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Market "Inverse-Plunges" But Not Everyone Happy
Today's tremendous rally in equities was well supported by broad risk assets initially, but as financials took off this afternoon to end the month down only 4.8%, CONTEXT remained less exuberant. The 6.2% rally in financial stocks today was not so evident in corporate bond-land where we saw net-selling overall. Copper slipped well off its highs of the day but ended very well as Oil was only able to match USD weakness on the day while Gold and Silver outperformed (with the former touching $1750). VIX was a popular topic as it dropped below 30% but we note that implied correlation did not drop from the open suggesting macro-hedges remained more bid than underlying sentiment might suggest. IG credit outperformed (relatively speaking) which seemed more a squeeze move into the month-end close but HY's move was impressive as an early afternoon fade in HYG reverted to end at its highs. Equities and Credit ended back at 11/14-15 levels with IG and HY ahead of equity.
Credit and Equity surged to get back to mid November levels and we note that IG credit appears to be leading - not exactly a hugely high beta sentiment really and more like a squeeze on low-cost hedgers.
We have talked about the relationship between index vol (options) and the vol of the underlying components a few times. The green line in the chart measures the relationship between index vol and the underlying vol of the components of the S&P 500. While VIX futures (red) did indeed drop significantly, the fact that Implied Correlation did not suggests that there remains an underlying bid for more macro protection than underlying single-names - or more differently correlation is expected to remain high as risk-on / risk-off remains the regime.
Consumer Staples were the month's outperformers and Financials the laggards but the strenght of financials since Friday is considerable.
Commodities today were exciting but flatlined this afternoon (post Europe close) and wqe note Oil's clinging to the USD move today. It was clear that Gold and Silver were the higher beta Fiat bets while Copper just got over-excited at China's new growth prospects.
FX markets were very dispersed today as AUD massively outperformed and JPY underperformed relative to the USD. Notably DXY is back to 11/22 levels but as is evident the change across various individual pairs is huge.
And finally, to put the move in CONTEXT, we look at how a broad basket of risk assets performed relative to ES (the e-mini S&P futures contract). As the smash higher occurred, markets synced as we suspect machines reverted to their algos and looked for correlations to center around some price level. As teh afternoon wore on, broad risk markets did not remain quite as excited and stabilized as stocks managed to squeeze higher into the close on decent volume. ES remains 10pts or so expensive to the CONTEXT of broad risk assets for now.
Charts: Bloomberg
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Pumped shamelessly!
Are we at the same point as September 18th-19th 2008 when the FED stepped up and tried to save things with it's new buying policy and insuring deposit accounts to $250,000. What happened after that?? The plunge. What is really lurking out there. I got raped today but I have a very tough time going long.
I agree nothing has fundamentally changed. Europe is still lame, china might be bursting, banks are still having major issues etc.
On the other hand TBTF have no interest in letting things meter out on their own and look like they're gonna milk it as long as they can.
Dont worry it won't be long before something else bad happens, theres just to many bad things in the air one of them has to drop.
You people need to sit back and relax. Watch the jugglers as they keep the balls in the air and marvel at how talented they are. They are officially on borrowed time looking at past financial disasters. Three years is the norm, so we have 3 years plus one month. Let them go for the record. The clock is ticking.
http://www.youtube.com/watch?v=EjYLRxHWKiQ
This time, the 'answer' for the financial disater (which of course theyll all say was impossible to foresee) will be real, real, fugly.
Just two data points I saw today make all the other "news" look flat out like moves of desperation. One was China having the worst factory orders since the depth of the big plunge in 2008, and the other is oil over $100. Chinese PMI and factory output shrinking the most since 2008 would be bad enough but those are lagging indicators, they show that we have been headed down for a while now and that new submergence is just starting to show up in the stats. They can talk up finance and all the green shoots they want but Chinese factory output is where the rubber meets the road as to the general economy with consumers.
