Peeking Beneath The Surface Of The 'Most Hated' Stock Rally

Tyler Durden's picture

Since hope re-blossomed at the start of June and was reignited by Mario's musings, the equity markets of the US and Europe have surged in an outpouring of faith in central bank excess and policy-maker's abilities to 'fix' everything (despite decades of truth that points in the exact opposite direction). But while the market levitates on ever-increasing multiples (as earnings current and forward are dragged lower by the economic reality of a debt-deleveraging world), the true picture of what is driving stocks become clear. For the first time since the BTFD rally began in March of 2009, cyclical stocks (or economically-sensitive firms) are underperforming notably - implying notably lower expectations for a levered recovery by the consumer. As Bloomberg's Chart of the day notes, either the economy will hockey-stick back to a significant rebound or broad equity market indices will fall back to a more defensive reality - given the non-economy-helping nature of LTRO/QE, we suspect the latter. Do you believe in miracles?



and as a reminder from MS Adam Parker:

Underneath the market rally there has been some abnormal micro structure, including the fact that mega-caps have outperformed in an up tape, high beta has underperformed, and in the last month energy was the best-performing sector while materials was the worst, despite the 0.83 correlation between the two over the past 40 years.


Chart: Bloomberg (via RBS)

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
SheepDog-One's picture

Perfect conditions for another '08 event....or even Sept 11 event.

Jayda1850's picture

bank holidays are so 1930's, I'm waiting for market holidays. you'll see how quick a society can collapse when mobs of people can get their fiat out of this BS system.

Skerp's picture

I agree, but still markets march higher.

My shorts getting slaughtered!

aint no fortunate son's picture

Every time the market starts to go DOWN, there's a mysterious (NOT!) sell-off in VIX... happening again today - VIX down even with markets down, near 3 year lows. Somebody (now who has the monsy to do that, eh Ben?) seems to be in shorting VIX every time - it's been especially evident during those late afternoon melt-ups on no volume, like Friday. VIX no longer reflects fear, its a proactive policy tool used to game the markets higher.$VIX&p=D&yr=3&mn=0&dy=0&id=p02845418374

If your shorts are getting hammered, thank the Bernank

orangedrinkandchips's picture


I agree, VXX, VIX and the bond markets are SO distorted and BROKEN....the markets do not work anymore. Beyond broken and distored.


But who is bigger than the markets?


Not me....

aint no fortunate son's picture

hope you're right

this gaming of volatility seems to have really picked up right around the time Sack left the FRB head trader spot - new guy making his bones?

TraderTimm's picture

Makes you wonder if the entire yield curve in the US is just a propped-up lie, like the LIBOR. What if the Chinese have been silently 'redeeming' their positions, but the curve hasn't budged due to artificial means?

As the tide recedes, we keep seeing larger and larger lies exposed in the muck. Who knows what it will expose next.


aint no fortunate son's picture

well, if everything was exposed it would have bernanke and the keebler elf in Leavenworth doing life real fast.

if every too big to jail CEO got slapped w/ a dozen indictments starting w/ conspiracy and moving through bank fraud, securities fraud, mail fraud, wire fraud, extortion, blackmail, collusion etc etc etc by mr. moral coward eric holder it would only take one of those slimeballs to roll over to bring the whole house of cards down... i'd love to see them pull in old grandfatherly Hank too

if pigs could only whistle


mind_imminst's picture

All short-term crashes will be blamed on rogue algo-trading and be cancelled....presto...back up to a lofty level in the equity markets. A bearish trend of 10% or more will be met with FED/CB action...presto...equity markets will soar. No bear markets allowed in a centrally planned HFT world. Get used to it. Everything is bullish. Don't get caught with big short positions.

HarryM's picture

VIX does seem to defy gravity

Wondering how long thye can keep a lid on it

aint no fortunate son's picture

$VXN is down even more % wise today - just broke below 15 for one of the only times in its 11 year history$VXN&p=D&yr=3&mn=0&dy=0&id=p95840259434

aint no fortunate son's picture

I rest my case... it looks like he can keep it on forever?

this is a terrified bureaucratic little control freak who has to have a stranglehood on every aspect of the capital markets - he's capable of anything

AssFire's picture

Endless shrimp @ Red Lobster tells me all I need to know.

SheepDog-One's picture

Raised in a Chinese sewer...yum yum eat up!

yogibear's picture

Yep, raised in polluted pools. The Chinese know where their being shipped. Most people use shrimp sauce.

malikai's picture

Deepwater Horizon Special!

francis_sawyer's picture

Don't forget the North Atlantic Scrod with Quaker State...

SheepDog-One's picture

Still people think this is all about 'spurring a consumer-driven recovery'? Ridiculous.

Vince Clortho's picture

Perhaps a "corpse of the consumer recovery" ?

Ralph Spoilsport's picture

The money for the "levered recovery by the consumer" is being spent on one last summer of good times. Winter is coming and hearts are hardening. There's a signpost up ahead....someone from ZH has defaced it so it now reads: FUCK YOU BERNANKE!

buzzsaw99's picture

hear that? choppers. big ones.

El Oregonian's picture

Oh no, that's Nancy Pelosi and staff returning from Holiday...

