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Pre-QE Trade Remains Only Beacon As Gold, Silver Outperform, Financials At October Highs

Tyler Durden's picture


Equity and credit markets eked out small gains on the day as Treasuries limped a few bps lower in yield (with 30Y the notable underperformer) and the EUR lost some ground to the USD. ES (the e-mini S&P futures contract) saw its lowest volume of the year today at 1.35mm contracts (30% below its 50DMA) as NYSE volumes -10% from yesterday but average for the month. Another small range day in almost every market aside from commodities which saw significant divergence with Silver (best today) and Gold surging (up around 1.15% on the week) while Oil and Copper dived (down 2.6-3% or so on the week) with the former managing to scramble back above $96 into the close. ES and the broad risk proxy CONTEXT maintained their very high correlation as Oil and 2s10s30s compression dragged on ES but AUDJPY and TSYs post-Europe inching higher in yields helped ES. HYG underperformed all day (often a canary but we have killed so many canaries recently). Energy names outperformed on the day (as Brent and WTI diverged notably) but financials did well with the majors now back up to the late October (Greek PSI deal) highs. All-in-all, eerily quiet ahead of NFP but it feels like something is stirring under the covers as European exuberance didn't carry through over here (except in ZNGA and FFN!).

ES volumes were the lowest ex-holiday in two months and 30% below the 50 day average volume.


Investment Grade credit just outperformed (on a beta basis) its high yield and equity peers today as HYG leaked lower in the face of the slow push higher in stocks (back up to their VWAP once again).


The commodity complex split into economically-sensitive and fiat-fiasco flows today as Gold and Silver just kept pushing to new recent highs (coordinated monetary policy and realization that LTRO doesn't solve insolvency - as Greece becomes farce) and Copper and Oil fell (global growth concerns?). With the USD up modestly on the week the outperformance is even more impressive and the fact that stocks are still nominally tracking gold and silver suggests the reality of their USD-numeraire is perhaps dawning on many.



Financials have had an incredible year-to-date with BofA up 34% for instance and Morgan Stanley a stomach-churning +29%. What is interesting though is that we have now stabilized at the late October highs which is when the European leaders decided on the Greek PSI deal (striking a deal that banks and insurers would accept a 50% haircut on GGBs). Citigroup remains the underperformer from these highs while more domestically focused WFC is outperforming.

30Y yields rose just over 1bp while 10Y was unch and 5s to 7s compressed 1-2bps in a lackluster day for Treasuries. This leaves 10Y as the week's outperformer (-7bps on the week) with 2Y actually +1bps on the week and the 30Y -5bps.

The USD rallied in early going after a miss in the Spanish auction (yes it was a miss no matter what certain TV chaps want to tell you) and a meet in the French auction. After US opened, the USD reversed and sold off and then as Europe closed the USD bottomed and leaked higher for the rest of the day. Once again FX markets reversed on market opens and closes. The EUR is down around 0.6% on the week (and the worst performer of the majors) though well off its worst levels from Tuesday. JPY is the best performer against the USD today and on the week as it has gained 0.6% (hence EURJPY has not been a big carry driver this week - though AUDJPY has seen renewed interest). The USD (proxy DXY) is up a modest 0.17% on the week.

Correlation between ES and broad risk assets continues to be high here (even as realized correlation within the equity indices actually drops to multi-month lows).  Risk is indeed on or off only and today's lack of volume push to new highs combined with financials back at what appears critical event highs and HYG's underperformance are a little more worrisome than normal but with NFP tomorrow, perhaps it is merely an example of fewer and fewer traders willing to participate.

Charts: Bloomberg and Capital Context


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Thu, 02/02/2012 - 18:08 | 2121418 non_anon
non_anon's picture

to the moon I tell ya, to the moon!

Thu, 02/02/2012 - 18:11 | 2121423 navy62802
navy62802's picture

That's the only place it can go in this environment.

Thu, 02/02/2012 - 19:24 | 2121590 SheepDog-One
SheepDog-One's picture

Oh I beg to differ, navy! It can go down and will go down, and when the last bear jumps onboard convinced it can only go up, thats when they pull the rug out! Money going down is just as good as money going up, these clowns make it each way makes no difference to them!

Thu, 02/02/2012 - 19:33 | 2121621 kito
kito's picture

nooo sheepie, there will be more hints and assurances and innuendo from ben that qe3 may be coming...and thats all thats needed to keep hopium alive. funny, almost a year and still no qe3. when will the hopium addicts learn? bens giving out supplies of methadone in the form of zirp, but its no substitution for crack cocaine liquid injection of lsaps!!!!! 