Oil at over $100 though is a leading indicator. As the excess summer blend inventory has to be sold and worked off and fast the price of RBOB has been stable to going down at wholesale level even as crude is up $20. Actual retail demand is down but prices have not followed since jobbers have spare capacity to store it till next spring the refineries do not. What is not sold by the deadline for selling winter blended RBOB will be sold to you in the spring at a hefty profit. In the meantime winter blend is hitting the pumps made from $95-100 oil and you can look for gasoline to be over $4 by Christmas, new years at latest unless demand drops of a cliff even from here, still it will have to go higher with the new crude reality. Also, I predict average price of a gallon of unleaded will be $4.50 on May 31. Unless we are are in a depression, then it will be $4.399.
Here is my two cents worth on my blog.
http://usa-wethepeople.com/2011/11/us-set-to-bail-out-europe/
How can you be long or short? Fundamentals say short but intervention says long, at least for a day. But the longer this intervention/manipulation goes on, the longer we all have to watch this BS play out. The more I think about it the more I think it can carry on for much longer than many of us think.
These swap lines were already open till next Aug at 1%. Obviously the question is...if they weren't working at 1 how much better will they work at .5? Something very serious has happened we just don't know what it is...yet.
Agreed. Something is that is not obvious to us is broken.
My SWAG says it has something to do with loans that cannot be paid (duh).
In perfect character, the CBs think more loans at lower expense will solve the problem.
There is so much to be rolled so soon that we likely will find out what (or who) is broken in fairly short order.
Swapping FRN's for euro, talk about the blind leading the blind!
Yes, all the stories say we are going to lend enough support to europe to calm markets, as in lender of last resort which not even the ECB could or would be. But, how much, on what terms? For what collateral? Germany put it's foot down because once you go down that rescue road you get sucked in, it will never be enough, it only encourages even worse practices and if all the zone knows we will step in with cheap dollars all the zone will go on a debt binge and they can't even service the debt they have now, the US will have to print by the trillions just to keep the rates at less than zero interest after inflation. The Fed has in effect said today that their balance sheet has no limit real or imagined. If there were some ambiguous limit to how much "help" we will give then we will reach that and find out all we ponied up till that limit was so much dust in the wind, money pissed away.
I would say that this has to be the total last gasp end stage of a dying system, but they keep coming up with a way to eek out a few more months, then weeks, now days. 2012 is not going to be a whole lot of fun. Thank goodness there is a huge cave network nearby, Oregon Caves in Cave Junction, for those that remain these will be the uber bling of cave dwellers.
I keep forgetting to add that we can allow Harrisburg PA to go bankrupt and get taken over by the state, we can allow Jefferson County Alabama to go bankrupt, we can stop enforcing laws all over the country while kids get pepper sprayed by overtime cops in the face for sitting down, we can refuse to fix our own roads and bridges and we tolerate 20%+ unemployment in the USA, we give a piddling 3.5% COLA to the poor and retired for the first raise since before Obama took office, we have NO money for those things yet we can afford trillions for German stubborn attitudes and Italian bunga bunga.
Nice.
I got raped so bad I can barely walk, and at that I had only 2x leverage. Can you please provide a link to what you are referring to in 9-18-2008?? anyone?
here's a great blog! check the archives too! great charts!
http://pebblewriter.blogspot.com/
Rape is the new foreplay.
agreed...tough day to be short but i don't see how the coordinated action is anything but an act of desperation...the fundamental problems have not been addressed and may in fact be worse than previously thought
at any rate, moves like this are not symptomatic of a healthy market imho
Press Release
Release Date: September 18, 2008
For release at 3:00 a.m. EDT
Today, the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan, and the Swiss National Bank are announcing coordinated measures designed to address the continued elevated pressures in U.S. dollar short-term funding markets. These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets. The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures.
Federal Reserve Actions
The Federal Open Market Committee has authorized a $180 billion expansion of its temporary reciprocal currency arrangements (swap lines). This increased capacity will be available to provide dollar funding for both term and overnight liquidity operations by the other central banks.