Wait... Silly me... She's upgraded to 767's recently...

mrktwtch2's picture

geeting long a little not much but a little..

orangedrinkandchips's picture

Bottom line:  There are a lot of smart people in Europe and here and if someone had the answer, we would be fixed now. However, when very "smart" people cant find a solution to this debt crap then THERE IS NO EASY ANSWER.....


The biggest problem is that Governments themselves are nothing but suckers waiting to be ripped off by the private sector. Lincoln brought that up when he was President over 150 yrs ago.....Back then the Govt needed they got boats....with holes in them!!! Paying 5x as much as the public.



LongSoupLine's picture



don't confuse smart with "good intentions".  Smart has nothing to do with it, as some of the smartest people in history were corrupt criminals and thieves.

TraderTimm's picture

I think globally there are smart people, except few of them are in the position to do anything about this mess. Honestly, who could blame them - if you are smart, you don't exactly gun for positions that require you to tell millions of people what to do, you're more interested in your own explorations and mental discoveries.

Sandy15's picture

It's obvious that this market is so FED pumped.  Six days of positive movement without a pull back.  Then first thing this morning they start pumping up on reduced volume.  Just take your 20's, 10's and 5's copy as many as you can on your copier.  Put them in the Bank and pay off your bills...........What? It's the same thing the FED is doing.

LongSoupLine's picture

bad boys, bad boys, whatcha gonna do?  whatcha gonna do when taxpayers come for you?

otto skorzeny's picture

I just signed an online birthday card to B.O. as "Jefferson Davis"- makes me feel a little better on a rainy,low-volume Monday

saywhat's picture

I know i'm opening myself up for bashing here....but Mr Market will ALWAY drill the most players possible. Always!

So is the harder trade to close your nose any go long on leverage or short?...the retorical answer flies in the face of this Richard Bernstein artice.  He is no perma bull.  I also hear the David RosenBEAR is turning bullish.  Read, and flame at will:

saywhat's picture

I know i'm opening myself up for bashing here....but Mr Market will ALWAY drill the most players possible. Always!

So is the harder trade to close your nose any go long on leverage or short?...the retorical answer flies in the face of this Richard Bernstein artice.  He is no perma bull.  I also hear the David RosenBEAR is turning bullish.  Fead, and flame at will:

marz929's picture

No flame from me Mr. Saywhat. RosenBEAR bullishness revolves around his belief that there will be some structural reform of entitlements, deficit cutting, some tax reform. So he has a few caveats.

Me thinks the rally continues till the end of the year. Maybe a hiccup in September/October like always. Most marginal monies from the institutions will be directed at the stock market as opposed to bonds so there is your support. All bets are off for 2013 as reality sets in.

I think the really big question, contrary to many posts, is whether Bernanke actually does a QE3. I guess I am very naive and assume that the man may actually consider the impact to the working guy in the form of higher oil, food, gas, utilities etc. and he actually holds off. One can always hope. But me thinks the market will demand QE3. The beast must be fed.

LongSoupLine's picture



No flame from me because I firmly believe this completely fucking corrupted "market" is capable of anything when CONgress, the Chairsatan and Goldmember LargeSachs is at the helm of the USS "Fuckyoumiddleclass"

LooseLee's picture

Yeah, right. And sentiment is soooooo bearish. From everything I read in the MSM, it is bullish sentiment that is running rampant. I'm holding short. Being contrarian now takes a lot of nerve. And, oh yeah. Cash account only with no margin. I can out wait the bulltards...

Scalaris's picture

Abnormal micro structure?

Really, is this what we are calling it now?

Blopper's picture

A professional trader has no love/hate emotion.

I am more equal than others's picture

Enlightenment has been achieved when you have neither love or hate but only apathy.  Isn't apathy one step away from being dead?

Blopper's picture

We're all one step away from being dead, we just don't realize it.

Do you know when you will die?


Hobbleknee's picture

"either the economy will hockey-stick back... or broad equity market indices will fall"

Wow, I wish I got paid millions for such incite.

Pasadena Phil's picture

I tossed my HP financial calculator years ago. I now use my mood ring for making investment decisions so yes, I do believe in miracles.

Soph's picture

Interesting that the divergence increases with each big money creation by the Fed (QE1&2) and the ECB (LTRO). Perhaps these will not converge again, but continue to drift as central banks keep printing.

orangegeek's picture

Primary wave 3 down is taking its time getting started - for all you elliott wavers.

Jake88's picture

Elliott wave is unadulterated balderdash. Not the least bit predictive. There is ALWAYS an alternative count to accomadate any directional move. DUH!!!

Sisyphus's picture

The father of Elliot waves - Toilette waves - show that we are in the Turd spiral x{# -> *} mode. The flush component of the wave is entering a courtesy flush mode. Once the Turd is safe at the bottom of the tank phase, the Toilette waves will be ready for a fresh dump mode cycle; and that could be brutal.

By the way, I did not say that!

Cpl Hicks's picture did not think that thought.
Someone else did.

yogibear's picture

Bernanke and the fed will just keep printing money. That's the answer.  The is no political will to face deficits and curtail spending until the dollar is completely trashed. As long as the US is the reserve currency the US government and the fed will abuse it's status.

Higher and higher debt ceilings.  In the mean time credit rating agencies like Moodys and Fitch maintain the US political agenda.

Vince Clortho's picture

Printing and cooking the books.

It's what they do.