) TLT started to leak higher (bearish for SPY) and so focus shifted almost entirely to HYG - which as is clear became synced with SPY and lifted all the way into the last hour; when 4) everything got a kick with VXX ripping back down, TLT plunging and HYG soaring, then as 5) VXX couldn't hold its gains, HYG once again took over and maintained its bid to hold everything in line...(se chart upper left below for how this played out on a model basis)...



In FX markets, we are seeing its not different this time...notice anything odd about the performance of the EURUSD aroun dthe open of the US day session into the close of the Europe session...EUR gets sold into the US open and then rapidly bought back into the European close (almost as if the algos use retail to soak up the pressure that they know will come as Europe closes and EURs get repatriated in a hurry...?)

And with WTI now back at $90 - rising in a straight line the last week - up over 12% from pre-EU Summit, while Gold is unch and Silver modestly higher...


and aggregated across asset-classes, risk was very much in wait-and-see mode (upper right - green line = CONTEXT) when compared to the exuberance of equities (red). Within the ETF capital structure HYG was dragged up to SPY's heights in the afternoon while VXX and TLT were relatively quiet (upper left). Correlation crumbled between reality and stocks (lower right) and VIX remains off with the nickel-picking fairies relative to any short-term fair-value...

Charts: Bloomberg


Bonus Chart: Financials underperformed overall and were very weak in the majors. BofA was the big loser -4.8% today and Citi was apparently down due to Ackman - but doesnt seem so bad compared to the rest...

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Canadian Dirtlump's picture

friday = payday = tube of rcm silver mooses


fuck the system cause the system fucked me.

The Monkey's picture

The push will continue. A lot of money has flowed in and out of Apple. Wait until earnings. Buyers will flock to stocks like moths to a flame. Happens every time.

J 457's picture

Nope.  Setting up for a crash just like last July.  Today may have been the top.

Jay Gould Esq.'s picture

"UPDATE: AXP (down AH) and IBM (up AH) miss top-line; QCOM misses everything and guides down (up AH - AAPL staggered a little but unch now), EBAY beat (small up AH); KMI miss (down AH)..."

...and Philip Morris, which does not report until tomorrow, is down $1.50 over the course of the past two sessions, in the face of nearly 200 Dow points to the upside.

'Tis but a casino. We pass the shoe...

WhyDoesItHurtWhen iPee's picture

Farcical ............ sounds like a delicious treat just out of reach.

Divine Wind's picture



I am audibly laughing as I write this note.

This will go into my ZeroHedge_Great_Quotes.txt  file !

runlevel's picture

can i get a copy of this ZeroHedge_Great_Quotes.txt file?

Cdad's picture

Not only has it all become farcical, that being the perfect word to describe this market, now we can add companies missing expectations by a mile...and rising in price anyway because, in the words of Bill "I should have stayed retired" Griffith, "we are being backstopped by the Fed."  

So...when S&P and NASDAPPLE companies miss, do they get a check from the Fed, too?

khakuda's picture

Stock market action is just like the 95-99 period when they had pumped too much money into the system and lowered rates at the drop of a hat.  Good news was good news and bad news was good news.  It just didn't matter.  Flat was the new down.

There certainly is inflation and it is showing up in stock prices.  The Fed has every intention of setting up another asset bubble.

Cdad's picture

Ummm....agreed...and said so by cribbing "farcical."  

So QCOM was $53.30 yesterday, is $59 today after it missed top and bottom...and guided down?  That is funny...and clearly a short.

Cdad's picture

How's about that report on FFIV?  Complete disaster...after ramping up $8 per share ahead of the report.  Brilliant!

fonzannoon's picture

I don't know about you CDAD but I was young and stupid in 1999. Just plain stupid in 2008. Fool me once....fool me twice...but you can't fool me again...thats how it goes right?

Cdad's picture

It is pretty hard to be fooled by a top and bottom line miss, and expectations guided down significantly.  Anyone fooled by that...has an obvious tumor.  

fonzannoon's picture

I mean these markets in general. If we are not seeing the bubbles bing blown all around us it's our fault.

One World Mafia's picture

Daniel Estulin's Bilderberg sources told him the same when they had their meeting in Chantilly Va.  Stocks to '90s highs then the crash.

Xibalba's picture

If the President (or his working group) does it..Then it isn't illegal!

Squid Vicious's picture

just need to put Ben Shalom on the boob tube every day, with vague references to more Fed action... we will be at 1500 in no time...