The FOMC has authorized increases in the existing swap lines with the ECB and the Swiss National Bank. These larger facilities will now support the provision of U.S. dollar liquidity in amounts of up to $110 billion by the ECB, an increase of $55 billion, and up to $27 billion by the Swiss National Bank, an increase of $15 billion.
In addition, new swap facilities have been authorized with the Bank of Japan, the Bank of England, and the Bank of Canada. These facilities will support the provision of U.S. dollar liquidity in amounts of up to $60 billion by the Bank of Japan, $40 billion by the Bank of England, and $10 billion by the Bank of Canada.
All of these reciprocal currency arrangements have been authorized through January 30, 2009.
Great post. Now look at what happened in the 3 weeks following this announcement. The SPY closed that week out at 123.47 and 3 weeks later, it closed at 88.04. Something to keep in mind, especially now since we are looking at solvency issues on the sovereigns, not just the banks.
You had a bad day? I was 2469th in the CNBC stock/forex contest short everything and they just called me and the guy never said anything. He just kept laughing.
Why you would invest your hard earned money in a corrupted, manipulated, fraudulent sewer like the US markets remains a mystery to me. You are not part of the ruling elite, you are not an insider like Warren Buffett, you do not get bailouts from a corrupt banking cartel if you guess wrong and you have no idea what these bastards have up their sleeves for the next 2 minutes let alone for the next day or so. You are a fool to read charts and suggest they offer insight into the future or to ever invest in paper commodities with such corruption as seen in the CME. In short, I am sorry you lost money today but, Ben Bernanke is a phony, liar and a cheat and to invest in a system built on accounting fraud and deception is a fool’s game. Get out, stay out, get into Gold and wait this out, you will become very rich when this fucking charade ends.
The Federal Reserve is a terroist organization.
I couldn't agree more. These academic losers are doing everything they can to destroy the free market. Somehow they just know what's good for us. It is amazing that such a small group of unelected people have so much power. Price discovery on a regular basis is a rare thing and soon to be a distant memory if it keeps going like this.
WEll after a day like today.. time for some chicks - http://hedge.ly/gFWVSm
SPY vs. FXE now at extremes.
Tomorrow we get a pullback, unless the Euro takes off.
http://chart.finance.yahoo.com/z?s=SPY&t=5d&q=l&l=on&z=l&c=FXE&a=v&p=s&l...
Presented with zero commentary. (Sorry for stealing your line, Tyler!)
http://data.cnbc.com/quotes/nflx
I wonder who squeezed in that buy of 500k shares at the last minute
Name begins with a B and ends with an ernank?
"When faced with a severe recession and you want to get the company's stock price to zero the board should double subscription prices every 6 months "
Chapter 9 page 315 Rule #3 of Corporate Governance by Moe, Curly, and Larry
The Euro is dead. It is something everyone knows but will not accept. In fact I would say these swap lines were opened to facilitate the end of the Euro.
Hmmm yea very possible.
So . . . if the Euro is dead, is it time to start buying some sov bonds?
dude u been here 2 years and i like ur name and most of what u say.
but u and all the other "OGs" here need to
SAY SOMETHING WORTHWHILE U GRADE SCHOOL PLAYGROUND BLOWJOB MAMMAS BOYS
why dont you GOLD AND SILVERBUG SURVIVALIST REDNECK OFAY FAGGOTS go SHORT GOLDMANS SIGMA X HOLDINGS YOU LAZY CUNTS
lennon hendrix whaddup
'Say something worthwhile' like what...do like RoboTarder does and list a couple stocks after close that are up on a 5 minute chart, and say you should have bought that this morning?
I say buy commodities, and take delivery of them, sorry if thats not what you want to hear....but I'm out-performing the SHIT out of equity markets over the last 2 years I'll guarantee you that!
You want 'Market gamblin' advice'? Go over to Yahoo! Finance...seems like you'd fit in better there with those clowns anyway.
Fuck you sockpuppet moto,you slimmey piece of shit.
Would love to smack you silly.
But you allready there.
FuckTard.