Thu, 02/02/2012 - 20:50 | 2121835 espirit
espirit's picture

Perhaps we should approach from a reverse psychology sort of perspective. 

Let Ben print.  Anticipate and expect global artifical life support - No, demand it!

Just thinking we have to get everyone on the same side of this Carnival Cruise Line. 

Thu, 02/02/2012 - 20:57 | 2121661 TruthInSunshine
TruthInSunshine's picture

The Bernank is trapped by his own hand. It's a liquidity trap.

Thu, 02/02/2012 - 19:06 | 2121538 ilion
ilion's picture

Euro shorts could throw in the towel if we close tomorrow above the 1.32 level. And when Euro goes up, we all know what gold will do. Adding some interesting thoughts here:

Thu, 02/02/2012 - 19:22 | 2121580 SheepDog-One
SheepDog-One's picture

All the Euro has going for it is shorts, if they leave the Euro is screwed.

Thu, 02/02/2012 - 18:09 | 2121420 fonzannoon
fonzannoon's picture

I just don't get the financials. If it's a dead cat bounce I guess I get it but otherwise I am lost.

Thu, 02/02/2012 - 18:34 | 2121494 MillionDollarBonus_
MillionDollarBonus_'s picture

Financials are benefiting from generously low interest rates and easy credit from our Federal Reserve. Not only that but many of the financials are also Systemically Important Financial Institutions or SIFIS. This means that they simply TOO BIG TO FAIL, since they are vital to the global economy.

Thu, 02/02/2012 - 18:35 | 2121496 DoChenRollingBearing
DoChenRollingBearing's picture

TBTF = TBTCare...

Thu, 02/02/2012 - 19:43 | 2121654 MarcusLCrassus
MarcusLCrassus's picture

They are not Too Big To Fail.  They are Too Big To Save. 

Thu, 02/02/2012 - 20:16 | 2121733 xela2200
xela2200's picture

Even with Free money in a manipulated market, They are going down in flames. THAT is how screwed those bankers are. They consumed themselves out. They just can't help themselves, it is in their nature.

The worst part is there are banks that are actually sound (for now) that are ready to take over, but the TBTF are in the way. Like a big glut in the fuel line.

Thu, 02/02/2012 - 20:36 | 2121796 TruthInSunshine
TruthInSunshine's picture

This 18 year old, Luke Rudkowski, regardless as to the specifics (yes, he may be idealistic - good for him) -  has more balls than 99.999999% of the American Sheeple:

 The Bernank Runs Away From Luke  - YouTube


If more young Americans show 1/10th the balls that Luke Rudkowski has shown, it will be a better future.

Thu, 02/02/2012 - 20:41 | 2121813 The Deleuzian
The Deleuzian's picture

Wow Truth...A millenial who knows his ass from a hole in the ground...I'd like to met and talk with this guy!  really!

Thu, 02/02/2012 - 18:40 | 2121502 fonzannoon
fonzannoon's picture

I would like to call you stupid but you are not. I would like to say you are evil but you are not. I would like to say you are funny but you are not. I don't know what exactly you are but it seems to be more about what you are not.

 Financials are going to choke on these low rates eventually.

Thu, 02/02/2012 - 18:54 | 2121517 The Deleuzian
The Deleuzian's picture

Fonzannoon...He is pure satire...100% homogenized

Thu, 02/02/2012 - 19:55 | 2121686 akak
akak's picture

Satire can only be seen as such by at least occasionally be counterbalanced by the truth.

In point of fact, whether MDB intends to be or not, he is merely a troll, and deserves to be treated as such.

I really wouldn't care if a burglar broke into my home in the middle of the night, shot my wife and children, tied me up, tortured me, and then afterward tried to claim "I was just kidding!".

Thu, 02/02/2012 - 20:05 | 2121714 The Deleuzian
The Deleuzian's picture

That's taking it to the extremes akak!...Freud said that jokes are only funny because they're 10% true...that would leave 90% exaggeration...Which is exactly what MDB is....

Thu, 02/02/2012 - 21:51 | 2121957 Bringin It
Bringin It's picture

Freud could not get past sexuality. 

