Oil And Treasuries Lead Stocks Higher As Credit Lags And Volume Remains Flaccid

Tyler Durden's picture


Admittedly slightly higher than yesterday's year-to-date lows in volume, today was not much better as S&P 500 e-mini futures (ES) pushed up over 1400, back to three month highs, on decent average trade size (following yesterday's low average trade size). Treasuries tracked stocks (higher in yield) but Gold and the USD disconnected (from stocks) into the US open and never really recovered. ES rolled off its highs late on and reverted perfectly to VWAP once again and rather coincidentally the 'correction' occurred just as ES priced in Gold hit the year's highs (which intriguingly is a critical cliff's edge level from a year ago). Oil's surge (and Treasury's weakness) were the main risk drivers which pushed CONTEXT to lead stocks higher as FX, credit, and PMs trod water largely. Interestingly, in ETF-land, our capital structure models were flashing red with HYG down notably and credit underperforming broadly, along with VIX (and VXX having an outside up-close day) not playing along with the rally. With VIX bouncing off 4-month lows, closing back over 16% (and up on the day), the pull to VWAP into the close on decent average trade size, the plunge in short-interest, and the underperformance broadly of credit markets (especially the ever-reliable-for-a-pump-job HYG); we'd be a little nervous up here (especially after Europe's sovereign and credit weakness today).

ES reverted nicely to VWAP amid low volumes (but notably higher average trade size with blocks coming in at the close); ending up 0.5% with VIX unch at 16%...


Credit dramatically underperforming equities...


With S&P 500 e-mini futures priced in gold at an interesting level...rolling over today into the close...

and close-up...


and Treasuries and stocks clung to one another while Gold and the USD decoupled lower (and it seemed like stocks wanted to get down there into the close)...


and while CONTEXT (based on broad risk assets) was dominated by Oil and Treasury's move today, the ETF-Structure (upper left) saw a major disconnnect (which we haven't seen recently) in HYG and VXX from SPY and TLT...


as is clear from the day's performance (inverted to make 'risk-on' action in stocks optically pleasing); VXX pushed higher and HYG lower as SPY recoupled with TLT on the close...

The last few times when HYG has closed red and SPY closed green two days-in-a-row were: 5/23 SPY fell 3.2% in next 5 days; 4/2 SPY fell 3.4% in the next 6 days; 1/12 SPY fell 0.5% the next day and rallied back 1% in the next 3.


or more clearly...


and as we noted last week, cash bonds appear a little over their skis - with the advance-decline line now rolling over...


If this HYG sell-off (which saw notable chunks of heavy volume in the afternoon) combined with the advance-decline in bonds is anything to go by, then this could get a little ugly given how low inventories are, how dire liquidity is currently, and the over-crowded nature of the trade.

Charts: Bloomberg


and Today's Bonus 'Oh Shit' chart is Priceline now -12.5% after-hours...

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Tue, 08/07/2012 - 16:16 | 2685683 bezell
bezell's picture

Markets ready for a plunge!!!!!!!

Tue, 08/07/2012 - 16:23 | 2685705 ihedgemyhedges
ihedgemyhedges's picture

Priceline tanking?????  Poor Robo, guess he'll just have to keep wanking off to his avatar for any after hours fun today............

Tue, 08/07/2012 - 17:02 | 2685795 slaughterer
slaughterer's picture

Things do not get super-ugly until HYG drops below $90.  Perhaps by Friday.  :-)

Wed, 08/08/2012 - 00:06 | 2686710 oogs66
oogs66's picture

ES priced in gold, did gartman write this?

Tue, 08/07/2012 - 16:19 | 2685692 azzhatter
azzhatter's picture

Tyler said flacid

Tue, 08/07/2012 - 16:19 | 2685694 buzzsaw99
buzzsaw99's picture

the price is wrong bitchez!

Tue, 08/07/2012 - 16:21 | 2685699 Meesohaawnee
Meesohaawnee's picture

DTO getting juicy. The fibber in chief knows 100 oil will wake the sheep. no way 3 months before this can be allowed..!! must get re elected to lead sheep to slaughter.

Tue, 08/07/2012 - 16:23 | 2685702 magpie
magpie's picture

Where art thou, SPR

Tue, 08/07/2012 - 16:23 | 2685703 fuu
fuu's picture

"Shatner's knee deep in hookers and booze..."