I was wondering that too. Won't these swap lines simply allow hemorrhaging EU entities to pawn off their worthless Euros on the US?
That's the opinion I'm under. Ben Bernanke is Mikey, and the bad Euro debt is Life cereal.
And just like Life cereal, which is chock full of soluble fiber, said Fed holder of same will experience the thrill of euro value incontinence -- to borrow a line from George C. Scott, "Like shit through a goose."
bingo, transfer the problems across the pond and stall (while buying gold)
curious, would it be beneficial to bring out the DM while the euro is high?
@ Sockcutter - you've got your Caps lock stuck on ...try typing with fingertips, not your buttocks
PS. you mention we should short Goldman Sucks... presumably you went long GS, JPM and BoA today yes?
PPS. did your Mum take your dummy away today, is that why you're a little bitter and twisted??
thanks for proving you actually have some balls everytime you post.
DOWNVOTE US U DUTCHFUCKING NAZI CUNTS
ROBOT TRADER IS A GOD. ori shoves broken glass bottles up his ass because it makes him feel like a for real DAY TRADER
suddendebt whaddup
td whats up with marla
LOL who is this, RoboTarders 'Go insane' ID for when he wants to act all crazy?
Pretty funny for all that. Gotta laugh sometimes as the world burns
Harry Wanger?
Wanger experiencing one of his Tourette's episodes.
So... I wonder which bank was going to fail today or tonight, which caused The Ben Bernak to use the FED to bail them out?
How bout this, end the fed, after we torture them. Then do this to them:
http://www.youtube.com/watch?v=drS0IHk-n_Q
There are no markets anymore...only interventions. - Chris Powell, GATA
There never were markets. The rich and powerful can't make a honest buck in a rational market that isn't fixed, so they are all fixed, and they always were.
I'm so glad that swap lines clears out bad debt and insolvent nations. Maybe we could open swap lines for those in underwater mortgages. I mean, if it’s good enough to fix countries, it has to be good enough to fix individuals.
Can't trade fundamentals just go with the flow--awesome day...
Can't even invest, nor make mid-term trades in this market. It's all about daytrading.
I need a drink.....
i hear that...double scotches all around
Pour it softly, pour it gently, and pour it to the brim !
tequila...via Esplon.
So markets are up on free money for the banks day...WOW so impressive!
Not.
And when BAC goes below 5 they'll do it again!
it's helter-skelter
I'm trying to crunch the numbers. Is it 'mass x velocity' to figure if you jump out of a particular floor it will have the desired outcome?
I suggest some field data. Push a banker out of each floor of a building - starting at the 5th, and up from there - and see what you get. The bonus is you get some sidewalk art. :D
No need to calculate. Just overestimate and you'll achieve it.
Transitory and barbaric.
Gold, silver, oil all had an early run but were then capped today and literally ran into an overhead ceiling while stocks ran free...hmmmmmm...almost makes you wonder???
The Blythe giveth; and the Blythe taketh away.
Blessed be the name of the Blythe.
Yes, gold and silver are not allowed to go up during US trading hours, only during the Asian market. We have to balance those standards of living you know.
Don't forget, guys. I predicted this last Friday, long before any fed action.
http://www.bushongbusiness.com/skip_danger/index.cgi/page/1/md/read/id/2...
My favorite comment from the day:
http://www.nytimes.com/2011/12/01/business/daily-stock-market-activity.html
"Effectively, the Fed has reduced the cover charge for alcoholics at the bar, but it has not changed the fact that the people at the bar are alcoholics."
Walmart hires a few Shelf Stocking Bitches and look what happens.
What did my Hundreds of Billions of Peso's buy me?
US Tax Payer
You get the blissful assurance that the banker's families will be feted and kept in the manner to which they have become accustomed.
Whaddaya want? Jeez.
So fundamentalists got raped again. These markets require more than fundamentals.