Most of the mind mending that goes on in the US is by Jungian phsychologists.  Some very interesting supressed knowledge re. Jung /from Jung can be had by taking a look at the Red Book [from the wiki/mic]

The Red Book, also known as Liber Novus (Latin for New Book), is a 205-page manuscript written and illustrated by Swiss psychiatrist Carl Gustav Jung between approximately 1914 and 1930, prepared for publication by The Philemon Foundation and published by W.W. Norton & Co. on October 7, 2009. Until 2001, his heirs denied scholars access to the book, which he began after a falling-out with Sigmund Freud in 1913. Jung originally titled the manuscript Liber Novus (literally meaning A New Book in Latin), but it was informally known and published as The Red Book.[1] The book is written in calligraphic text and contains many illuminations.

Up until Nov 2001, only 24 people had seen this book  Illuminating.

A few months ago, you could download the manuscript as a pdf for free.   Looks like that's no longer the case.  Come on Philemon Foundation.


Thu, 02/02/2012 - 18:44 | 2121510 AL_SWEARENGEN

Don't I yearn for the days when a draw across the throat made fucking resolution.

Thu, 02/02/2012 - 19:17 | 2121569 kill switch
kill switch's picture



MDB, Did you have a charisma bypass? WTF

Thu, 02/02/2012 - 19:21 | 2121578 SheepDog-One
SheepDog-One's picture

MDB is a good entertaining troll, unlike that assclown RoboTarder who is at best a Yahoo!Finance level troll.

Thu, 02/02/2012 - 18:41 | 2121504 HD
HD's picture

The financials can't fail - which is also why they can't succeed.

Like taking your sister to the prom - yes, you have a date, but nothing is going to happen (unless you live in the deep south).

Thu, 02/02/2012 - 19:08 | 2121544 ebworthen
ebworthen's picture

Financials are being fluffed to try and bring in retail investors and pension funds.

The HFT robots will be the first to the exits.

Fundamentals are dead.

Thu, 02/02/2012 - 19:36 | 2121628 kito
kito's picture

its ok fonzannoon, you cant get something thats not gettable.......

Thu, 02/02/2012 - 18:11 | 2121425 Hulk
Hulk's picture

Permanent backwardization I tell you, permanent backwardization! To the moon Alice!!!

Thu, 02/02/2012 - 18:34 | 2121495 DoChenRollingBearing
DoChenRollingBearing's picture

+ a big fat 1

If backardization were to hold for more than a week, say, to the moon it will go.  A big backwardation would mean that NO ONE wants to send out their gold to receive a promise of LESS in the future.

Thu, 02/02/2012 - 18:43 | 2121509 Hulk
Hulk's picture


Thu, 02/02/2012 - 19:11 | 2121553 The Deleuzian
The Deleuzian's picture

Hulk...If we see anymore of these Xstrata-Glencore 'holy matrimony silent whispers'...Who knows how mispriced things could get...Just sayin'

Thu, 02/02/2012 - 20:50 | 2121836 Hulk
Hulk's picture


Thu, 02/02/2012 - 18:11 | 2121426 sidkof
sidkof's picture

my buddy's step-sister makes $68/hour on the internet. She has been without work for 8 months but last month her paycheck was $7255 just working on the internet for a few hours. Go to this web site and read more..

Thu, 02/02/2012 - 18:12 | 2121435 fonzannoon
fonzannoon's picture

Fk off

Thu, 02/02/2012 - 19:39 | 2121645 non_anon
non_anon's picture

yesterday it was the step aunt making over $8k

Thu, 02/02/2012 - 20:58 | 2121852 espirit
espirit's picture

Heck, that's nothing.  I've lost that much on the internet playing in this rigged casino.

Still have my phyzz tho'.

Thu, 02/02/2012 - 20:06 | 2121698 akak
akak's picture

Hey Sidkof, tell you what ---- I'll check out your site when you promise to buy my little pill for only $149.95 that is guaranteed to enlarge your penis by ONE FULL FOOT!  Go to this web site and read more:

Being as you are probably Chinese (as are most online spammers), it would almost certainly be of great benefit to you, as well as a big hit with all the ladies in Guangdong.

Thu, 02/02/2012 - 18:13 | 2121439 Hulk
Hulk's picture

Hey TD, lets off this guy...

Thu, 02/02/2012 - 18:32 | 2121487 DoChenRollingBearing
DoChenRollingBearing's picture

My buddy's step-sister is doing 5 - 7 years for fraud...

Thu, 02/02/2012 - 18:48 | 2121507 ricocyb13
ricocyb13's picture

my buddy's step-brother is the head of Goldman Sachs and makes millions each minute (without work) by fucking the whole world.

