As Reality Recedes, Rumor Rampage Returns... Redux

Tyler Durden's picture

Having hit its highs in the pre-open, equity markets drip-drip-dripped lower all day, retracing their late-day exuberance relative to credit markets and broad risk-assets by the middle of the afternoon. Even financials had given back almost all of their post 230ET ramp yesterday but then - IT happened again. Italy's Monti made the same technocrat-fed comments as yesterday and financials take off again leading stocks higher (only to come back 10 minutes later and back-pedal on his hard facts). This time though - was different. Yesterday's rumor-ramp added 2.5% to XLF (the financials ETF) but this time it only managed to spur a 0.5% gain before the effects faded. Coincidentally - the ramp pushed ES (the S&P 500 e-mini futures) up to VWAP where sure enough we saw heavy volume with large average trade size step in to briefly stall the rally - which then managed to push on to near the day-session's highs (but notably all on its own again). ES very much repeated the same pattern as yesterday but with lower average trade size still - ending the day exuberant but on its own. The USD kept pushing higher though - with the divergence with stocks now very large - (as EUR leaked lower - even as AUD rallied on the rumor-ramp) but this USD strength did not weigh as angrily overall on commodities today. Late Europe rumors of another LTRO pushed stocks up and dragged gold and silver up rapidly but they all gave it back by the close. With the USD up 1.5% on the week, Oil, Copper, Gold, and Silver are in the same currency-driven range between down 1.25 and 2% on the week - perhaps suggesting yesterday's plunge in PMs has seen a short-term end to the liquidation factors (though for how long). Into a long weekend, it seemed volume remained decent enough but once again average trade size was very low (suggesting little conviction here and/or algos giving pro-size exits). Treasury yields rose all day (ending higher by 3bps or so) pulling back to near Tuesday's closing levels. VIX tracked down to 21.5% (losing less than 1 vol on the day) and is once again cheap relative to credit/equity's view.

Stocks (blue) rally away from reality then pull back again and close rich to risk-assets, credit, and gold - while the USD (green) just keeps on rising and diverging from its typical pro-QE pro-ease, lower-is-better correlation...

and in a similar vein, equities (blue) surged away from credit last night only to retraced for the rest of the day and then at today's close the same...

Today's closing level was not totally unexpected - up to the highs of the early session and the last few week trendline - and we note the plethora of large/professional trades (blue bars) up here again - fading the rally?


It has been a tempestuous week or two in the EURUSD vs US Equity relationship...


Financials ended the day practically unch if one looks at the XLF but the swings were exciting. Note though today's rumor-ramp was massively less impressive than yesterday's...

and with regard to the very narrow closing range of ES that we have seen this week - combined with a fading average trade size - it suggests consolidation before a new leg down. Unlike the mid-December consolidation which was accompanied by rising average trade size. Also note (click on chart for larger version) today was pretty much the lowest average trade size day of the year...

so overall today looked a lot like yesterday with equities going full retard once again into the close and we await the sad realization of a Europe that will open with nothing fixed tonight...

and apologies for using similar charts to yesterday - the VIX and correlation moved in very similar ways too... with VIX making a dash early on and swinging to relatively too high levels (compared to equity/credit models - left hand chart below) and correlation - which swung from low (into yesterday's close and beyond) to high as reality set in throughout the European day and most of US to low again as equities did their magical unicorn dance into the close...

and commodities appear to have compressed around the USD-implied weakness on the week, with gold and silver outperforming the last 24-36 hours...

Charts: Bloomberg and Capital Context

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redpill's picture

Europe is becoming quite the show.  We have socialist Hollande chasing the wealth out of France to London with a 70% income tax threat while he simultaneously insists on Eurobonds being front and center on the agenda for the EU!   In other words, feel free to blow out your own budget deficit to record levels, and get Germany to pay for it!  Ah, Germans.  Couldn't help themselves from creating this beast known as the Euro.  Now at the end we see the beast turn on its master, like a chimp raised from infancy only to go mad and tear its owner's face off.

This is the political version of the battle of Stalingrad, it doesn't matter how many Eurobond proposals they kill, there will be two more to take its place until the brutal financial winter finally kills off their grand scheme altogether.

Germany will soon be left with two very clear choices: allow Eurobonds to be issued and force your citizenry to subsidize the endless debt of the southern half of the Eurozone perpetually, or allow your grand Eurozone experiment to crumble to pieces.

Itch's picture

The Germans were brought in form the cold in Europe to keep them on a leash and suppress German strength, that’s all, no more no less, dont buy the lie that this is Germany's Euro experiment, its not. An “experiment which had Germany in mind” is a better turn of phrase. Of course the German political class (and any educated German adult) have always known this, always knew there was a deep suspicion and animosity towards them(the European motive to keep them under duress has never dissapeared), so they were motivated to play the long game and got their house seriously in order, they choose to suffer while the rest of Europe went on a rampage.

Why did they do it? When everyone else was at the punch bowl, Germany takes a pew...humm, im reminded of the saying "Never turst a man that doesnt take a drink". They done it for the current political leverage they now command! power flows to its natural home I suppose, and now they are in a position to leave Europe under an entirely justified premise and do what they want (which in the German case, is always unsettling). You have to understand the German personality, they rarely act without a plan, and they seen this one comming alright. They are regimented, structured, clinical motherfuckers, and the majority of Germans would agree.

