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Stocks Plunge (Open-To-Close) As Commodities Outperform

Submitted by Tyler Durden on 02/21/2012 17:51 -0400

Volumes were below average but not dismally so as the sad 6.5pt drop in ES (the e-mini S&P 500 futures contract) from Sunday's open to today's close is incredibly the largest drop since 12/28 [correction: 2/10 saw a slightly larger open to close drop] on a day when the problems of Greece are now apparently behind us and Dow 13,000 means that retail will come storming back. High yield credit underperformed (and investment grade outperformed) as stocks drifted to Friday's lows suggesting some up-in-quality rotation (though HYG - the high-yield bond ETF - was strong most of the day). Financials ended the day red with the majors losing significant ground off intraday highs (and CDS widening still further) but the bigger story of the day was the rise in commodities with Copper (RRR cut?) and Silver outperforming (up 3.3% since Friday's close already), WTI managing $106 intraday and Gold touching $1760 (both up over 2% from Friday). What was surprising was the dramatic outperformance with the USD which weakened by 0.44% from Friday as EUR is up 0.75% from Friday alone (while Cable, JPY, and most notably for risk AUD are all weaker against the USD). Treasuries sold off through European hours today and then recovered about half the loss only to ebb quietly into the close with 30Y +6.5bps from Friday (another divergence with stocks) and steeper curve. All-in-all, it seems confusion reigned on Europe but the bias in credit (and financials) seemed more concerned than equities (even with HD and WMT) and FX as real assets were bought aggressively.

Stocks outperformed high-yield credit (after pulling close to 'fair' in the last hour) as the rather tongue-in-cheek 'plunge' in stocks from Sunday night's open at only 6.5-7pts is the biggest drop of the year - but as is clear, we recovered into the close as the csramble for green/unch was clear (and average trade size picked up as we pushed into that close).

Commodities were the bigger story of the day in terms of market action (Oil $106 at nine-month highs, Gold $1760 and Silver $34.3 back at early Feb swing highs)...

...but broadly speaking stocks (ES) sold off considerably more this afternoon than broad risk assets (CONTEXT) would imply...

Of course this is short-term 'trading' divergence against the considerably longer-term 'systemic' divergence we have seen in Bonds vs Stocks or Gold vs Stocks which could perhaps be starting to converge.

Charts: Bloomberg and Capital Context

Correction: open to close is 2nd largest loss of the year (2/10 was slightly bigger):

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Tue, 02/21/2012 - 17:57 | 2182413 Wolferl

Finally. Tyler Durden is right. ;-)

Tue, 02/21/2012 - 20:12 | 2182796 HedgeAccordingly

in october of 2008 CRUDE high was 95 a bbl and S&P's were trading 1490-1586... worth digesting - http://hedge.ly/xaVVuD

Tue, 02/21/2012 - 17:59 | 2182419 Wolferl

Oh, btw, we discussed this on maxkeiser.com, how many are you, Tyler? ;-)

Tue, 02/21/2012 - 18:56 | 2182566 Zero Govt

One. Don't you know there's only one God?

..now back under the rock with you

Tue, 02/21/2012 - 17:59 | 2182420 SilverRhino

Silver had one damn good day today.

Tue, 02/21/2012 - 19:38 | 2182664 HungrySeagull

And there will be more.

I am already setting up where I would want to trade a little on these moves.

Tue, 02/21/2012 - 23:08 | 2183215 WmMcK

How about PT? Parity with Au in the near future? It's been on sale for a while now. Check out the 30 day and YTD charts. Dollar cost averaging, bitchez.

Tue, 02/21/2012 - 17:59 | 2182421 Encroaching Darkness

So, is this it? Finally, the currency collapse and commodity climb as everyone finally notices that paper is printed into green toilet wipes, while real assets and refined metals show their intrinsic worth?

About time.

Tue, 02/21/2012 - 18:03 | 2182435 kito

qe3.....bahhhhhhhhaawahhhaa, hhaaaahhhhha, big ben is riding that stock wave....................

Tue, 02/21/2012 - 18:08 | 2182449 fonzannoon

it seems like a correction has got to be on the way. What is the catalyst higher frrom here?

Tue, 02/21/2012 - 18:11 | 2182459 dracos_ghost

Sunshine and fresh air. This market needs no other catalyst. Random numbers with an uptrend bias = World Markets.

Tue, 02/21/2012 - 18:17 | 2182473 LawsofPhysics

The MSM is already trying to convince "investors" that equities are their best hedge against inflation. Fucking crazy shit right there. Outside of that HFT bot don really care as it is all "1s" and "0s" to them.

Tue, 02/21/2012 - 18:51 | 2182549 GernB

They also don't care if the market is trending up or down as long as they get in before it makes the big move.