Thu, 02/02/2012 - 18:59 | 2121522 The Deleuzian
The Deleuzian's picture

Soulless lucky bastard mother fucker!! hahhhahahahhahaahahahaha!!!!

Thu, 02/02/2012 - 18:46 | 2121512 sabra1
sabra1's picture

my buddy's sister is doing alan greenspan! pics to follow in 9 months!

Thu, 02/02/2012 - 19:51 | 2121678 TruthInSunshine
TruthInSunshine's picture

Your buddy's sister is Andrea Mitchell?

No pictures, we beg of you!

We'll give you whatever you want! Please, for the love of God!

Thu, 02/02/2012 - 19:04 | 2121531 seek
seek's picture

Interesting, the account is 1 year, 18 weeks. That's some serious seasoning for a spammer. Maybe it's a hacked password.

Either way, I hope he's really pulling in that much fiat, and keeps it all as fiat. It will hurt that much more when the collapse hits.

Thu, 02/02/2012 - 19:38 | 2121642 seek
seek's picture

I dug into his comments. It's a well-seasoned spam account used for SEO linking. Every single message from day one is basically SEO link spam.

More posts in the past 24 hours than in the past year and a half, I'm guessing SEO wasn't paying and he sold off the seasoned account, or moved on to a different business model. In any case, he's going to be crispy soon.

Thu, 02/02/2012 - 19:47 | 2121669 MarcusLCrassus
MarcusLCrassus's picture

There are those AI programs that the Pentagon created that automatically go out and create thousands of logins with thousands of sites all over the internet.  They stay dormant until the person who runs the program tells them to go out and start posting.  The posts are done so that the text is a little different everywhere it is posted so it looks like it is actually a human who is doing it. 


There are a lot of these bots running around now, not all run by the DoD/CIA anymore either, but by spammers. 

Thu, 02/02/2012 - 21:03 | 2121870 espirit
espirit's picture

Sure wish they would EX the one sending me the GiGaNtic! ErEcTiLe DySFuNcTion! @#$%! Meds spam. 

Fri, 02/03/2012 - 07:27 | 2122479 Sathington Willougby
Sathington Willougby's picture


My neighbor's granddad makes $1.75 million a day on the internet.  He's been working against the most incorrigible thieves for 30 years and should've retired, but ceaseless pleading from humans shackled to sheep and goats compells him to try to resurrect a nation and law from shambles.  Go to to read more.

Thu, 02/02/2012 - 18:20 | 2121463 Hedgetard55
Hedgetard55's picture

Financials smell QE in some form or fashion, otherwise they are toast.


Mo' money, mo' money, mo' money.

Thu, 02/02/2012 - 19:16 | 2121567 SheepDog-One
SheepDog-One's picture

They've been smelling 'QE' for a year now. What I smell is a big pile of BS.

Thu, 02/02/2012 - 19:40 | 2121646 kito
kito's picture

 +15.3 trillion!!!! (id put it in actual numerical form, but my fingers tire easily)....

Thu, 02/02/2012 - 18:20 | 2121465 a4ln143c2001
a4ln143c2001's picture

very tempted to double down on my gold position...but i will let my original position ride it out for now 

Thu, 02/02/2012 - 18:25 | 2121476 Jena
Jena's picture

ain't it temtping, though?

Thu, 02/02/2012 - 18:30 | 2121484 DoChenRollingBearing
DoChenRollingBearing's picture

It is tempting to up my gold holdings too, but I have hit a "round number" and am content for now.  When some more money comes, though...

Thu, 02/02/2012 - 18:27 | 2121478 zerotohero
zerotohero's picture

My buddy's sister makes $20 a trick in Detroit - I can get sidkof some work.

Thu, 02/02/2012 - 18:31 | 2121486 The Deleuzian
The Deleuzian's picture

QE is in the air...Bernanke talking about 'if inflation can be kept on target' with it being so low and all that today...



Thu, 02/02/2012 - 19:25 | 2121592 SheepDog-One
SheepDog-One's picture

QE is in the air? Oh I thought that was Bernank farting.

Thu, 02/02/2012 - 19:32 | 2121620 The Deleuzian
The Deleuzian's picture

Sheepie-We'll see the QE's...Those megalomaniacs can't sit and fart on their hands for long........

Thu, 02/02/2012 - 21:06 | 2121874 espirit
espirit's picture

I'll see your QE's, and raise you a "Troika".

