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Stocks Plunge On Rare Equity-Gold Decoupling
Equities suffered their largest single-day drop in 4 months as for once Apple was unable to single-handedly hold up the index letting it drop closer to its credit-oriented risk. A monster day for NYSE and ES (S&P 500 e-mini futures) volume saw Financials and Discretionary sectors underperforming and the Energy sector joining Utilities in the red for the year. The S&P closed at its lows as it broke its 50DMA for the first time since DEC11 as AAPL dropped 1.25% for the day (and -2.5% from the highs) but most notably equities and Treasuries are back in sync from early March as 10Y closed under 2% for the first time in a month. Gold and Silver surged around the European close, on little news, as we suspect safe-haven buying and an unwind of the gold-hedged bank-stress-test rally - with another relatively unusual divergence between Gold and stocks on the day. VIX broke above 21% closing just below it back near one-month peaks as the term structure bear-flattened (but notbaly pushing ahead of its credit-equity implied fair value). JPY strengthened all day (and AUD weakened) as carry trades were unwound in FX markets leaving the USD marginally higher on the day (and EUR marginally lower despite the turmoil in European markets). Oil fell back below $101.50 but it was Copper that has suffered the most - down almost 4% since Last Thursday. Credit markets were weak with HY marginally underperforming IG (beta adjusted) but still implying further weakness in equities as HYG closed just shy of its 200DMA.
Treasury yields tumbled 5-7bps on the day with the long-end outperforming but equities stayed in sync as they pulled back to early March levels...
but it appears as though the gold-equities hedge is being unwound as they have converged rapidly YTD in the last day or two. This retraces all of the post Bank stress-test outperformance and almost undoing any post LTRO2 outperformance juice left in stocks.
YTD performance of main risk assets...
While Apple relishes still +55% YTD, broad sectors of the S&P 500 are rolling over rapidly. Energy joined Utilities today in the red for the year but financials have tailed the most in the last few days...
And the broad derisking of the S&P - which closed under its 50DMA for the first time in 4 months is perhaps starting to drag Apple lower also as it sufferes it largest drop since mid-December...
but Apple's impact remains evident when compared to credit markets where the selling is picking up speed and volume also...
But VIX is pushing on ahead regardless (with the largest 2-day spike in over 5 months), touching its 100DMA today at the top, and closing slightly above its credit- and equity-model implied value would suggest...
And while JPY repatriation (carry unwinds) was evident all day long, it seems between our notes on EUR-USD basis swap deterioration occurring again and the repatriation of EUR that the USD was relatively stable - only managiong small gains on the day - despite all the dysphoria in Europe...
Nowhere is Europe's stress more evident (except perhaps in our LTRO Stigma trade) than in the Senior and Subordinated credit spreads of European banks. It seems a Senior-Sub decompression trade is in order given the spread and ratio of the two levels of the capital structure but on reflection - just what will be the recovery rate on these should an event occur - given the massive encumbrance of LTRO? It would seem Sub financials look rich still and while more expensive for carry - certainly face minimal recoveries.
All-in-all, pretty much what credit markets have been arguing for for a week or two now as the sad reality of a flow-less liquidity pump and slowing global economy come home to roost. The cracks in the veneer of AAPL are perhaps most worrying for all those hedgies who have levered themselves into it as we wait until Europe's open to see if the pressure on Italian and Spanish banks resumes.
Finally, for the Alcoa watchers, the company did report a better than expected $0.10 EPS, compared to an expected loss. Yet what does $0.10 translate to? Why $94 million in actual Net Income. Something else is far more troubling: namely the company free cash flow (EBITDA-Interest Expense-CapEx), which is sliding on an LTM basis, as well as its net leverage (total debt-cash), which soared to the highest since December 2010 in Q1 2012 at $7866 million, or roughly 5.0x the company's FCF. Alcoa better restart the cash generation soon or else.
AA Free Cash Flow:
AA Net Leverage:
Charts: Bloomberg
Bonus Chart (because its one of those days)...S&P 500 priced in Gold...maybe time to unwind some exuberance
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AAPL - GLD compression trade.
As petrol prices rise and western demand shrinks, refineries are closing across the developed world http://www.ft.com/cms/s/0/256f583c-7a83-11e1-8ae6-00144feab49a.html#axzz1rlmmUbBOBuy silver, it's on sale now!!!
-John
Primitive Skills Classes - Edible Plant Tours
http://www.heartrootnatureconnection.com
Glod shrots curshed!
I just ordered $5k in silver dollars @ spot. Take THAT you fuckers!
Just make sure to do some boating after you take delivery.