Looks like Robert Prechter and his Idioticians, sorry Ellioticians, have f**ked up (yet) again, tripping over their wave counts and falling flat on their fat faces yet again
Prechter called a 'special short' of the stock markets last week (as he did every month throughout 2010) and dribbled an extra long pager on the market dumping (it will one day Rob, but calling it 24 months in a row you're gonna get it right one day tosser but not by skill !)
...indeed despite failing miserably every month of 2010, and his thick-as-a-retard collegue Steven Hocberg also getting his calls (badly) wrong every week of 2010, these Idioticians still think they can keep calling the market
Failing 12 months out of 12 months hasn't given Prickter even the remotest clue he hasn't a clue what he's doing... Putzpants just keeps on predcting, keeps on failing, keeps on being the worst market caller and biggest joke in stocks, Forex and metals
Elliott Wave International: a 95-100% failure rate but Rob Prechters complete delusion and belief trumps factual reality and his appalling track record... keep the faith Rob, you're an ongoing tragic reminder of what an ongoing tragedy you are
You obviously don't understand EWT, because this was clearly a double zig zag extension with a subminuette twist and just a sprinkle of astigmatism. Our studies have shown that 99.9999% of the time, this pattern results in a continuation of what will prove to be the hairy third leg down of a grand supercycle crash. /sarc
Prechter himself says that EWT works because the markets are an especially accurate and clear reflection of human sentiment. But we all know that's bullshit. The markets reflect what Ben and company want them to reflect. So, by Prechter's own admission, EWT won't work under these conditions. I'm sure he's alerted his subscribers to the problem.
Hey Tyler.
I bet you could develop a new index...the "a major announcement will break in 72 hours" index.
Look at the pattern of divergence between ES, Context, and various stock indices with previous big market moves.
I would appreciate a heads up before the next breaking news event.
The market response to the growing urgency to print currency is not a good thing. This rally will be short - lived. The bow of the Titanic rose, when the ship hit the iceberg. In economic context, the debt load will rip a hole in the economy. Got a seat in the lifeboat?
http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/
this is it, BiCheZ!
slewie is now leaking the fact that this shit won't work!
oh! the humanity!
Charles Ponzi, meet insider trading.
A marriage made in hell.
I dumped all my shorts Monday expecting something like today to happen by Friday -- its so predictable. The short ETFs were dirt cheap today! We should be back to doom and gloom by this weekend.
Very useful, thanks Ben!
Study everyone if you will, the week of 9/14/2008.
ZeroH Knuckleheads get raped pretty good today. :)
Keep shorting, punks.. :)))))
Lol! Nice try. The short is always over after 10%, whether it's over or not. Most here are smart enough to know that. My accounts all rode this up today. But I'm always cocked for the next short. Almost like picking cherries.
Go long then and Wall Street will short you. F*cking santa rally just happened. All we need now is more EZ bad news...and watch for it, China/Asia problems. US markets are in la la land. Juiced by the FED.
No new highs butnut.
Eat this: 1325 on S&P by Year End.
You mean profit this. We'll take what the ponzi gives.
Eat this, top ramen a buck a package by year end. Gas $4.50 by May.
End yr rally just happened. With oil now bid at 100, major slowing down in the EZ, China and yes the US, this is a sharp meltup - stocks peaked in one day. Still credit markets love CB intervention and it was a major event to be a non event in the next few weeks. This is not bull run, just the Santa rally came earlier. Some consolidation next few days. Then the market will go short.
...Asia just got hit with more inflation.
NOV 25 S$P screen shot, now look for upper zig-zag band.
http://img696.imageshack.us/img696/2159/spnov25.jpg
I can't wait till someone smacks the USA off their throne......
Please be soon....
Gold outperformed shit today.....
whatchu talkin.you.
The USDollar dropped.
As the name suggests, I'm still learning, so bear with me..
The bulk of the rally happened overnight in futures then the markets popped first thing on little volume.
Then all the volume happened just to push it up another little bit.
I know this is simplistic but it seems like prices were just adjusting to currency values.
Am I seeing this the right way?
Thanks for all your comments, banter, and humor here. I learn a lot from this site.