A Market Full Of Sound And Fury Signifying Unch

Tyler Durden's picture

Three important things occurred today: 1) US equities converged down to high-yield credit's less sanguine view of the world; 2) US equities converged to US Treasuries hope-less view of the world; and 3) Gold was the leading indicator for where risk assets should be today - as its stability was the only rock upon which to anchor expectations of intervention once again. The equity market fulfilled every technical analyst's wet dream today with a low volume gap-fill - which notably left today's VWAP at almost exactly the closing price from Friday (i.e. gave bigger players a chance to get out without losing their short - which was exemplified by the sell-off into the close on much bigger than average trade size). Never have we heard just whimsical exuberance at the market closing practically unchanged (ES +2pts) but critically risk markets in general did nothing but revert ahead of tomorrow's real action as the UK (and that means the European credit market) comes back from a long-weekend. Broadly speaking - US equities outperformed risk-assets modestly until the late-day give back dragged them back to reality but overall - IG credit underperformed, HYG outperformed (inflows dominant), and HY and S&P 500 e-mini futures (ES) stayed in sync. The morning's excitement about WTI being down so much and the consumer buying more iPads was short-lived as it surged back above $98. Copper outperformed (and Silver underperformed) but Gold which was modestly lower was the picture of stability and the USD, Treasuries, and Stocks all pulled up to meet its reality. Treasuries ended the day unchanged after dropping 4-5bps in yield at their open last night. The USD is fractionally higher from Friday's close though EURUSD limped higher all-day to 1.3050 (though remains rich to its swap-spead-implied fair-value). AUD weakness into the close stumbled the risk-on vibe and we note that a quite dramatic drop from the open in VIX today has the volatility term-structure back to its flattest in five-months.

ES filled its overnight gap, pushed to nearby resistance, and as VWAP hit Friday's close, exits started (blue bars at right) as we pulled back close to unchanged and support...

Notice below that once VWAP (light blue line) had reached up and filled the gap to Friday's lows, volume (red oval) started to pick up and form the top in stocks - leaving ES with a closing VWAP almost exacvtly (green arrow) equal to Friday's close - who says algos dominate trading eh? ES auctioning up like this to fill the gap and not following through does not suggest risk-on...

HYG (high yield bond ETF) and SPY (stocks) have reconverged after a couple of months of hope...

We called it last night with Gold's stability and sure enough it seemed a strange attractor for today's reversion as perhaps Gold's insight into intervention was enough to snap equities back to unchanged (though if the Fed is willing to move on a -1.5% day - we are all in for a treat over the next few years)...

HYG outperformed (after opening on its 50DMA and bouncing) only to fall back towards the close (on a side note, HYG vol looks modestly cheap relative to SPY vol if anyone is looking to play some low cost lomng vol trades here). IG underperformed significantly (while HY clung to ES all day) and chatter was that credit was quiet but some tranche hedging (and cheap macro protection buyers) as opposed to down-in-quality rotation was evident...

It did not take much for stocks to dump to convergence with Treasuries reality but of course they had to pull away higher today once again - will Treasuries prove right once again?

Equities pulled away from broad risk assets (CONTEXT) around the US day session open (green arrow) and correlation (which was extremely high overnight) started to flag. As we closed, equities drifed back to risk-asset reality...

and finally the volatility term structure has flattened to five-month lows...

So while European sovereigns were weak today, and stocks bounced, the credit connection in Europe is yet to awaken and if IG's performance over here is anything to go by, we will see any early bounce in Europe tonight get sold...

Charts: Bloomberg and Capital Context


Bonus Chart: EUR-USD swap spreads imply EURUSD at least 80pips lower here...

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insanelysane's picture

The "invisible hand" of the bankster mafia is going to sleep good tonight as they had a late night planning last night and executing today.

Must extend and pretend till November.  Must extend and pretend till November.  Must.....

freeasabee1's picture

Love the headline, one of my favourite quotes by good old Shakespeare.  

mammoth mo's picture

I couldn't be more sick.  The one day the market should crash it ends mostly up and mixed.  This was the worst day I've seen in market manipulation.  If the market can go up today - we should all be very afraid.

Boilermaker's picture

Yea, it's a blue ribbon day for fraud.

Although, I'm still curious who bought UP the flash crash ~800 points in a matter of seconds...

junkyardjack's picture

Its an election year, there is only one direction the US market can go...

