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As Reality Recedes, Rumor Rampage Returns

Tyler Durden's picture


Equities and broad risk-assets were generally in sync today until around 1430ET when between rumors of a Euro-wide deposit-guarantee 'scheme' - which we had already dismissed as impossible short-term, very unlikely medium-term, and not a long-term solution to redenomination/insolvency risk - and Kocherlakota's hints as NEW QE if the fiscal cliff arrives - US equity markets took off (as did Gold). S&P 500 e-mini futures (ES) pushed to more than 12pts rich to CONTEXT (our proxy for risk-assets based on TSYs, FX carry, credit, and commodities) on all that hope - stalling at yesterday's late-day heavy volume swing highs. Of course the high-beta momo monkeys were pounced on and AAPL as well as the major financials all popped notably - breaking above yesterday's closing VWAP. Today was a low average trade size day - the lowest in a week (but a relatively high volume day) - after a large average trade size day yesterday which smells like algos pushing to enable larger selling (especially as we expect a denial any moment from Europe). VIX plunged off its highs but closed only marginally down with ES closing very marginally higher on the day - so some context is required to avoid anchoring bias intraday and while TSY yields did pop and EUR rallied after equities got going, they remain notably divergent from that sur-reality. Gold and Silver surged on the QE/EU hopes as well but remain down 2% and 3% on the week.

Trying to gauge equity's performance relative to the rest of risk assets is tough so we use the CONTEXT model below - which stayed nicely in sync until the full-retard hope trade came back in the last 90 minutes or so of the day...


And digging into some of the detail - equities started the silliness along with Gold (green arrows) and USD and TSYs followed (red arrow) after 30 mins or so - dragged by correlations but clearly a lot less impressed by the 'chatter'...

Credit markets were not as enthused as stocks into the close (though did get retacked tighter/higher as stocks rallied)...


S&P 500 e-mini futures saw average trade size drop notably today (lower pane)...

and medium-term it appears ES managed to rollover at yesterday's heavy volume swing (blue region and green arrow)...

In the majaor financials, JPM and Citi managed to scramble back into the green YTD, but BofA outperformed on the day - even if Morgan Stanley was the best off the pre-rumor lows (+4.3%!)...

but while Facebook managed to gain over 3% - it clung to yesterday's VWAP like lint to a hoodie...

Broadly speaking cross asset-class correlations were rising through the European day into early afternoon in the US but as the right chart below shows - cracked as stocks soared on the full-retard afternoon exuberance...

VIX also seemed a little rich early on (above chart left), fell towards crediot/equity fair into the afternoon then ended notably below fair (cheap) into the close.

Charts: Bloomberg and Capital Context


Bonus Chart: Gold vs Gold Lease Rates

Based on an idea (h/t @SoberLook), we looked at the rolling correlation between gold and gold lease rates and found that during periods of non-intervention the 'rational' positive correlation between the two holds but once central bank interveners begin (QE1, QE2, Twist, LTRO) then correlations flip and the irrational becomes the new normal...


Bonus Bonus Chart: European sovereigns did not explode as much as FX, equity, and corporate credit markets might have expected today... perhaps the reason is seen below - as we have talked about recently - there is a growing trade-arb to get short LTRO-facing financials credit against a long credit position in their domestic sovereign - 3 major pushes for that trade here...


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Wed, 05/23/2012 - 16:22 | 2456461 phyregold
phyregold's picture

So i'm putting away about 350$ a week now into PM, i just can't decide if gold is the way or silver.  Silver is being surprssed so sooner or later it'll explode, but gold is gold.  Which would you guys do?

Wed, 05/23/2012 - 17:33 | 2456701 SMG
SMG's picture

Dow -6.66 points today. 

Satan laughing spreads his wings.

Wed, 05/23/2012 - 16:29 | 2456484 Clueless Economist
Clueless Economist's picture

ROLLS of 1960-1964 Silver quarters.  Not much wear as older dates

Wed, 05/23/2012 - 16:30 | 2456491 phyregold
phyregold's picture

Well and see thats the thing gold coins you have to get pre 33, there is no law for silver.

