Stocks Slump But Commodities Jump Despite USD Pump

Tyler Durden's picture

US equities dumped out of the gate from the day-session open - after drifting lower with Europe all night/morning. Regimes shifted as Europe closed with Gold and Silver spurting higher (with the latter outperforming to play catch-up from last week) which led to the start of a correlated risk-on move in stocks (egged on in a 'ignorant' way but Oil strength from its increasing war-premium given the middle-east turbulence.) The levitation on low average trade size and low volume was mind-blowingly algorithmic as ES came to rest for the last hour almost perfectly at VWAP (and EURUSD seemed pegged at 1.25). Just like on Friday though, with a few minutes to go, ES dropped rapidly on heavy volume and average trade size as it would appear institutional sell orders plagued the market. The close took us back into the down-trend channel and back to 10-day lows for stocks. Modest USD strength (and JPY strength on carry-unwinds) left Oil lower from Friday but well off its lows as the rest of the commodity complex surged. Treasuries gained back all of Friday's losses ending at Thursday's low yields with 30Y outperforming. Financials and Energy sectors were worst with the major financials ending down 5-7% from the pre-downgrade close now. HYG (and HY) outperformed in the short-term but as we noted earlier remains a convergence trade than an indication of rotation or strength. The late-day dump in stocks lifted VIX back over 20% ending up 2.3 vols as implied correlation lifted back above the 70 'crisis' levels once again.

S&P 500 e-mini futures (ES) drifted lower early, snapped lower on the day-session open, recovered from Europe's close - magically levitating perfectly to VWAP (red arrow - blue line) and then dumped on heavy activity into the close...


and while credit did widen (weaken) today, stocks contonue to underperform in the short-term (though as we noted here earlier, there is good reason for this and we should see the divergence stall now)...

Commodities all performed well off the lows (even as Oil closed down on the day more in line with USD strength) as it seemed the rally in Treasuries stalled at Europe's close and safe-haven flows pushed into Gold and Silver...

and the divergence between stocks/bonds and gold/USD is clear (around the European close here)...

risk assets in general were very quiet this afternoon as CONTEXT trod water and stocks limped UP to meet its value (and VWAP). We will need to see some follow-through on EURJPY or Treasuries (or a reversion in WTI) for equities to leak more here...

Charts: Bloomberg and Capital Context

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The Swedish Chef's picture

All very pretty charts... Now, where is the Spanish bank downgrade that was coming today?

BlandJoe24's picture

started to wonder if Moody's is purposefully hedging ZeroHedge..... maybe so their friends and supporters make a buck or two off the thousands that play the market based on ZH info....and to show the insightful but disruptive "fringe" just who's "boss"...  

on the other hand, TD sometime forgets to include words like "probably" or "as far as i can tell" in favour of words of certainty.  Being wrong a few times can be a good lesson... 

(for newbies:  Don't turn into a mindless follower.  ZH is often right - for which i'm very grateful - but sometimes wrong.  So don't bet everything on every investment tip you're reading into ZH postings, you may lose. )


  update: As per ZH tweet, Moody's just downgraded, just later in the day than usual.  TD/ZH was right on this one.  And no immediate EURUSD movement - weird.

The Swedish Chef's picture

Well, they took a pretty long friggin detour over Spanish financial press in that case. MSM in Spain also picked up the news.

Short Memories's picture

All priced in to the perfectly efficient market already on perfect information! :)

ZeroAvatar's picture

Anyone buying stawks right now would have to be Forrest Gump.



Edit:  Bitchez.

Sam Clemons's picture

Stawk panic is not near good enough if it doesn't even cause a precious metals panic.  TPTB better wake up.

bdc63's picture

somebody must have called in sick today at the JPM silver-short trading desk.  i'm sure it will all be back to normal tomorrow.

Abraxas's picture

It's those damn temps.

CPL's picture

It always seems to be a concern.


Good thing that JPM has all that Silver Squaaaaared away to consolidate their assets against their outstanding liabilities and their ETN portfolio.


Downgrades play fucking havoc on how fast and how much is due on any loan.  Even a loan of silver to capital to 89000:1 over leverage trade.


It's going to get weird again...really weird.

slewie the pi-rat's picture

thxz for the last chart

i found this kinda interesting and put it here where tyler and others can note it if they wish [Paste}:

Gold as an Alternative Day-to-Day Currency

Many gold supporters believe that gold can replace fiat currency as money. We’re not one of those believers. We realize that it’s not a matter of being right, but in the current powers that be, it is a matter of accepting its use in the system. At this moment, they’re showing no inclination or support for the idea of gold as money. But they do see it being used in a critical way. (Which we will discuss in the next part of this series.) {end]

zeroHeads may recognize this as a slewie theme:  PM coinage circulation as money and not at a disadvantage to "legal" tender; not to replace fiat, but to replace the lack of real money used freely as currency in circulation

here is the author who was kind enuf to address this concern on a site not zH and please note:  he didn't say it was a styooopid dumbass idea, did he?  he just said it was still falling on deaf ears in his life, as in mine on zeroHedge at this moment

The Black Hole of Deflation - Part 1
By: Julian D. W. Phillips

well good! as i said last week (pretty loudly, i'll admit) this isn't something which most gold advocates see as important, but a few of us are actually jefforsonians and understand it might be more important than even post-modern thought might appreciate as a monetary principle

...whatever that might mean...  ???...

web bot's picture

Hey Slewie,

IMO currencies will never be tied to PMs... at least not in this world. BUT PMs will act as a transitory currency during the collapse and general reset.

slewie the pi-rat's picture

you don't understand me

or that currencies and PMs are already tied, world-wide

they are not pegged;  if you don't trade today, you may not get the same price tomorrow;  but you will be able to trade for FRNs or canadian or pesos or euros or whatever currency you are using, wherever you are, tomorrow, the next daym next week;  same as last year, too

you think you understand others, but you don't even know what you are saying, yourself

see ya!