SAT 800's picture

The post is very good in pointing out the Bank Holiday in England today; it's very significant. Tomorrow the grownups will be back.

disabledvet's picture

Indeed. "Just awful." Let's take a closer look at what happened today:

Stoploss's picture

Beware that pit viper.

Comay Mierda's picture

gold has been holding up like a champ!  i wonder if JPM will try to dump another year's worth of supply in the span of a few minutes tomorrow in rehypothecated bullshit fiat supply

SAT 800's picture

I doubt it; today was the day to party for short term price bashers; tomorrow the grown-ups will be back and the New York Whores will have someone looking over their shoulders. I would guess at firm and higher tomorrow.(Bank Holiday in England; classic day to play fuck-a-whoopee in New York; but as you say, very restrained).

fonzannoon's picture

They are having too much fun shorting the miners to care what the metal is actually doing. When they get done with the miners they will probably bomb the metal just for fun. It is what it is I guess. The bottom will fall out when everyone leaset expects it.

slewie the pi-rat's picture

gee! maybe everything really IS 'screwed down tight'...

i've lost track of how many months, now, i've been noting this, here, regularly and without much more to be said, really

2 months for sure;  probably at least 3, now;  maybe more...?

when will it ever end?  L0L!!!

mammoth mo's picture

Today marks the acceptance of total market control of variables......


For now.


A down day would have at least added some credibility. 

theTribster's picture

It is amazing to watch, today was a beautiful production after such a crazy weekend. Obviously they anticipated this and were prepared to guide the markets appropriately, which they did. Were there elections this weekend?

The news is created and or manipulated.

The market metrics are manipulated.

The markets themselves are manipulated.

The laws and regulations are manipulated.

The ratings are manipulated.

Its a sad state of affairs for a society that can't believe anything and I mean anything at all, imagine that our whole reality is shaped by lies and misrepresentations - all day, everyday. I've been a news junkie my whole life and no period in American history compares, neither in terms of scale or in terms of depth. The distortions, while many are not entirely concious of (sheeple), are still bearing down on soceity and changing it - a lot. An increasing number of people are pretending to be a sleep or just choosing to ignore reality. In either case they are affected and negative emotions build-up in them just like they do in the consious folks like ZHers - just not to the same extent. There are times I wish I was still asleep at the wheel, this knowledge can be frustrating to have (as many here MUST experience?).

Society now measures success exclusively by the size of someone's wallet, no longer does intellect or empathy or any other human quality matter - just how rich you are and how many things you have. Couple these things together, lies about markets/money plus the importance of them, then the system crashes and everyone loses a substantial portion of their wealth and what do you get? Its obvious.

Given all the lies, misrepresentations and distortions coupled with the number of people waking up how long before the internet goes under the thumb? Let's face it, without the internet people would have absolutely zero chance of knowing or understanding what is going on! It is literally the ony tool we have to communicate ideas and uncover reality - without it, well....

So, another day of massive manipulation just like every other. Gold and Silver being pushed down as far as they can get it, just another manipulation that sells the bigger lie of potential prosperity living in the greenback. As Jesse says, "Love my country, hate my Government" = I think most Americans feel that way right now - the 99%.

Boilermaker's picture

ES opens....you got it....GREEN

Simply unf'ing-believable.

Lost Wages's picture

Is this article saying US stocks will go up tomorrow, down tomorrow, or up then down? I'm admittedly confused.

CryingBear's picture


Jake88's picture

Again with the wet dreams.

monopoly's picture

I really appreciate the evening rap up that Zero Hedge posts. Could not be part of the market today so these summaries help quite a bit. And sure wish there was some way we could get rid of these idiotic self serving posts that are useless drivel and none of us are interested in. An ignore button would be good. That way Zero Hedge never restricts content as has been part of its mantra since the beginning.....but we do not have to deal with these worthless idiots.

Mr. Noatak's picture

My opinions only:

Consider the apocryphal story of the sailor who ate a tulip bulb, without realizing its immense value, and precipitated the end of the Tulip craze. Or, the fictional account of the Emperor who was ID'd by the kid as having no clothes? Such parables persist throughout all cultures because the underlying principles are exact. The smoke and mirrors economy of the U.S. that began around 1975 will ultimately be revealed. But this is a good thing. Once we fully admit and embrace our economic situation, we can begin to honestly discuss fixes.