They have had the benefit of tying themselves to a corpse for long enough, they knew this day would come; so its either fully commit and pay out, or they are now free to leave. (Schachmatt!)

williambanzai7's picture


Please junk this Sarkturd...

derek_vineyard's picture

there will come a point where all this talk won't matter either way....position yourself accordingly right now (if you already haven't)

Joe The Plumber's picture

But until then dont forget the inside joke among bankers

"a problem delayed is a problem solved"

SheepDog-One's picture

Soon. The level of blatant manipulation says they dont give a crap anymore.

RiverRoad's picture

She's warming up for her aria.

Sequitur's picture

Dear Tylers:

Note the SEC has recently released some kind of memo stating they are "unlikely" to recommend a single charge or prosecution in connection with Lehman's colossal failure.


Repo 105

Cdad's picture

The regime is clearly very desperate these last two days have seen some of the most desperate long side action I have ever seen.  Just pathetic.  

Obviously, the criminal syndicate known as Wall Street has decided to go it alone...without capital formation.  Surely, know one will buy into these obvious last hour market manipulations.

SheepDog-One's picture

Seeing this level of total intervention and manipulation just shows me their 'dont give a shit' meter is pegged....they clearly know none of it will matter soon.

Cdad's picture

The old regime seems to be stuck in a pre internet mentality.  They seem to think people still get information from the likes of The BlowHorn [CNBC]...and they seem unaware that people have much better/truer information sources well as the ability to clearly see the low volume market ramps, etc.  It is as if the old regime still thinks we are checking the back page of the news paper/financial section to get closing price prints on stawks...or some such stupidity.  

In the end...I believe you are correct.  The time to simply chuck in the towel on these pathetic equity NONmarkets is at hand.  These algorithmic traders have simply destroyed the whole structure of the market.

spinone's picture

DJIA is + 33 you doomers. BTFD!

Randall Cabot's picture

"Coincidentally - the ramp pushed ES (the S&P 500 e-mini futures) up to VWAP where sure enough we saw heavy volume with large average trade size step in to briefly stall the rally - which then managed to push on to near the day-session's highs (but notably all on its own again)."

Freaking Russell was lagging all day so I was happy to see it ramp near the end but I was waiting for it to hit a wall at VWAP so I could sell my R2K longs which it did and I did ---only to watch it recover and continue to skyrocket right into the AH---the complete opposite of the last three days!!! Crazy man, crazy!

slewie the pi-rat's picture

MOPE (management of perception economics) is now reliant on RUMOR (a greek goddess akaOssa orPheme, btw)


God Bless The Virtuous's picture

Just what does all this tell you?

Well, it tells me that there is a tremendous amount of stock out there that needs to be "pushed" onto someone.

Trouble is, the retail investor is flipping all the mo - mo barracuda's the bird!

The little guy is safe on the side lines, the mutual fund industry is short on cash, so who the hell is buying the "Bull Shit News" out of Europe driving the market off the mat's?

I wouldn't put anything past the fed  / treasury!

This is the most directly influenced market I have ever seen!

Hey Bubble Blowin' Ben, do you really think all this perversion to the free market system is building consumer confidence?

Gensler / Shapiro ineptitude, Obama and his communist policies?

Yeah, this is just what the republic needs to get back on track!

Hey Mr. Gensler, where the fuck is the Jon Corzine Perp Walk he so richly deserves?

Eric Holder, the Scumbag leader of the New Black Panthers is out calling for killing crackers!

He Hates ever last cracker!

He wants a world free of white people, kill the crackers!

Hey Eric, you think this is making white America feel more safe and comfortable with this communist community organizer who just so happens to be your boss fanning the flames!

Where is the accountability?

There is none, it is the Cloward and Piven "Collapse the System", Saul Alinsky inspired "Death to Capitalism" O.W.S. Obama blessed perdition in real time!

God bless and watch over the republic!

garypaul's picture

Yes the market ramped less than yesterday, but it had also fallen less than it did yesterday. Just WTF is that supposed to prove?

CrashisOptimistic's picture

It proves there is no market.  

Why do you think there is one?

The Monkey's picture

The ramps tell me the bulls are still fighting...

HD's picture

The bulls or the algos?

The Monkey's picture

There is limited additional time for distribution. Europe will likely kick the can down the road again, but we're fixing to peek around the corner at FY 2013 earnings which look worse every day. That said, we could see 1400 again before 1200. Patience. Let the bulls do your work for you.

Rathmullan's picture

Well stated Monkey. That having been said, I hope you're wrong on the 1400 --as I'm sure you are as well.

ChrisDG74's picture

Meh. The FED can replace that in one hour, with one printing press.

ChrisDG74's picture

Meh. The FED can replace that in one hour, with one printing press.

ChrisDG74's picture

Shit. Posted to the wrong story.

dcb's picture

yeah I was talking to a friend today, there was real manipulation in the air. I'd love if they published tradign data again, because this was clearly a single player move to start.

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