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Market Commentary: "Broken"
Submitted by Peter Tchir of TF Market Advisors
Asking almost any credit trader how their market is trading, and the most common answer is broken. Yesterday, a few people would have said bidless, or ugly, but today, its just broken. Liquidity is extremely low. Every trade resets the market. Trades are being driven by fear and fear alone. Fear of a further sell-off. Fear of whipsaw. Sovereign debt trading was the first to be hit, and it has now hit all the credit markets. Even equities seem to have seen a complete breakdown, with big air pockets. For the S&P, 5 points seems to be just a little noise every few minutes waiting for the next big move. S&P futures have already traded in a 70 point range, not too big for a month, but a lot for 12 hours.
Yesterday's winners still seem to be doing well. Gold, up big, again. Even more interesting, is that Spanish and Italian 10 year bonds are performing again. Spanish 10 year bonds have traded below 5% at times. It had been a smart trade to fade ECB intervention, but with everyone realizing that we are hitting the wall here, they seem to be putting in more effort. I am impressed that yields in those countries have moved well over 1% in 2 days, and am surprised they have been able to stay there. The CDS market doesn't feel quite as strong as the bond themselves, but they are subject to less direct central bank intervention. It still feels like no one believes the rate improvement will be sustained. At some point, once the dust settles, someone should examine how much trading was require to move rates this much. To get a move of 1% across the curve of 2.2 trillion euro of combined debt, how much had to be bought? I am scared that the number is low, showing that this isn't really a market. If rates in 5 years were moved by 25% (5.5% to 4.5%), you would like to think a reasonable amount of the float had to change hands. I have always been a big fan of mark to market, but that was assuming there was a market.
So anyways, keep an eye on those two countries. The longer they hold, the more hope that Europe has of stopping the contagion talk, at least maybe until next weekend. I remain convinced, that if the markets don't stabilize by then, the German's in particular, may not provide the tranche of money Greece needs for it's August 20th maturities and interest payments.
Any tightening so far, is purely short squeeze or fast money. IG16 and HY16 index trading better. IG16 feels most "squeezy" but that makes sense as people were buying protection on that because they couldn't stomach buying protection on HY16 which was experiencing one of its worst single day declines ever (maybe its worst ever). HY16 is only okay, up not even a point, showing it is a bit of short covering, but not a real risk on rally. It should be outperforming by a lot more if this was risk on.
BAC is another prime example. It was almost 50 tighter at one point this morning, though leaking a bit. It is quite possible that too many people were lifting offers with dreams of sugar plum fairies and defaults in their head. It is unlikely to be that simple or that quick - if anything should have be learned from 2008, it is that banks in particular have more ways than most to avoid default. This gap tighter will squeeze out some weak or silly shorts. In any case the magnitude of the moves does not truly reflect that large of a sentiment. It seems like every 10 million trade pushes the market 5 bps and the good traders wait for the turning point, so there are only sellers on the way tighter, and only buyers on the way wider. Again, the market is broken. Before anyone jumps on some anti-cds bandwagon, I think the cash market is even more broken. The bond market looks at the CDS market with envy. There are actually two way markets and trades occuring.
Well, it seems to me that we should just go home until closer to 2 pm. It is unlikely that anything big happens before then, and all you will do is stare at the screen trying to determine what every tick is telling you. Does a price move mean someone knows something? (not a horrible assumption when it comes to a government rife with leaks). In the end barring any headline, we will likely just chop ourselves around until the Fed either launches some new stimulus program or it's lights out for the market as expectations of aggressive Fed policy are certainly hoped for if not priced in.
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Silver, beeches
Rule 666
Don't panic, this turmoil is 'priced in.'
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I am impressed that yields in those countries have moved well over 1% in 2 days, and am surprised they have been able to stay there.
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dont be.. Italy/Spain can wait.. when big beast like US stocks market is down 20% in 10 days,,, bonds can wait. fate is sealed for taht countries..
alx
Yeah, seems to be a lot of that going around...
Gee, They got rid of all human intervention in pricing because they wouldn't kiss the ass of the mighty Goldman and replaced them all with programs written by 20 year old math PHD's that have never even owned a 100 shares of stock. I can't imagine why the system doesnt work ??
Analogous to what neoliberal market policies have done to labor. Does the system not "work" anymore? Depends on who you ask, no? I'm quite sure that GS et al would strongly disagree.
