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Treasury Curve Pancaking As Stocks Approach 1252 Support

Submitted by Tyler Durden on 08/02/2011 14:13 -0400

The worst possible news for financials, which basically never managed to tick higher in all of 2011, is now here as the entire Treasury curve has virtually pancaked today, making sure that the perfect storm for banks is here, with nobody trading (no sales revenue), prop trading dismantled (no trading revenue), and no lending revenue soon either (2s10s heading to 0%). The closed loop will send even more money into the 10 and 30 Year, causing even more pain for banks, and so on ad inf until Bernanke relents. And you can be certain that the CEOs of the TBTFs are on the phone with the New York Fed as we speak. Luckily, the next FOMC meeting is August 9 which means the market will only have to deal with this non QE3 uncertainty for a few days. Naturally when QE3 is announced, gold will promptly leave $2000 in the rearview mirror.

And elsewhere, with the 200DMA support now history, the next support line, as we mentioned last week, is roughly 1252 which is now just 12 points away. After that... there is no support until about 1150.

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Tue, 08/02/2011 - 14:14 | 1517583 FoieGras

10y breakeven TIP inflation is ~2.3% ... very close to it's 5y average. QE3 won't happen before this metric does't collapse back down to the 1.5% level.

Tue, 08/02/2011 - 14:27 | 1517648 Boston

Exactly.

And this drop in the breakeven could take 6 months, during which time the SPX drops another 20-30%.

Tue, 08/02/2011 - 15:19 | 1517857 narnia

the TIPS spread is going to tell you, within a range, exactly what the Fed wants it to tell you.

Tue, 08/02/2011 - 14:33 | 1517679 Transitory Disi...

Just be aware of one thing: The next big collapse in the markets leaves The Fed and government with no ammunition to counteract it – rates are at zero and QE didn’t work except to crank up the price of food and energy.

You think this won’t happen eh? Ok, go ahead and believe that. Go ahead and believe that “we’re special.” It worked out real well for you in 2008 and the value of your IRA or 401k, didn’t it?

…

Remember that in 2009 we were told by everyone that the recession “ended.” Well how come Feldstein is on CNBC right now saying that we’re still in a recession?

Oh really? Still in one eh? I thought we were all done with recession in 2009? Paul Krugman where are you? Oh yeah, speaking of him, his solution is to print up yet more money and drive energy and food prices even higher, so we can be like the Chinese and starve 1/4 of the population, then try to figure out how to keep them from rioting! You want to know how it’s stopped? You stop the debasement – by force if necessary by Congress removing Bernanke via emergency legislation – and perhaps by removing The Fed itself. We will no more allow the dollar to be destroyed in that fashion than the Chinese will allow their people to starve as a result of our policies.

Four years ago this was solvable with a lot of pain but it would have been bearable and resolvable. Today it’s worse. If we don’t cut this crap out there will be no resolution at all and the ultimate result will be severe, widespread and potentially revolutionary civil unrest.

http://www.shtfplan.com/headline-news/government-will-have-no-ammunition...

Tue, 08/02/2011 - 14:38 | 1517709 gmrpeabody

Wow..., somebody woke-up on the wrong side of the bed.

Tue, 08/02/2011 - 14:45 | 1517730 Fearganainm

This is From Denningers Blog at least give him some credit!!!

Tue, 08/02/2011 - 15:12 | 1517824 Transitory Disi...

Sorry, I had not realised it was from another blog. I had linked to the site I got it from in the post.

My bad.

Tue, 08/02/2011 - 17:49 | 1518559 Iam_Silverman

"Well how come Feldstein is on CNBC right now saying that we’re still in a recession?"

Because he didn't get the memo? I'm sure that he will be getting a visit very soon from some nicely dressed men in black suits and a 'persuasive" demeanor.

Tue, 08/02/2011 - 14:20 | 1517591 BaBaBouy

Gold just hit a new high in USD fiats, and also in most other major Fiats ...

GoldToTheMoon ...

Most ASIANS have been buying hand-and-fist for years, and are riding high now and going forward ...

Unfortunately most AMERICANS have not, having been Dumbed down by their mainstream media and WALL STREET MBA's...

Is USA now heading the way of SPAIN / ITALY / GREECE ???

Tue, 08/02/2011 - 14:15 | 1517592 r101958

Big question....will the PPT step in at the end of the day........again?

Tue, 08/02/2011 - 14:20 | 1517613 r101958

Looks like they already are. Who wagers Dow closes above 12k today?

Tue, 08/02/2011 - 14:24 | 1517634 HelluvaEngineer

counting on it

Tue, 08/02/2011 - 17:04 | 1518363 mayhem_korner

-11,866

FAIL

Tue, 08/02/2011 - 14:15 | 1517596 bigdumbnugly

then it comes to be that the soothing light at the end of your tunnel

was just a freight train coming your way.

(said best here by one of the best bands in the world).

http://www.youtube.com/watch?v=j8e3uvK4x40

Tue, 08/02/2011 - 14:16 | 1517597 caerus

bring it all down...bitchez

Tue, 08/02/2011 - 14:17 | 1517598 BaBaBouy

Tue, 08/02/2011 - 14:17 | 1517601 HelluvaEngineer

Hate to say it but I just hedged. I expect a big rally until Friday.

Tue, 08/02/2011 - 14:22 | 1517626 eureka

Based on?

Another Obam'ass motivational turd-speach?

A Bernanke burb about Fed expedient bankster spoon-feed in 10 seconds?