Wed, 05/23/2012 - 16:58 | 2456587 Spirit Of Truth
Spirit Of Truth's picture

Sorry but precious metals won't save you from the danger we're up against:

Wed, 05/23/2012 - 17:17 | 2456645 john39
john39's picture

come on man.  Russia is obviously playing defense, as is China and Iran.  The U.S./NATO/Israel are the aggressor states here, or haven't you noticed which side has troops on every continent fighting wars constantly for the last decade?  there is only one death star, and its not Russia.

Wed, 05/23/2012 - 22:59 | 2457619 Spirit Of Truth
Spirit Of Truth's picture

You've been very well misled.  I suggest you now reconsider:

Wed, 05/23/2012 - 17:31 | 2456696 ZeroAvatar
ZeroAvatar's picture

Spirit:  I have read most of your material over the course of the last year or two.

Your heart's in the right place. And I agree, It'll be Russia that we fight (at least 1st) during WW3.

Disclosure: Long 7.62x39, silver, freeze-dried foods.



Wed, 05/23/2012 - 17:40 | 2456728 HelluvaEngineer
HelluvaEngineer's picture

If we're gonna fight Russia, you might want a 5.45x39 rifle.  Just saying.

Wed, 05/23/2012 - 18:38 | 2456899 barliman
barliman's picture


Or better yet a 7.62 x 39 ...


Thu, 05/24/2012 - 00:13 | 2457815 Ahmeexnal
Ahmeexnal's picture

Fight the russians with bootleg 'made in china' vodka.

Wed, 05/23/2012 - 17:30 | 2456684 guinea
guinea's picture

I'm a surgeon, screw silver or gold.  I'll trade appendix removals for chickens.  No one would shoot or gas me for my silver or gold stash.

Wed, 05/23/2012 - 17:39 | 2456724 garypaul
garypaul's picture

Be wary that it might be a right-side diverticulitis instead (possibly of congenital origin).

Wed, 05/23/2012 - 19:38 | 2457061 guinea
guinea's picture


Wed, 05/23/2012 - 16:39 | 2456526 vast-dom
vast-dom's picture

buying AND trading RUMORS is the only way forward, but not just plain rumors; rather, inside-info rumors. there is no way to invest day to day at this point -- you must be able to afford your narrative and slough through the rigged day to day nonsense -- it's only a matter of time before this market collapses...

Wed, 05/23/2012 - 16:45 | 2456546 resurger
resurger's picture

Short & Wait ..


Wed, 05/23/2012 - 16:56 | 2456583 lasvegaspersona
lasvegaspersona's picture

by your name you already know the answer phyre...

Wed, 05/23/2012 - 17:04 | 2456603 5880
5880's picture

Take your money from you

Thu, 05/24/2012 - 05:48 | 2458196 gmak
gmak's picture

The gold / silver spot ratio is above 55. In recent times, this is about the max, which means that silver will outperform going forward until the ratio reaches the low of around 45. Note that these values have changed over time and the ratio has been as high as 80 briefly and as low as 30ish (when silver was up over 40 in irrational exhuberance).

I favour buying silver when the ratio is high and switching to gold when it is lower. Conversely, I favour buying gold when the ratio is low and switching the gold for silver when it is high (as I have done recently with my physical).


Note that this precludes taking a philosophical stance on what 'gold' is, or what 'silver' is. It merely seeks to increase supplies of the metal by switching between them when the ratio is favourable in that direction.



Wed, 05/23/2012 - 16:23 | 2456462 New Survivalist
New Survivalist's picture

6.66 Bitchez.

Wed, 05/23/2012 - 16:24 | 2456466 Bill D. Cat
Bill D. Cat's picture

Loves me the alliteration .

Wed, 05/23/2012 - 16:25 | 2456470 bdc63
bdc63's picture

Nicely done Tyler.  Thanks for the charts.

Wed, 05/23/2012 - 16:50 | 2456561 Muppet Pimp
Muppet Pimp's picture

Agreed, was thinking the same thing as I read it, very nice work gents.

Wed, 05/23/2012 - 16:25 | 2456471 FieldingMellish
FieldingMellish's picture

HUI showing the way for gold diggers...