Does that still work, even if I don't have a boat?
you found a boat by the lake, rented it and sank the boat and anything you had on you which was all your gold and silver and the guy who rented out the boat ran off with OJ to find "the real killer"
Nice! The Silver bullets hurt 'em, hurt 'em bad! Especially when you "Bring it on home!"
I've been following the NDX as it steadily led equities upwards for 6 months, but as of today all 6 month equity uptrends are broken, and the tech-led equity runups look to be over. AAPL, the best, won't be able to resist the break.
Silver has been doing the opposite, remaining below an 11 month downtrend, but is now just 1.50 away from an upside breakout hiding in plain sight: my indicators are leading me to buy silver on 2 consecutive higher closes over 33.
One of these days, weeks or months, Mr. Market is going to clear his throat and speak up, and my gut tells me that in a fraudulent fed-supported equity market, he may be speaking from the precious metals pulpit.
Not for long!
If you play with GLD, be sure you have your nomex gloves and clothing on before you jump. Fire extinguisher is also recommended.
GLD stangle just barely out of the money > 90 days looks like the play that has the least flammability
Definition of risk assets is wrong. US treasury = very risky. JGD = ubber risky. Equity somewhat risky . Gold = low risk. Silver = UFO/Kryptonite to the current financial system. I love kryptonite.
my classmate's sister makes $62 hourly on the laptop. She has been unemployed for 5 months but last month her pay check was $13843 just working on the laptop for a few hours. Read more on this web site .... http://bit.ly/FPPP3j
Okay so how many times have we done this before....jump from European bonds to the "safe haven" of US treasuries....but then you realize they really are not safe havens...so I expect more and more people and countries...you know those little countries like China and Brazil etc...are kind of getting the picture that the ole US dollar ain´t what it used to be and will not even be close in the future..so more and more are going to gold...IMHO...Spanish and Italinan bonds bad.....USA bonds good...LMAO
Bonds, schmonds...its all polishing brass on the Titanic. BRIC's already shit canning the US dollar, and dont forget other great commodities such as shotgun shells.
Gee, USD up marginally, equities down, yields up, AND Gold and Silver up.
Maybe the beachball is slipping from TPTB's grip, soon to pop to the surface.
Aww, who am I kidding. Still not enough Phyzz buyers. Yet.
Obama sitting with the President of Brazil yesterday looked like he was smelling a fart, seriously, he looked very unhappy and disgusted. I'm sure she was letting him know that Brazil isn't real happy with the nitwits printing money and injecting in ALL the wrong places! I'm pretty sure they (BRICS) all realize that the good ole dollar is nothing more than toilet paper in training...
It begins, the long slide home. Drinks all around.
head and shoulders forming in spx in gold
http://stockcharts.com/h-sc/ui?s=$SPX:$GOLD&p=D&yr=1&mn=0&dy=0&id=p13361103898
~head-shoulders-knees-&-toes, knees-&-toes~
meaning what? Think that "head and shoulders" business has held up in that chart in the past? I think not. s&p vs gold is a ratio, not a physical thing used & traded, even hoarded or in a derivative ETF. Given how both have moved up a while I'd suggest it's the scatter-plot pattern you best pay attention to.
Not quite as good, here's an overlay of 3-year daily price activity.
s&p500 3yr's
spy 3yr's
As you can see 2010 July & August, 2011 July-Aug show inverted moves from gold vs s&p500. Since end-feb we've been trending inverted BUT on small-scale daily price moves mostly moving the same direction.
Repeat after me: Gold is not a risk trade.
Gold is not a trade at all to me, Im not looking to trade it in later for dollars, its for when dollars turn into a 3rd world currency.
What do you guys think will happen - as an immediate, short term reaction - to the US Dollar if margin hikes come in big time in the next couple days?
Dollar will be <temporarily>stronger while cash is raise selling stocks, gold, commodities to meet margin calls. Weak hands will be shaken out while things go on sale.
margin hikes affect shorts as well as longs. Given the bias to the short-side for gold I bet that would shove prices up.
A little maths on the recent DHS ammo orders...
DHS is buying :
450 million rounds of .40
175 million rounds of .233
135 000 gun carrying agents.
That ammo is said to last 5 years.
925 bullets/agent/year.
The army in 2010 bought :
200 million 5.56 for 12 months.
1.425 million troops and 110 000 of them in Afghanistan.
Ratio of troops/ammo used.
140 bullets/soldier/year.
So they are trying to tell us that the army uses 7 times less bullets (in time of war) than DHS who never use their guns but to train once a year? (yeah they don't use only 5.56 but 5.56 is half of what the entire army shoots so at best DHS is expecting to use 3.5 times more ammo/person than the army)
Who are they trying to fool?? The order of ammo from DHS means either they gonna start shooting people/hire a whole lot of people... OR the order is gonna last them way longer than expected.