What goes around comes around. Apparently people are finding it hard to cope with competition against machines and supporting structures and policies that promote related "efficiencies."
Welcome to the future.
Broken, completly broken. My margin requirements have been raised more times than than I can count in the last week. Dirty pool.
Governments, oligarchs and kleptocrats tend to break things. They enjoy the best and leave the garbage for the rest of us.
Its broken because we are broke.
Now they are replacing Goldmans computers with the governments computers.....its like we have gone from adults to children now....
"Adults" , are merely adolescents and children with ear hair.
Farm livin' is the life for me...
http://sotcksdairyroadfarm.blogspot.com/
This Peter Tchir fellow a bright fellow. Concise, no BS and insightful.
crude's been hammered
IG16 feels most squeezy? What the fuck does that mean? Robot love?
Crammer just said he doesn't believe this is a crash. I love my morning laugh form CNBC!
after 3 big down days he is still calling it a "flash" crash...its a "crash" crash!
"It don't mean a thing, if you ain't got that swing".
It's precisely these kinds of markets that make people fortunes (while the other side loses them).
Get the right rhythm, and you can retire for life. Nicely.
Sure beats the piddly ass ups and downs going nowhere the past year.
Those short triples I had are finally dancing on the moon. 'Bout time.
Hey, you wanna know the best thing about the London riots?
The looters were forming queues at the broken windows! Waiting in line to steal shit!
Ha ha us English! We are so orderly! When I blow the whistle, over the top to be shot!
Get in line for total fucking chaos. It's not our turn yet. Italy and France first. ha ha ha!!!
Very interesting!
I do say, pardon me chap, may I get in the looting que?
Saw some blacks on tv carrying bags of stolen rice from the store. Rice.
The onlyquestion is what will the Fedury do?
Obama and Congress are mum. They will not do anything.
Is the Fed all in? Then this will only be an bump.
Now ... if the Fedury decides to play it little ... then we go down some more
The question behind the question is ... how afraid of us (American voters) are they?
I saw a video last nite pirated out of a DHS meeting that was telling them that americans have their little 8 year old girls on AR 15's cutting bullseyes all day long, and have plenty of ammo. They all sounded quite worried and said it wont be anything like the riots you see in Libya or Syria, here it will be lots of Gubment agents laying bleeding out.
Couple of points:
1) How many combat veterans from past Afgan/Iraq campaigns have decided that their government can not be trusted?
2) DHS and local/state LEOs have demonstrated their amazing lack of self control over the past 10 years as they have gained more fire power.
3) Former military veterans ARE ABLE to figure out the ratio of bad actors to LEO/DHS arms carrying foot solders and can also gauge response times in SHTF scenarios where the afore mentioned veterans must indeed protect their own.
4) DHS had better figure out how to distinguish themselves from the rabble they are supposedly in charge of handling.
Sounds like DHS troops are being primed to shoot BEFORE they see the whites of their eyes. I suppose with that as a starting point, drones wouldn't be such a huge step. The troops would be grateful for the "protection" and glad that they weren't forced to do the killing personally.
Bwahahahaha, Faber over at Blowhorn just announced that the White House had planned a public event today and both Cramer and Melissa made a face like someone kicked them both in the twat. Not to worry though, he then pointed out that they decided not to do it and Cramer said it was a good thing considering how the market reacted to the telepropter's bullshit yesterday.
When a cult of personality leader like Obama has lost all credibility, watch out its now about to get real bad.
Waiting...
"Liquidity is extremely low"
And will remain so until just about 2:00PM EST
As I noted elsewhere on here I sold sds calls yesterday and went long in the afternoon. Got lucky. I am going to sell on any weakness this am or today and only keep a couple very small positions on select stocks.
That was a stupid risk and I had to drink myself drunk till I passed out last night but looks like i might be making some beer money for a few months this am lol.
Yeah, figure everyone sells once the Fed starts talking unless they announce that they'll be sending a whole fleet of helicopters skyward.
No conviction evident for BAC over 7. I know it's up over 5%, but even so if it's hitting resistance on a bounceback morning you'd have to expect there is worse in store for it.
Say no more.
Everything Is Broken (R. L. does the Dylan classic, turn it up.)
http://www.youtube.com/watch?v=jhKqqYuV9MU
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