Thu, 02/02/2012 - 18:33 | 2121490 NotApplicable
NotApplicable's picture

For a second there, I thought bacon had become unaffordable. :(

Thu, 02/02/2012 - 18:38 | 2121499 The Deleuzian
The Deleuzian's picture

My buddy's Dad owns a big cattle farm here in Iowa...He said "look out"'ll see prices rise regardless of policy...Texas, Oklahoma, got killed last summer in drought...Stack up if your a carnivore!!

Thu, 02/02/2012 - 19:12 | 2121558 youngman
youngman's picture

Cattle rustling is a new growing job where I live..Down here in Colombia...

Thu, 02/02/2012 - 19:03 | 2121524 chump666
chump666's picture

The market is a forward indicator.  It's priced out any new QE (official).  Hence the momo positions now falling off one by one.

As long as the ECB is buying in all markets and keeping the LTRO ad infinity PIIGS yields will somewhat come down.  Until a new non PIIG blows out, or the whole EZ starts to blow out.  Either way credit markets take their cue from the biggest money print in history via the ECB and backstopped by the FED.  That is essentially your QE3.  For the official QE3 you'll need an equity wipe-out, which will occur once China blows, hence the rallies (Dow/S&P) started from Jan 1/ Feb 1 on fudged China PMIs (soft landning).  When China can no longer con the markets (bank loans collapse, property collapses, industry collapses and the Yuan collapses).  Our markets will sell to hell.

Thu, 02/02/2012 - 19:02 | 2121525 xela2200
xela2200's picture

PM are climbing the wall of worry one brick at a time.

Thu, 02/02/2012 - 19:06 | 2121539 ebworthen
ebworthen's picture

The financials have been ramped close to the levels needed to flush.

Thu, 02/02/2012 - 19:18 | 2121573 SheepDog-One
SheepDog-One's picture

Lets ramp financials and MOMO's to full retard, because surely Uncle Ben will ride in to the rescue.

Nah, I'd bet the other way that shareholders are about to be left holding an empty bag.

Thu, 02/02/2012 - 19:22 | 2121581 rodocostarica
rodocostarica's picture

Hey youngman. What part of Columbia ya livin (if you dont mind) Great frickin country. You a youngman and a luckyman.



Thu, 02/02/2012 - 19:59 | 2121696 GaryNeville
GaryNeville's picture

Sad to see the markets becoming so zombiefied - even the cheerleaders they get on Bloomberg are compaining about the lack of volatility! The bots have got to be gettin seriously bloated as the late afternoon meltups come day after day!

I think traders are looking for the right headline to sell on - and it has to be a big headline! NFP tomorrow is a good candidate - a disappoint and dip maybe 1.5 % - but I wouldnt be suprised to see the afternoon recovery and the melt up to march on next week. Forget geopolitics and whatever you think is brewing in Europe - unless europe is about to blow up imminently no1 seems to care about next month or the one after that. Lagarde and Merkel have achieved what they always wanted to - drag out Greece's demise for so long that by the time they default every1 will be so tired of it all there won't even be a market reaction.

Markets stuck well within a range - very hard to see which way they'll pop out. Fundementals would favour downside but with people buying any pull back and Euro, Japan, China and the USA all either stealth QE ing - or talking about QE ing - wouldnt put my house on it.

Tough trading for a bear but don't be fooled - the correction will come. As Marc Faber said last week you need to be worried when the markets are rallying but you see stocks breaking down everyday!

Thu, 02/02/2012 - 20:13 | 2121736 The Deleuzian
The Deleuzian's picture

Good points...But the Bears (Gold Bugs) have made it quite well the last decade or so...Honestly...I'm in complete freeze-frame...I can't willingly commit more capital at this point but it remains difficult to do nothing...

I guess when in doubt...I can pick through the junk silver downtown! 

Thu, 02/02/2012 - 20:36 | 2121789 Dead Canary
Dead Canary's picture

HYG underperformed all day (often a canary but we have killed so many canaries recently).

Don't say that. Even in jest.

Fri, 02/03/2012 - 01:20 | 2122277 Hans Gruber 1962
Hans Gruber 1962's picture

If Big Brother comes knocking.........Ummmmm……now where did I put that gold…..ummm it may be under rose bush #9 in the south garden at my place in Chile. Ummm, no I take that back……I can’t remember where that is……what….ummm…ummm….ummmm…I have NO recollection of that Senator.

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