There's no way this is a ``normal`` order of ammo... the maths doesn't fit.
And no one buys hollow point ammo for 'practice'.
They know something big is coming, and need tons of ammo...but I laugh at their puny .40 cal.
.40 cal is actually a bit over 10mm. It's not that small of a round. Not as powerful as a .44, but still way over 9mm.
No actually its not much different than a 9mm, a bit more velocity is all, calibers basically identical.....giving up ground to other slower yet heavier rounds such as a .45 ACP. All will kill you, to be sure, but I'm sticking with my .308 and 12 guage slugs.
.40 cal is actually a bit over 10mm.
No it is not, not in the original loading.................or handloads, can rip the .40's ass off.
It's a shortened case off the 10mm.
Some great rounds, but if you look at the BEST 9-.40.-.45acp there is VERY little difference in the One shot kill stats.
The Military bitches because they have to use ball 9mm..................target ammo.Hauge Convention.
Was wonder why 40 calibar rounds had spiked. I thought all the goverment chumps were carrying 9mm?
Hasn't the clock stuck midnight to turn our princess president's carriage into a pumpkin yet?
Most of the feds carry .40s&w and shoot them out of Sigs or Glocks. In fact the .40 was developed in response to the inability of some FBI agents to handle the much more effective 10mm that was developed for the FBI after a couple of agents were killed in a shootout with some perps using hi-cap 9mm handguns.
The real reason 'Fed's' like the .40 is because of women Fed's, bottom line.
Was wonder why 40 calibar rounds had spiked
No, THE MILITARY DOES,AND .45acp.for Spec Ops.
I thought all the goverment chumps were carrying 9mm?
THE .40 is strictly an LE round, and agencies.
VA police use 9mm with a sig or berreta. Mil, army uses 9mm sidearms, except as noted above, specops.
.40 cal is popular for their small carbine's. Think urban.
Or it's only Fast & Furious 2: Holder's Cut...
They plan to go after Neighborhood watchers
!!!!!!!
OK, the .40 cal purchase is meaningless, but that much .223? THAT is seriously ominous.
Hmm found the contract on the interwebs, definitely for real. Doubleplusungood.
Just goes to show that diverisification is the key and anyone without PMs in their portfolio is an idiot. And by PMs I mean the real thing: PMs, not TP.
things could move very quickly from this point .............be very careful !
So now we go from "BTFD" to "BTFP", substituting the word "plunge" for "dip".
Alcoa just reported a "big beat", kicking-off earnings season.
http://www.cnbc.com/id/46994972
And away we go!
Bull-leash!
Well, I guess on that note we can wave goodbye to QE3....the economy is GREAT Alcoa says so!
What do the banksters really want to hear, 'good earnings' or 'more free trillions will be delivered to your little clawed hands'....I think the latter is what theyre wanting to hear. A crackhead doesnt want a healthy bean sprout sandwich....he wants CRACK!
Ben has the hot hand right now. Yields dropping, energy dropping. He could give a crap about gold. Get oil below 100, pull out the transitory argument and hit print. Probably by august. When we get downgraded in Sept the 10yr will hit 1%.
Bens problem is, I think, its simply not 2009 anymore, and no one is left to believe any of it. And just because bubble equities go down, does not mean oil or other commodities go down....we havent printed any less dollars.
Agreed, I think he is using the Costanza approach now. It's not a lie if you believe it.
That's a credible theory. works well with this:
2012 Apr 10 gold price performance 10 years | Flickr - goldpricemodel
and this:
2012 feb 17 oil ROC look-ahead $brent $wtic
2012 03 26 dow vs oil | Flickr - Photo Sharing!
2012 apr 10 oil price trends | Flickr - goldpricemodel
They want the crack, no doubt they are now junkies and Ben's the pusher man...
And he gets a contact high watching them making it go up in smoke
Revenue up .8 %, Earnings down 70% from last years first quarter. Sounds wonderful, NOT
To hear the Alcoa story based upon gushing financial media headline content, you'd think there was never a better earnings report, ever.
I think they're all gonna take a page out of Jamie Dimon's JPM beats.
Pump the funny numbers, push the bad shit WAY out into the future.
And hope everything hangs on until you can sell your preffered stocks and resign....
Fucking Irish ! Obviously English is not their first language ! Monedas 2012 Infamous Irish Potato Famine Denier
Note to Robottrader (if you are out there): As of today, EUFN (European financials) is up 5.59% YTD, vs. 8.02% for S&P 500.