Tue, 02/21/2012 - 18:25 | 2182493 GeezerGeek

Why can't the MSM keep issuing, every Monday, Wednesday and Friday, the good news that the Greek crisis is solved? It's worked for the last several months, and how many people know that it's really been solved this time? It has, hasn't it? But as I was saying, the same headline has been quite effective in raising the S&P 500 in recent months and I see no reason the same lies shouldn't continue to work. Any lie, told often enough...

Tue, 02/21/2012 - 18:52 | 2182553 GernB

How many times do you think they could print the same headline (in different words) before the market catches on.

Tue, 02/21/2012 - 20:39 | 2182893 satan2liberals

90 days and counting.

Tue, 02/21/2012 - 18:33 | 2182506 The Swedish Chef

Next weeks LTRO? UBS says it will of ten trillion USD...

Tue, 02/21/2012 - 18:44 | 2182530 Common_Cents22

CNBS yelling Dow 13,000! is a great catalyst.

Tue, 02/21/2012 - 20:16 | 2182806 Don Smith

Something about rainbow-flavored candies and fantastical equines...

Tue, 02/21/2012 - 18:14 | 2182465 chump666

Commodities bid? I don't think so, with the AUD (commodity corrected currency) selling and USD bids in, Asia opens should knock commodities down some. We are a fraction away from a liquidation sell off. Nice juicy warning signs flicking. Everyone in the world knows that this nutty cartel of the ECB/IMF/EU have made a absolute meal of the EZ bond markets. Markets are waking up too that. What do you? Dump soon-to-be downgraded crap quality European bonds and jump into equities. Nope. Yields should blow out again on the PIIGs despite the money pumps, the political chaos is about to kick off in Europe. That will follow through on to stock market volatlity. Already volatility is picking up in US markets on profit taking. 13000 touched on the Dow and the market went short. So nervous trading is taking place.

So, USTs will be bid, USD bid, oil bid on tensions, gold flat-line, stocks will be begin to wobble down. Till the panic sell.

Tue, 02/21/2012 - 18:16 | 2182470 fonzannoon

Agreed all around. I don't know if a trillion dollar LTRO throws a monkey wrench in that analysis though.

Tue, 02/21/2012 - 18:48 | 2182541 chump666

We will see. Market likes liquidity, but the trillion could be a huge plug, that and it has "crisis" written all over it. Obama's/Fed 2009 rally had a constant flow of cash being injected into Wall Street. Europe is so much worst and broken.

Also, oil hits 110 markets will sell. Germany will start to sweat some and Europe will have inflation hitting full force.

Then there is China.

Beautiful huh?

Tue, 02/21/2012 - 18:17 | 2182475 The Swedish Chef

The bearish bias: stocks "plunge" on a day when most major American indices close in the green.

Yeah, I know, it´s all LTRO, keynesian blahblahblah...but still. Green is green.

Tue, 02/21/2012 - 18:58 | 2182571 GernB

Tops are very frequently accompanied by extremes in bullish sentiment. The reverse is not always true, that bullish sentiment signals tops, so you can't point to it as a sign of a turn, but it is once more hint that a top may be near. I would assume that once they suck everyone and their brother into the "it's only going up from here" dillusion then there are no more suckers left to convince to buy and nervous sellers start to dominate.

Tue, 02/21/2012 - 18:32 | 2182504 DUNTHAT

MIGHT WANT TO CHECK OUT THAT DJT DOW DIVERGENCE. HAVEN'T SEEN THAT IN A WHILE.

Tue, 02/21/2012 - 19:29 | 2182643 TradingJoe

Me think joe six pack won't get sucked in this time but if he does then he/she deserves it full throttle!!! The dump on I Mean!!

Tue, 02/21/2012 - 23:27 | 2183269 toadold

Well Joe Sixpack watched his 401K and such get massacred. He's pretty much gone paranoid. If he has any extra money he pays down debt, buys physicals, and can't hardly wait till Novemeber of 2012. The people still investing in "equities" are people who have more money than Joe to gamble with. Their ass burning is in the future.

Wed, 02/22/2012 - 00:57 | 2183481 Dermasolarapate...

"flight to real value"....Murray Rothbard.

http://mises.org/books/mysteryofbanking.pdf

Wed, 02/22/2012 - 02:22 | 2183631 pdizzle

Here's an interesting chart putting this current rally into persepective:

http://www.chartoftheday.com/201202172.htm?T

Wed, 02/22/2012 - 02:41 | 2183652 dcb

wti hit my mid term top point today, so sell and reshort

treasury auction today, so expect some big moves tbt, tlt. with a fast finger this can leade to easy gains. just draw the trend line on sso as usualthe algo's run things. you knew there would be a drop to the close because we were above that we may continue a couple days of small games like this, unti a big drop again and perhaps a buy, but time to reenter shorts on the weekly highs.

Wed, 02/22/2012 - 03:23 | 2183719 sikefeier0728