Wed, 05/23/2012 - 16:25 | 2456472 Angel Face
Angel Face's picture

Did Germany annex Greece?

Wed, 05/23/2012 - 17:47 | 2456751 brooklynlou
brooklynlou's picture

Actually Greece annexed Germany ;-)

Wed, 05/23/2012 - 16:27 | 2456474 nobusiness
nobusiness's picture

I have a headache.  they might as well just ban shorting instead of crushing us every time it starts to work.

Wed, 05/23/2012 - 16:34 | 2456510 The Monkey
The Monkey's picture

These days, markets can crash down, or up.  Rule of thumb, be very patient and only take the very deep retracements following "great' news.

Wed, 05/23/2012 - 16:36 | 2456514 rocker
rocker's picture

It's their money once you put a trade on. Long or Short does not matter.

It's a Rigged, Manipulated, Casino Wheel.  Don't you get it.

Nobody but hedge funds, HFTs,  (Trading desk at Goldman Sachs, JP Morgan, Citigroup, Wells Fargo), are allowed to take money out.

And Never Forget Rule #1.   Goldman Rules the World. (That's the financial World).   

Wed, 05/23/2012 - 16:40 | 2456531 nobusiness
nobusiness's picture

If they keep burning the shorts, who is going to cover when the plunge comes?  Thats how crashes happen, no one willing to buy.  Never mind, I forgot the fed always buys.


To do items






Wed, 05/23/2012 - 16:45 | 2456544 The Monkey
The Monkey's picture

This is typical range bound market before it (probalby) breaks to the downside.  Last year top formation took half a year before breaking down, so we likely have a long way to go and the rallies will be surprising as always.

Wed, 05/23/2012 - 17:12 | 2456630 Gene8696
Gene8696's picture

To do:
- more Ammo
- more toilet paper.

The rest I will get from my neighbors...

Wed, 05/23/2012 - 17:36 | 2456714 SmoothCoolSmoke
SmoothCoolSmoke's picture

Shorts made a ton of $$$ the last 3 weeks. I took my IRA from $32K to $89K playing weekly puts.

Wed, 05/23/2012 - 18:24 | 2456859 spinone
spinone's picture

No one is left to set the floor but the Fed.

Wed, 05/23/2012 - 16:27 | 2456475 gjp
gjp's picture

Gold and ES may both react to the rumours, but gold is down 2-3% on the week while ES are up nearly 2% and the NASDAQ up nearly 3%.  Looks like Bernanke is winning again, for now.

It's terrible to root for destruction of the system, but it's really gotta go.

Wed, 05/23/2012 - 17:04 | 2456601 The Monkey
The Monkey's picture

Bernanke will look like an idiot when P/E multiples suddenly compress and all of the slack of the central banks liquidity renders monetary policy useless.  The Fed is helping set up conditions for sustained deflation by inflating the gap between price and demand.

Wed, 05/23/2012 - 16:28 | 2456481 Hedgetard55
Hedgetard55's picture

It is a market of intervention and rumors of intervention, nothing more.

Wed, 05/23/2012 - 16:29 | 2456485 nobusiness
nobusiness's picture

What's with these tech firms telling the truth all of a sudden.  First FB then Dell now NTAP?  Must really be getting bad if the old earnings tricks don't work anymore!!!!!

Wed, 05/23/2012 - 16:30 | 2456489 Calidreaming
Calidreaming's picture

THis joke will end soon enough.   Nothing Big Ben ,Merkel, IMF, China or the world can do much about it.  Fucking playing trading games. Messing with my kids future. 

The future is so bright I have to wear shades  (to shield me from that nuclear explosion stuff)



Wed, 05/23/2012 - 16:30 | 2456490 RaymondKHessel
RaymondKHessel's picture

Don't decide phyregold. Hard questions demand hard solutions and here are two hardasses ready to go the distance!!




Wed, 05/23/2012 - 16:31 | 2456496 Scalaris
Scalaris's picture

I'd say that I'm surprised, but that would simply be untrue.

Wed, 05/23/2012 - 16:32 | 2456502 nobusiness
nobusiness's picture

Dear SEC


It is simple.  What did they know? and when did they know it?  Just look at the trades.