Of course, we still have over 8 months till year end. But as of today, European financials are underperforming.
Alcoa beat .....but sales were flat...and I bet the future can´t be to bright with China over producing....Conf Call on now..we will see
Is it really 'rare', or more so 'phase definitive'? Gold is a bi-polar creature. It was holding in OK on the equities up trend creating 'inflation' influence until the equities failed last Wednesday... and the Gold got spanked. Yet, in spite of equities continued weakness from Thursday onward, Gold has done well. That's because it is merely back in the definitive phase it prefers: 'crisis' haven bid.
I expect they will smack gold down until the big boys clear out the vaults at low prices. China seems to be in on it. Silver will run out a lot sooner, may be why they've pounded it so hard lately. The game is changing, I just cut my margin exposure way down.
It's April. Traders are getting an early jump on May i.e. if it's May go away.
It's the warm weather that has everything happening early this spring, including selloffs.
"Correction" will be allowed, but not a catastrophic sell off. Watch out for the rebound effect tomorrow.
Are you serious? The market is nothing but funny money right now as funds have been heading to the exits all year. Noone wants to be last out the exit. This plunge is just starting and it will be MASSIVE.
This place is littered with the bodies of those who thought the can couldn't be kicked any farther.
not those who come up with charts like this:
2012 mar 01 oil vs dow with price-mapping equation
dow price prediction ivars zerohedge tfmetals adjusted
2011-7-06 spy price curvatures 01 | Flickr - goldpricemodel
2011-7-06 spy price curvatures 02 | Flickr - goldpricemodel
2011-7-06 spy price curvatures 04 | Flickr - goldpricemodel
http://flic.kr/p/bkbg9B
whipsawCity
Wheat (Globex) Intraday Commodity Futures Price Chart: May 2012
Did lumber futures whipsaw ? Monedas 2012 Sawdust and Peanut Shells
at first i thought they wood knot, but they fueled me and the saw sang
What the hell is a whipsaw ? Is it a whip with metal teeth or a saw with a leather tassle snapper ? Monedas 2012 A mind is a terrible thing to waste !
well, wasted it is!
does a transitive verb always hafta be a noun too? we could ask that guy, i think his name is gerund or something... they didn't cover this in math class did they?
They're going to have to go and tell Rick Santorum to get back in the race. It's bad for business.
That YTD S&P vs. 10Y chart is the best bit of research I have seen in a long while. Look at how the gap closes perfectly after the NFP report. They are steering this thing down and probably think they can land it somehow... in inflationville of course. All the other charts are revelations as well. Kudos to the Tylers at capital context.
Problem is, its like steering an ocean cargo liner thru formula 1 curves.
Titanic actually steered quite well around that iceberg. Maybe too well.
This could be the disconnect that starts the panic ? Double panic ! Panic out of stocks and bonds............panic into PMs ! One is falling and the other is climbing out of reach as you wait for your sale to clear funds ! It could be like a Korean atomic chain reaction....or better like a Korean missle....no one knows where or how far it's going ! Monedas 2012 Comedy Jihad Happy Days Are Here Again !
Standard issue for every Norkom soldier is a pair of tweezers for foraging ! Monedas 2012 Comedy Jihad Humour Decoupling
In 1929 they only had to sell once to get the Gold ! Now you got to sell to get the Fiat...then buy the Gold ! Got claustrophobia ? The Titanic is sinking and you are in the engine room shoveling coal....and the automatic doors are ratcheting down ? This is a potential "double panic" mechanism ! Hoarders have more fun ! Monedas 2012 Comedy of Errors
Coin store holiday ? If there is a panic into PMs....how long will the coin stores stay open....they may just stop selling....period ? Would you let the mob clean you out ? Monedas 2012 Comedy Fear Mongereing Provocateur
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Gold has been coupled to equities? Let me look back a few months.
obviously inflation coupled together many things, gold,oil,equities among them.
Decoupling (as you seem to suggest late in your piece) due to realization that the next move by Fed will more likely be toward easing rather than tightening. Decoupling will come to an end if QE III is initiated in near future.
i see it is your first day posting, so hi!
Decoupling (as you seem to suggest late in your piece) due to realization that the next move by Fed will more likely be toward easing rather than tightening. Decoupling will come to an end if QE III is initiated in near future.
The markets are rigged. If they go up till election day non-stop everyone will realize this fact.
Yawn. Wake me up when the VIX is 30.
Welcome to the peak!
Peak oil, peak stocks, peak people.
It's a grand show, just don't stay too long. Get ready for the long descent, or suffer the fall.
Let's all buy some silver
What could go wrong? http://flic.kr/p/bxySU9