TWSceptic's picture

This feels like a bull trap.

bdc63's picture

keep an eye on 1292 ... my magic 8 ball says it ain't hold'in this time.  next support appears to be down around 1225ish

The Swedish Chef's picture

1292? Can´t see it, too far down...

cognus's picture

I think he meant BEAR trap...

That's the problem with fresh local bottoms... feels murky, and nobody wants to be a fried hero

slaughterer's picture

Too many technical trading desks short here.  CONTEXT implies a correlation move upwards for ES.  I would expect that movement up to start already tomorrow as part of EOQ window dressing.  

Conman's picture

You mean the 2 week long QE squeeze still has people in short?

web bot's picture

With stocks running out of earnings, the US, Europe and China slowing, with treasuries getting severely crowded... is the smart money very soon going to start to look for safety and yield in another fashion? Are PMs getting ready to move significantly higher? PM appreciation is a form of yield. If so, it's going to be a very exciting but nerve racking ride for longs.

slaughterer's picture

Sorry ZIRP HEDGERS, but the pre-July 4th low-volume ramp is one of Bennie's favorite tricks every year.   

LawsofPhysics's picture

If it is expected, it won't happen.  Ben is trying to front run himself this year.

bdc63's picture

There is some moron on CNBC right now declaring that housing has officially bottomed ... oh my

The Swedish Chef's picture

Expect one every other month for the rest of the decade long correction...

Roy T's picture

One small quibble, CNBC has someone on every day not every other month declaring that a housing bottom is in.

LawsofPhysics's picture

LMFAO!!  Did everyone just get a raise?  Wages still matter.

dexter bland's picture

S&P Homebuilding sub-index  is up 77% since last October.

And what has gold done in that time?

Wage rises are coming from lower gas prices, and mortgage rates. Two more well entrenched trends it may be best not to ignore.


dexter bland's picture

...that's if you are interested in making money, rather than being part of a precious metals devotional cult.


LudwigVon's picture


And what has gold done in that time?

Gold and Silver are money, not an investment there WB ...

Wage rises are coming from lower gas prices, and mortgage rates.

No, gasoline impact is 1/2 of what you think it is (see consumption), and prices have barely fallen, while shipping rates only seem to rise. There is no demand for housing beyond the mortgage rate impact for best-credit borrowers - who do not need to delay purchase for another 10bp. Again, negligible.

Now prices for necessities will continue their uneven rise, while employment continues to flat-line at best (still missing 7 million jobs), and then dump another 3 million in supply onto the property market over the next 2 years. At the rate that consumers are cutting back on the ultimate discretionary expenditure (retail gasoline), again 1/2 of the 30 year average, they are more strapped than ever. 

Plus, the Dallas branch of the Fed says there is another 20-30% downside to complete the reversion to the long-term average home price. ;)

pragmatic hobo's picture

so, ... is RIMM bottoming out?

pleseus's picture

QE3 hope filled rally from the last couple weeks is running out of steam.

bdc63's picture

Never underestimate the value of the Bernanke Put.  If the FED would come out and say "no more QE, ever", we would lose several hundred S&P points in the bat of an eye.

Everyone knows that the FED will print as much and long as they need to.  So, the only way this market drops dramatically is if something happens that traders don't think mere liquidity flooding can solve ... and we get closer to that 'event' every day that the sun rises in Europe.

LawsofPhysics's picture

You mean businesses still need energy and commodities to do, well, anything?  Who would have guessed it.

monopoly's picture

Really enjoy these market wraps. Just tell it with truth. What a novel idea. RIMM has about 9 dollars before a bottom. Getting closer. PCX is first up. Govt. Motors in the teens, banks getting taken out back....and gold, silver, higher. Do think oil near a reversal. And what a reversal it will be me thinks.

Have a nice day. We are so screwed.

CPL's picture

It's going to be a horrible mess.

ZeroAvatar's picture

Hussman today quoting Richard Russell, " in primary bear, 28% to 56% drop in stocks coming..." or something like that. S&P 500 '666', bitchez!

chump666's picture

Asia goes bid a slight short squeeze will occur, since selling/buying trends now originate in Asia (not EZ)  Commodities are bid, should support Asian equities.

Soros should get off the wacky tobacco.  Europe's economy died a year back, just a zombie now. Yes, but once it realizes it's dead...will be a shock.

But Asia is the doomsday trade.

localpacific's picture

Todays bearfest provided some opportunities though. Video: Stocks drop as expected 

chistletoe's picture

not just gold and silver ...


DBA made a huge move up today as agriculture products are up across the board ...

drought spreading across the USA along with abnormal heat (can you say dustbowl rerun?).

Natural gas is also continuing its definitive course upwards off the bottm, now in its third week ....

It takes just as much electricity to cool a building down as it does to warm it up ....