Wed, 05/23/2012 - 16:33 | 2456508 LongSoupLine
LongSoupLine's picture

unbelievable horseshit from 2:30 on.  Just more proof how fucked this whole rigged game is.

Wed, 05/23/2012 - 16:38 | 2456523 John Law Lives
John Law Lives's picture

It is nauseating when fundamentals are swept aside in lieu of rumors and game rigging by whoremasters.

Wed, 05/23/2012 - 16:42 | 2456536 The Monkey
The Monkey's picture

They can't hold it up forever, but most likely, it will go on a long, long time.  Don't get overly agressive.  Make sure to cover when it's looking especially bearish.

Wed, 05/23/2012 - 16:42 | 2456538 Comay Mierda
Comay Mierda's picture

you gotta expect the algo ramps on bad news europe days

Wed, 05/23/2012 - 16:39 | 2456527 The Monkey
The Monkey's picture

Don't be a sucker short seller.  The froth in the equity market is your friend.  The whole thing moved on a few pips of euro short covering.  Expect very big rips and then wait for even more retracement before you hit the short button. 

Wed, 05/23/2012 - 17:34 | 2456705 SPAREPARTS
SPAREPARTS's picture

no big deal, this is how it must be done, we have to play it out. The only thing that will change the tune is checkmate and even if you might have stacked, you are going to be shaken when it hits. nothing will seem safe

Wed, 05/23/2012 - 16:36 | 2456519 John Law Lives
John Law Lives's picture

Amazing how The Machine pumped the markets back from such steep losses after markets in Asia and Europe took a drubbing during their most recent trading sessions.  Gee, so much for free markets when Chairsatan is on the job.  It makes you wonder if Fed Board members have an App that tells them when they need to float yet another public rumour of QE.  Call it the iPPT App...

On another note, here is some sobering news.  HP plans to sack ~27,000 employees:

Wed, 05/23/2012 - 17:37 | 2456720 SPAREPARTS
SPAREPARTS's picture

thats America Leading the way to a brighter future, sounds like a GE advertisement, see this is how you do it

Wed, 05/23/2012 - 16:38 | 2456524 spastic_colon
spastic_colon's picture

thanks again AAPL fags

Wed, 05/23/2012 - 16:40 | 2456530 khakuda
khakuda's picture

It's like 2007 when the news got worse and worse and the equity markets whistled past the graveyard until the day they didn't.

Wed, 05/23/2012 - 16:58 | 2456586 The Monkey
The Monkey's picture

Yup - and to me that means you either have conviction and hold 1X shorts that don't decay, or you trade the very high probably sentiment overshoot highs with leverage.  But, it's pretty obvious that FY13 earnings are going to be in a world of hurt.

Wed, 05/23/2012 - 17:40 | 2456729 SPAREPARTS
SPAREPARTS's picture

I cant make shorts or options work,only long mining

Wed, 05/23/2012 - 16:42 | 2456535 Randall Cabot
Randall Cabot's picture

Looks like that camelback pattern of the last week or so is history and we're back to the afternoon gap-filling ramp into the close.

Wed, 05/23/2012 - 16:42 | 2456537 catacl1sm
catacl1sm's picture

Tyler, I'm ashamed of you. Don't you know hoodies are racist!

Wed, 05/23/2012 - 19:04 | 2456979 juangrande
juangrande's picture

The original American hoodie wearers .... they loved a good lynching.... maybe burn a couple,too...

Wed, 05/23/2012 - 16:48 | 2456554 Boilermaker
Boilermaker's picture

My god, this shit gets old.

Wed, 05/23/2012 - 21:31 | 2457371 BeetleBailey
BeetleBailey's picture

I agree. Did one trade this week and got stopped at cost. Have sat watching charts and thinking this is iditotic.

Wed, 05/23/2012 - 23:02 | 2457633 CvlDobd
CvlDobd's picture

Do like your employee. Invest in mutual funds so you don't have to worry about the stock market. Ah! The power of ignorance!

