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Market Snapshot: Just The Facts

Tyler Durden's picture




 

The squeeze continued in equities as indices of the most-shorted names handily outperformed the broad market but it was the general aggression with which equity's moved relative to both credit and broad risk assets that will raise eyebrows as rumor after refutation after no-news after denial seemed to have full optionality with all the upside (hope) and no downside (reality).

Equities and credit stayed relatively close together until the early afternoon but as we headed into the last hour or two equities were making higher highs as credit lower highs (red and green arrows). Combined with underlying relative weakness in financial stocks, net-selling in bonds, and negligible compression in their CDS, it seemed equities may just be tottering but an upper cut from Gasbag and a left cross by YHOO/MSFT and ES took off to the races - well beyond credit, broad-risk-assets, and sense.

After hours, ES pulled back closer to fair (red oval) with credit indices and context but remains considerably 'better-looking' than most other assets would infer. The last 30 mins or so (into and through the close) did see risk-assets in general limping lower even as stock futures pushed higher (we have seen stocks notably rich to context since early morning today (Europe time). While the discrepancies between IG, HY, and ES are not large (above) and between ES and CONTEXT (below) it does provide some slowing pressure for the new normal reality elevation that is US equities.

 

Most specifically in credit today indices underperformed intrinsics (on the day - though remain well ahead from Friday's close) with skews implying the Long IG, Short HY decompression trade remains crowded (IG super rich and HY super cheap here to intrinsics). This could add some more ammo to HY outperformance but given the size of shifts in the short-end of the HY space (very much wider since Friday) relative to the 5Y maturity, we get the feeling that retail is getting drawn into HYG while pros are selling down cash HY. It did seem like retail was buying while professionals were backing up the truck less. Nowhere is that more evident than in HYG relative to HY this afternoon...

We explored the technicals and less-than-bullish movements in financials bonds vs stocks earlier this afternoon - that did not change although Jimbo Gorman's leak did manage a decent ramp in the financial stocks into the close - closing +1.2% from Friday now (though Citi, Goldman, American Express, and BofA are all still lower from Friday's close in stocks). Basis trades in CDS-bond land and unwinds of arbs seemed the order of the day with very little real compression in spreads which remain hugely troublesome for a trustworthy organization in the financial services business.

The EUR just kept on going - even in the face of larger haircuts and further stress tests which appear only designed to show minimal GRE exposure which we all know is not the point. Besides with France and Germany having a tete-a-kopf about whether any bank has capital 'issues' and who will pay for it, we were rather surprised by the endless bid to the EUR (vs USD) as CHF weakened and CAD strengthened against the USD. After the close of cash in the US, the EUR retreated modestly as DXY bounced off the week's lows. AUD strength has been quite impressive too which always helps the carry trade get going more.

TSYs made it back to almost unchanged on the week (with the short-end underperforming) but managed a small rally around the close to end with yield down on the week but higher on the day. Modest flattening also came in on a day when the Twist bought TIPS.

Commodities and precious metals all bounced nicely this afternoon after being down earlier near the week's lows. Copper managed a unch-to-down-4%-to-unch roundtrip and Silver was even more impressive in its dip and rip. Gold, Silver, and Oil are all now higher on the week as Copper lags (Silver the outperformer) and Oil tests $80 once again.

The bottom-line is we are all waiting with bated breath for the 'fix' for Dexia tomorrow that will solve the ills of the world but for now we suspect the long-only equity managers that appear sheep-like one after the other on TV must be entering the peak Sisyphean phase just about now as volume lag and bearish sentiment and outflows remain and under the covers, professionals do not seem to be the ones holding this up.

Charts: Bloomberg and Capital Context

 

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Wed, 10/05/2011 - 17:09 | 1742900 trampstamp
trampstamp's picture

Man if that dollar breaks the head and shoulder tomorrow looks like we may have another up day. Crap.

Wed, 10/05/2011 - 17:11 | 1742910 Scalaris
Scalaris's picture

facts you say?

- does not compute. 

Wed, 10/05/2011 - 17:16 | 1742923 sheeple2012
sheeple2012's picture

perfectly rational 75 handle rally in a day and change... because uhh, umm...why again? 

Wed, 10/05/2011 - 17:16 | 1742924 arm50
arm50's picture

We will see $8-9B reverse-POMO tomorrow. Should be interesting.

Wed, 10/05/2011 - 17:20 | 1742937 disabledvet
disabledvet's picture

You forgot to add "and 50 billion dollars really isn't all that much cash on hand." Other than...pretty good!

Wed, 10/05/2011 - 17:22 | 1742945 Zonker
Zonker's picture

Another huge missed trading opportunity by ZH... 70 handles becuase the sky is always falling

Wed, 10/05/2011 - 17:27 | 1742959 buzzsaw99
buzzsaw99's picture

you should go over to ibankcoin. they have been long throughout this selloff and are up like 145% over the past three months. lulz

Wed, 10/05/2011 - 18:09 | 1743096 walküre
walküre's picture

The experienced ZH community bought the oversold market and is selling into this rally.

I suppose you might be one of the few that are thankfully still buying. Keep it up.

Tomorrow is another day.

Thursday is no POMO on deck, FWIW and Friday is more POMO.

Trade it accordingly.

 

Wed, 10/05/2011 - 17:45 | 1742948 Cult of Criminality
Cult of Criminality's picture

Well until tommorow

 

Shiny Happy People... REM....

