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Modest Late Day Excitement Tops Quiet Day
FX markets have pretty much trodden water for the last 24 hours with admittedly a small USD bullish bias providing little ammo for any correlation-driven risk-asset moves today. Credit markets did wonder gently up and down but ES was like a Parkinson's patient off his meds as it noisily whipped up and down in a small range generally tracking credit. Into the close HY and ES surged (on nothing except perhaps the EUR futures CoT data) as MF Global's stock price dived but HY managed to hold and close at its highs while ES pulled back modestly. IG didn't play into the late day exuberance and we suspect the HY shift is more index arb as intrinsics actually widened on the day and the index remains cheap. HY is still 'cheap' as a risk asset relative to equities which might explain some of the grab here into the close but with a weekend of uncertainty ahead, why not wait til Monday to add risk? Copper managed to rally from pre-open today as did oil marginally but Silver and Gold were unimpressive as they held gains (much as DXY was holding its losses on the week).
ES managed to make higher highs than early in the day (as did HY) but IG credit did not. The surge in HY was unusual especially seeing as the HY bond advance-decline line has risen into an empirically expensive region here. HYG and HY tracked each relatively well today - following yesterday's very notable divergence - but HY remains notably expensive as HYG basically went sideways all day. HYG and SPY managed to come back toegther by the close - again suggesting something technical at play specifically with HY17 index.
Volumes were definitely low with ES around 25% below average today and secondary bonds still quiet though IG picked up a little as issuance held. Still little to no HY issuance (which helps explain the advance in HY bond net buying as fund flows pick up) suggests risk appetite for new money is not frothy yet - perhaps they are waiting for November.
Late in the day, we saw a familiar pattern emerge as index vol dropped but implied correlation rose. This tends to imply that some macro overlays were being lifted (as single-name protection was maintained) - which fits with the moves we also saw in HY credit indices and fair-value. We would also add that VIX/VXV (short over medium term vol term structure) is very steep but implied skewness and kurtosis (as we have discussed here before) as well as the vol skew appear much more 'hedged' than the broad market - i.e. professionals are definitely maintaining hedges to some degree in equity markets as opposed to buying into the exuberance.
This does provide some ammo for those suggesting there is more room to the upside here as more capitulations are possible but the last couple of days we have fundamentally pointed to two main drivers of stress for equities which indicate a deteriorating EPS outlook no matter how many times we repeat the 70%-beat-earnings mantra.
Some context on the week is needed when considering commodities and FX. The USD is around 1.9% weaker on the week but as is evident above, the last 24 hours either saw everyone who trades commodities talking to their clearing houses or just away for the weekend (except of course Copper).
The earlier discussions with regard to the TSY complex and MF Global proved interesting and today saw TSYs rally back and 2s10s30s drop (carry bid). Stocks definitely disconnected from the TSY complex today but it seems in general bond and equity markets (think MIB vs BTPs) have become unqiuely driven asset classes thanks to interventions.
All-in-all, a quiet day with some flurry of risk-on at the close which seemed more technical than real demand. The wait-and-see mode in which FX traded made most sense given the weakness in European debt markets and as we closed ES remains 5-7pts expensive to CONTEXT (the broad risk-basket index).
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I learned alot from you today! Thank you
not that anyone cares about individual stocks anymore ....
Goldman Sachs cut Patriot Coal (PCX) to "sell"
two weeks ago, with a price target of 10
when it was trading for around 9 1/2.
Today it was up another 13%, to 13.60 ....
same old, same old .....
Hehe.
Owning individual stocks is so 20th century.
lol, just fade the big firms sell/buy recommendations.
Why not wait until monday to take risk?
Because by the time it looks good to invest the market would have already erased any excess gain.
I am quite happy to go long almost every weekend when i am back into stocks. It has been free money. No matter how early u get ur order placed you will miss that monday pop if after hours hasnt already claimed it.
Get risky this weekend.
Then go find some ladies!
100+ crude oil as we put those turkey's in the oven http://hedge.ly/rVNut4
So Tyler - Are you well now that the month has yielded another massive rally barbecuing your shorts in unprecedented fashion? I love the data on your site beyond belief and love your uncanny ability to dethrone the Wall Street bullshit BUT I think your abhorence of Wall Street spin doctors is having a "bias effect" on your readers in that they are going into "prevent defence mode" that is to say that you are spooking them into "CASH" when the worst "asset" (if you can call Ponzi-created fiat cash an "asset") that they could possibly own. Interviews with Grandfathers of German-Canadians that I know talked to me about what actually happened during Weimar 1921-1923 and they were saving every penny that they could possibly save after the end of the Great War because they were fearful. The post WWI Germans placed incredible faith in their banks and thanks to Baron Von Rothschild, in order to save his (losing) bond trade in the Weimar bonds, he DEMANDED that they reflate, the bankers and pols not realizing that his "offset" was his massive holding in GOLD BULLION. CASH is NOT "King". You will be told that it is the ultimate haven (U.S. dollars) just as the Austrian housewife was told by the Rothschild spinners that they should "SAFE THEY-R MARKS" in 1919. The ONLY way out of this disaster is through JETTISONING cash and applying it to hard assets. German Grandmothers that I know melted down candlesticks and jewellery and converted into currency and actually bought buildings in Frankfurt with candlestick "melt" and arose from the ashes as serious holders of prime income properties by 1947.
I do not have every answer but as a hard asset historian, as opposed to a "gold bug", I underpin my net worth with bullion and then trade the sentiment numbers from Barron's. In September, you had a 26% bullish concensus. It was 18% in 2009.
You posted over 100 times that European banks were going to "blow up" and everyone got short and sold. They didn't and now I am WAY richer than I was. Thank you and thank god for the "blogosphere".
End of story...
I never felt that ZH et al suggested 'cash'. More that one needs to move away from zombie purchases and realize that the absolute worst frame of mind is one of manufactured envy and conspicuous consumption. PMs are fine but at the same time - it's absolutely impossible for cash to disappear overnight. One NEEDS to hold cash because that's what the system around us feeds upon. PMs - store wealth. You would never fill your GOOD bag with only PMs. Cash talks to what percent of people? Quite high is my guess. I never get the feeling that 'cash' is a safe haven from this site - far from it - being an oddball, I hold more cash than 90% of the peeps here I'm sure.
When it comes to trading - We have good trades and bad. If you say otherwise - harruumph!! At tax time, my accountant asks how I 'knew' such-n-such was going to work out. I tell him, "I got lucky". Which is about 80% true.... Regardless of your conquests, I wouldn't doubt it's much the same with your trading account. Who needs a broker or even to read 'the news'? Random walk theory and darts work almost as well.
Do you think there are many active shorts here? I get the sense quite a few people have realized how futile Ponzi Street is. Do you sit at the blackjack table until your luck turns around? Nobody does or can, that's the way it works for The House.
DAX monthly chart at blog shows recent bullish candle revealing aggressive short covering rally enclosed within big picture bearish pattern.
Bullish USD weekly/monthly and bearish SP500/DOW monthly charts will eventually ensure reversal of equity uptrend.
http://stockmarket618.wordpress.com
I originally read that as:
'Modest Late Day Excrement Tops Quiet Day'same difference