Wed, 05/23/2012 - 16:53 | 2456570 FinalCollapse
FinalCollapse's picture

I thought that spreading rumors in order to make trading profit is illegal. Where is SEC/FBI on it. Shouldn't that asshole  Fed governor be investigated under criminal statues?

Wed, 05/23/2012 - 17:22 | 2456661 Vince Clortho
Vince Clortho's picture


In reality it's one of Ben's most often used tools.

1. Rumor of printing.

2.  Printing.

That pretty much covers the whole tool bag.

Wed, 05/23/2012 - 19:15 | 2456998 Savyindallas
Savyindallas's picture

What? Are you kidding me? Where is the SEC? The low level guys are sitting there watching gay porn. The big boys are on the phone with their former c0-workers at Goldman Sachs placing trades for their relatives.

Wed, 05/23/2012 - 16:55 | 2456580 Big Ben
Big Ben's picture

Deja vu. The European leaders huddle. And just before closing a wild rumor of a new plan to save everything magically pushes the indexes into the green.

Wed, 05/23/2012 - 16:55 | 2456581 pleseus
pleseus's picture

QE won't happen with front running on rumors

Wed, 05/23/2012 - 17:04 | 2456604 MrPoopypants
MrPoopypants's picture

Truly. Just short and hang on till June FOMC.

Wed, 05/23/2012 - 17:03 | 2456600 MrPoopypants
MrPoopypants's picture

Long ES / Short Risk basket after 2 PM every day, given a certain divergence threshold. Inverse arbitrage, bitchez!

Wed, 05/23/2012 - 17:20 | 2456652 dollarmite
dollarmite's picture

Serious questions: Why is it always up near the close? I would have thought that since all the HFT bots go flat to limit overnight exposure, markets would always tail down? And yet here we are.

Wed, 05/23/2012 - 17:22 | 2456663 Obnoxio
Obnoxio's picture

It was a good day for some of the mining shares. Premier Gold up 20% and Gold Corp up 6.78%. I think some of the miners may hold on to gold instead of cash like MUX is doing.

Wed, 05/23/2012 - 17:34 | 2456708 Tirpitz
Tirpitz's picture

The charts look promising - GDXJ displays a key reversal at good volume today.

Wed, 05/23/2012 - 17:45 | 2456744 SPAREPARTS
SPAREPARTS's picture

I have been wondering for awhile now. Mining companies must be stashing extra and for go earnings short term to blow later to augment momentium

Wed, 05/23/2012 - 17:32 | 2456700 SmoothCoolSmoke
SmoothCoolSmoke's picture

TPTB and their Algo-Bots, can BLOW ME... AND THE HORSE I RODE IN ON.

Wed, 05/23/2012 - 18:00 | 2456789 EclecticParrot
EclecticParrot's picture

The buying started the rumor, not the reverse.  Remember Goldman's recent bearish research note ?  Those fuckers knew selling volume would dry up as the Europa meeting commenced.  They always wait for the baby to go to sleep before taking its candy.  Shameless pricks.  Tommorow they'll be touting the 'oversold bounce', even as they short the open and prepare to lather, rinse and repeat tomorrow.

Wed, 05/23/2012 - 19:16 | 2457001 Disenchanted
Disenchanted's picture



an airburst of hopium


whipsaw the muppets x infinity

= ?

Wed, 05/23/2012 - 21:06 | 2457276 orangegeek
orangegeek's picture

It's amazing that a few spoken words from a broke continent can cause such a swing in the markets.


Still bearish on the Dow.

Thu, 05/24/2012 - 01:12 | 2457921 The Monkey
The Monkey's picture

The US market is the most overvalued in the world right now, thanks mostly to the Fed. It doesn't reflect true value because there is a gun pointed to it's head. Thank you Ben for creating a stable foundation for the market place where value is readily apparent.

Hiistory will not be kind.

Thu, 05/24/2012 - 06:48 | 2458253 HungrySeagull
HungrySeagull's picture

No matter, stack on...

To the other poster, I stack 50 silver and then lie in wait for Gold.

Then I stack some more silver...

I remember when Silver was about 20 to 1 gold. If that returns, then most of the stacked silver will harness more gold over time.

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