 

http://www.youtube.com/watch?v=S8afojtw4UE&feature=related

Kate is so hot I had to watch it twice....Feel the energy rise up your spine with her voice,You deserve it.....Feel good !

My best to all

Wed, 10/05/2011 - 17:27 | 1742960 paul_Liu
paul_Liu's picture

Tyler, Please continue your fight with MS.

Wed, 10/05/2011 - 17:32 | 1742976 RobotTrader
RobotTrader's picture

Oh well.

Both the Nasdaq McClellan Oscillator and Summation Index turned back up today.

http://stockcharts.com/freecharts/McSumNASD.html

Yahoo Finance reported a massive surge in breadth also.

Richard Russell's PTI indicator last night was +8.

So it is still a green light for the bulls.

Wed, 10/05/2011 - 18:28 | 1743148 SheepDog-One
SheepDog-One's picture

Hey how did all your indicators work for you when you charged in all long at DOW 12,700?

Youre such a total ass hat.

Wed, 10/05/2011 - 17:32 | 1742979 SmoothCoolSmoke
SmoothCoolSmoke's picture

Leisurely adding to SPXU, FXP and MS puts.  SP 1000 coming before SP 1200.

Smoking MacBerans Mature Virginia in a Boswell Lumberman on the ride home.   Night all.

Wed, 10/05/2011 - 17:33 | 1742983 Zgangsta
Zgangsta's picture

Argh, I hate all of this foreplay!  Let's just get straight to banning all shorts and margin, and let the chips fall where they may.

Wed, 10/05/2011 - 17:44 | 1743028 LeonardoFibonacci
LeonardoFibonacci's picture

When the gubberment supports its banks like US of A did 3 years ago, we are communists period.  And Zimbabwe Obama should go back to Africa!

Wed, 10/05/2011 - 17:56 | 1743055 slewie the pi-rat
slewie the pi-rat's picture

My name is Wednesday. I'm a cop.

Wed, 10/05/2011 - 18:07 | 1743089 John Law Lives
John Law Lives's picture

The stock market and the real economy exist in different realms.

This is reality in the US:

http://blogs.wsj.com/economics/2011/10/05/nearly-half-of-households-rece...

excerpt:

"Nearly half, 48.5%, of the population lived in a household that received some type of government benefit in the first quarter of 2010, according to Census data. Those numbers have risen since the middle of the recession when 44.4% lived households receiving benefits in the third quarter of 2008."

 

Wed, 10/05/2011 - 18:18 | 1743116 chump666
chump666's picture

This is a mid week squeeze, given oversold levels you gotta expect this, but, it won't last.  The rumor melt-ups are good for 48hrs max, so they pumped another session (last) full of BS.  I don't think the market is buying on the rumor, it's just covering short positions.  There will be resumed selling into the close of the week and into next week,  Remember Asia was selling yesterday and Copper has been selling since Sept 2011.

Oil went bid as Asia (net importers) is going into a hard landing.  Good job Europe...

Wed, 10/05/2011 - 18:22 | 1743129 chump666
chump666's picture

...and if CDS spreads don't narrow for Asia during their trading session. 

US/EZ markets will get the wake up call from hell.

Wed, 10/05/2011 - 18:26 | 1743145 SheepDog-One
SheepDog-One's picture

All conditions will be different within 12 hours. Trade accordingly.

Wed, 10/05/2011 - 18:31 | 1743161 msmith
msmith's picture

The SPX sees a potential pullback before the upside resumes.  http://bit.ly/nomuaV

Wed, 10/05/2011 - 22:14 | 1743954 El Hosel
El Hosel's picture

msmith

  ..... Yeah, the SPX is UNCH the last 12 years or so. Wake me up when the "upside" resumes. 

Wed, 10/05/2011 - 18:47 | 1743230 nyse
nyse's picture

Key: "professionals do not seem to be the ones holding this up."

Bingo.

Wed, 10/05/2011 - 20:17 | 1743599 jm
jm's picture

Funny, I talked to some professionals today with some HY energy producers they broke...

Wed, 10/05/2011 - 18:53 | 1743247 RMolineaux
RMolineaux's picture

A suggestion to Tyler:   In your current analysis you have come to rely a lot on the movement of credit default swaps (CDS) as a data trend .  This may at some point backfire, since their prices reflect the passing opinions and emotions of speculators and little else.  CDS are at the center of the derivative superstructure and are a recent (and unnecesary) addition to Wall Street's new and ingenious methods of skimming the cream from the economy.  Until a few years ago, CDS were used almost entirely in the municpal bond market, unti some Wall Street hotshot decided it could be a good source of fee income.   Then, without reserves or supervision, the value of

 

 

 

 

 

Then suddenly the market balooned out into insured amounts of unbelievable size, with non-holders getting into the crap-shoot, on the pretext of adding liquidity.  (Where have we seen that pretext used before?)  In my opinion, all CDS should be legally nullified, with premiums returned to purchasers with interest.

 

 

 

 

cd

Wed, 10/05/2011 - 23:03 | 1744051 PulauHantu29
PulauHantu29's picture

You can't eat the damn stuff!

 

Gold’s Still A Great Investment, Says Frank Holmes–The Price Will Double


By Henry Blodget

 | Daily Ticker – 9 hours ago http://finance.yahoo.com/blogs/daily-ticker/gold-still-great-investment-...
Wed, 10/12/2011 - 11:29 | 1765877 karmete
karmete's picture

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