Tue, 08/07/2012 - 16:34 | 2685726 LouisDega
LouisDega's picture

He looks it. 

Tue, 08/07/2012 - 16:35 | 2685734 adr
adr's picture

Unless we get a real plunge this would be a great time to buy Priceline. All other indicators show a favored stock like PCLN will make back the plunge and then some within a few days. The exact bottom is unknown right now, it could be -17% or -19%. Just means the perfectly timed insider buys will make maximum profit.

The half life of bad news seems to be two days. By Friday missed earnings will be old news. Whatever BS rumor the financial media puts out will take every momo stock up 10% in milliseconds.

I read that today's gains were because Chesapeake beat EPS. With all the BS that happened to that company over the quarter and nat gas surging over 70%, how could they not beat?

The farce continues. Up next, Episode 11 - The Bernanke's Blue Balls. Followed by Episode 12 - The Backed Up Load Blows

Tue, 08/07/2012 - 16:35 | 2685735 Catullus
Catullus's picture

First Energy took it on the chin today too. The economy sucks. They confirmed guidance for 2012. But pulled 2013 guidance and said their GDP growth assumption was 2.5% for next year. Ouch.

Earnings guidance across the board needs to be revised. Coming up on some nasty shit for back half of the year.

Tue, 08/07/2012 - 16:35 | 2685738 Meesohaawnee
Meesohaawnee's picture

pcln tanking? oh well now 1500 SPY is a lock.

Tue, 08/07/2012 - 16:35 | 2685740 SmoothCoolSmoke
SmoothCoolSmoke's picture

Shorts who somehow managed to tough it out are gonna come up big.  All 3 of us !!!!!!!!!!!!!

Tue, 08/07/2012 - 16:37 | 2685742 Winston Churchill
Winston Churchill's picture


Tue, 08/07/2012 - 16:40 | 2685748 optimator
optimator's picture


Tue, 08/07/2012 - 17:04 | 2685801 slaughterer
slaughterer's picture

6 (2,345 shares)

Tue, 08/07/2012 - 20:55 | 2686369 chump666
chump666's picture


Tue, 08/07/2012 - 16:41 | 2685749 bnbdnb
bnbdnb's picture

Web sales/service providers keep losing money. Bubble over.

Tue, 08/07/2012 - 16:44 | 2685758 AlaricBalth
AlaricBalth's picture

If anyone has an interest. This should make for some good reading tonight.
OCC Q12012 Derivatives report.

Tue, 08/07/2012 - 17:02 | 2685796 hankwil74
hankwil74's picture

Oil leading stocks higher because higher energy prices are good for the average business, or because higher prices at the pump means less expendable income for the average American to spend in the economy?

Wed, 08/08/2012 - 01:17 | 2686795 slewie the pi-rat
slewie the pi-rat's picture


read it again;  keep trying!

Tue, 08/07/2012 - 17:08 | 2685811 Meesohaawnee
Meesohaawnee's picture

7           signed.. Robotrader

Tue, 08/07/2012 - 17:11 | 2685816 CunnyFunt
CunnyFunt's picture

Did Sprott buy more silver today?

Tue, 08/07/2012 - 17:15 | 2685822 resurger
resurger's picture

WOW priceline WTF!

whoever was long that share, is Royally FUCKED!

Tue, 08/07/2012 - 17:26 | 2685849 Robslob
Robslob's picture

Until next week when it recovers do to HFT bot hunger for momentum.

Tue, 08/07/2012 - 17:28 | 2685854 disabledvet
disabledvet's picture

My understanding is that oil in storage has been at recoerd levels going on a year now. The temptation to inflate must be beyond belief. Of course who wants to make North Dakota the richest place on earth when all the "Special Relationships" are with the Saudi's.

Tue, 08/07/2012 - 17:58 | 2685925 Richard Head
Richard Head's picture

Paging resident fuckwit robot trader...you have a margin call, again.

Tue, 08/07/2012 - 20:48 | 2686355 chump666
chump666's picture

topping out brutally.

S&P f's   -0.20%, Dow f's -0.15%

looks like hedge fund selling.  USD is bid.  Awaiting HK/Shanghai.  HK goes neg with USD buying.  Indexes (may/april tops breached) should start to roll over.


Wed, 08/08/2012 - 05:34 | 2686977 145
145's picture

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