Tic tock's picture

They're not going to give up until someone puts a shovel in their hands

adr's picture

It looks like last Tuesday an algo was triggered with the explicit purpose of bidding up oil to $90 in a week from $83. Take a look at the weekly chart and you can pretty much draw a straight line with very small deviations above and below from $83 to $90. The MSM story is that oil demand has increased because inventories were drawn down. Of course it had nothing to do with refineries accepting less oil because demand is down, and rigs drilling less.

The past two weeks has been one giant BS move triggered by the NY Fed buy button.

Then you have the corn chart looking like the AAPL hockey stick chart, nat gas up 5% on the day for no particular reason, and other general lunacy.

nobusiness's picture

Every company that reported is now moving up.  magical  YUM, EBAY, IBM, QCOM.  Another 100 point day tomorrow. 

mendigo's picture

If thier CEO was not thrown in jail and/or they did not declare bancrupcy then the stock must rise as these were priced in.
If Ben says nothing of substance then the stock must rise.
If economic data is bleak then the stock musr rise.
Do you get the picture - doesn't require S7 fortunately.

HelluvaEngineer's picture

Potter has a very long shopping list

Meesohaawnee's picture

remember when it was a "market" and stocks just naturally sold off a bit after earnings? seems like decades ago. but on the oil. issue. Have used DTO really nice when it seems the move down.

ATG's picture

So in other words, Dow down?

We've been buying DIA Aug puts for fun and profit:


(The higher the Dow goes, the harder it gets, but maybe one day soon,

we can breathe a sigh of relief.)

nobusiness's picture

The last time IBM was up 4 in the after hours it opened up 10 the next day.  Ramp Ramp Ramp we must keep the market up.  Fuck spain, Italy and greece.  they have less importance than IBM, QCOM, AAPL and YUM.

Stuart's picture

the markets are broken.  Too much rigging finally broke them.  

i_call_you_my_base's picture

I wonder if people are waking up every morning just thankful that the whole shitty farce hasn't fallen apart, so they buy.

SmoothCoolSmoke's picture

SP up 50 in 12 trading hours; 4 points AN HOUR.  4 SP points used be a WEEK, Heck, I can remember when that was a MONTH!


pleseus's picture

Eventually the buying will dry up. Looks like a blow off top.

john_connor's picture

VIX looks ready to explode

HelluvaEngineer's picture

Please, for the love of God, don't buy VXX, because you're just going to sell it at 10:30am tomorrow.

Sandy15's picture

The FED starts buying the market.  Have you not watched the pattern they've created........  They try to squeeze out the shorts that hopped on in the sell off........

radicall's picture

Other than VIX decoupling from SPY - there is also Small Caps (Russell 2000) underperforming S&P 500 unlike what you'd expect in a Beta Chase

The Monkey's picture

Beta chase or not, watch out above!

Meesohaawnee's picture

Seems to me like SPY 1400 is a lock tomorrow.

The Monkey's picture

Not tomorrow, but it's a lock. This baby is going to retest the top. Stimulus, no recession (per Bernanke), Google, Apple and the Fed on tap. Will be a blockbuster.

Meesohaawnee's picture

i think the goal here is obummer has ordered ben to get a year high . That way he can order his soldiers on the MSM to have one night were the lead is "stocks at year highs" ..that way the sheeple will think all is great... thats how desperate hes getting.

poor fella's picture

Just fooking silly - Volume gets any lower and the markets are going to look like those BATS charts. Here comes the 'Yo-Yo Shoots the Moon over wide open beavers' formation.

I for one am glad as hell the price of oil is rising... put some shackles on that MOFO at the Fed. The American Spring is around $7/gallon. Peak is a given, but seeing POO inflation while demand collapses (at those higher levels), could cause a shit-storm...   Keep an eye out for those FEMA camps  ;)

The day the Internet kill-switch gets flipped, I'm driving straight the fuck home.

orangegeek's picture

Final leg of SP500 to complete wave 2 is unfolding.


chump666's picture

Asia (now dealing with major inflation/stagflation breakouts, India with food inflation and China crunched ecomomy whilst housing goes hyper-inflated i.e safe haven flows) will love the oil price being bid.  Bernanke is playing with fire.


dcb's picture

yeah, I notice the euro thing and what's been happening, so I have started to close positions in the evening and open them in the am, been getting tred of our algo's ramping up and giving europe the profits

my chart on oil looks a bit different

Wholeden Caulfield's picture

Elvis has left the building....well, the carbon based Elvis'...no read on this tape with shit that got me

through for 25 years. Time to chill and wait for more normal vibe...maybe when the cost of $ comes back and

I recognize the yield curve.

chump666's picture

Brutal overbought markets just smashed through early July's top