Tue, 08/02/2011 - 14:28 | 1517656 Sophist Economicus

Funny, I'm sitting here right now, with my cursor over the buy side of an ES future, too chicken to click -- but thinking it is the right answer right about now

Tue, 08/02/2011 - 14:33 | 1517678 JuicyTheAnimal

Yup, I'm thinking this is another Wall St shake down so they can buy the dip before more Berskanke bucks flood the markets.

Tue, 08/02/2011 - 14:42 | 1517720 Panafrican Funk...

Remember, the call at the beginning of the year was 1400 on the S&P. They will hit that mark. Trade the December expiration.

Tue, 08/02/2011 - 14:46 | 1517728 gmrpeabody

TOO CHICKEN TO CLICK...

rotflmao... i like that.

Tue, 08/02/2011 - 14:18 | 1517603 Cassandra Syndrome

Pigs in a blanket Bitchez

Tue, 08/02/2011 - 14:58 | 1517769 Oh regional Indian

Silk purses.... sow one hears...

Glitches.

ORI

Tue, 08/02/2011 - 14:19 | 1517605 Blithering ORSA

But we totally need to crap down S&P's necjk if they keep talking about downgrading USTs.

Tue, 08/02/2011 - 14:21 | 1517608 Cdad

http://www.youtube.com/watch?v=5_H-LY4Jb2M

You know the nearer your destination, the more you're slip slidin' away.

Tue, 08/02/2011 - 14:20 | 1517611 stormsailor

if it bounces off the 100 like the last 2 hrs we might just get there. /es is looking very solid. melting up onlow volume right now.

wait for the bounce

Tue, 08/02/2011 - 14:20 | 1517616 GeneMarchbanks

Mmmmmm... Pancakes...

Tue, 08/02/2011 - 14:21 | 1517620 Mr Lennon Hendrix

Major prop desks are shorting, and buying puts, now that they know they have a blank check to do what they want. They are doing this to make sure Bernanke issues QE 3, and because they will buy the very same trades on the low.

Tue, 08/02/2011 - 14:27 | 1517652 r101958

Makes sense.

Tue, 08/02/2011 - 14:22 | 1517625 mt paul

was going to post some thing cryptic

about 1250 support..

but

got aced by the Tyler...

snooze you loose

long silver

Tue, 08/02/2011 - 14:22 | 1517627 The Limerick King

The flattening yield curve is real

So how does that make the banks feel?

When asked for his view

Jamie shared what he knew:

"It makes it much harder to steal"

Tue, 08/02/2011 - 14:22 | 1517628 slaughterer

We have to close below 1268 before we can talk of 1252 as next support. On each of the index pukes I saw after 12:30, there were BOSs gobbling up discarded shares. 4:1 Put/Call ratio on Aug SPY options sets up the market for a nice suqeeze.

Tue, 08/02/2011 - 15:55 | 1518110 fuu

Might see that by EOD.

Tue, 08/02/2011 - 14:25 | 1517639 Caviar Emptor

My gold $2,400 call within 6 months doesn't look so unrealistic after all

Tue, 08/02/2011 - 14:29 | 1517662 AGORACOM

Caviar, the real question is how far past $2,400 does gold blow? Are we looking at $3,000 by end of 2012 ( ex - Mayan end of world dividend)?

George

Tue, 08/02/2011 - 14:48 | 1517741 Caviar Emptor

Not sure why that's "the real question". I'm a long term holder like many on ZH. I'm not trying to time gold to make a quick buck. It's not a get rich quick scheme. It's simply the most direct and effective way of preserving capital through times of monetary imbalance and economic disruption. End of 2012 is an arbitrary time frame. Gold will continue to rise inexorably for as far as the eye can see, as it has since we went off the gold standard.

Tue, 08/02/2011 - 15:07 | 1517802 Oh regional Indian

CE, for guys of the caliber here on ZH, I find your call an elementary error.

2,400 dollar gold at 50 USDX is meaningless. As the chart on Kitco never fails to remind us, did gold gain due to a fall in the dollar or rise in demand?

CE Watson till you clear the call! ;-)

ORI

http://aadivaahan.wordpress.com/2011/07/30/pre-cursor-01/

Tue, 08/02/2011 - 14:26 | 1517643 AGORACOM

March 30th I predicted QE3 would come ... but only after a delay necessary to achieve political will as a result of bad economic data (jobs, spending, GDP all suffice). The delay would bring some serious damage to markets and serve to shut up all QE3 critics. We're almost there.

http://bit.ly/ehcdGc

Regards,

George ... The Greek ... From Canada

Tue, 08/02/2011 - 14:25 | 1517645 jrt

Tyler, what's going on with the grains right now?

Tue, 08/02/2011 - 14:44 | 1517725 KickIce

No kidding, just as big of a story as gold imo, if not bigger.

Tue, 08/02/2011 - 15:13 | 1517827 franzpick

$ moving today into corn, beans and wheat can be nicely seen here: http://finviz.com/futures_charts.ashx?t=GRAINS&p=h1

$ moving out of everything else, except gold, is viewable here: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=msummary&cmd=show,iday[Y]&disp=SXA

Tue, 08/02/2011 - 14:26 | 1517646 slaughterer

ADP is the most unreliable eco point, and will be massively massaged upwards to 200,000.

Tue, 08/02/2011 - 14:26 | 1517649 Yen Cross

POTUS will ' FLIP' the griddle and cook some " WAFFLES"

Tue, 08/02/2011 - 16:00 | 1517712 EvlTheCat

Thank God he's a country boy...........?

Tue, 08/02/2011 - 14:42 | 1517718 Worker Bee

"Blue Waffles"..fixed it for ya

Tue, 08/02/2011 - 14:26 | 1517650 Tense INDIAN

The dollar rally may be stunning::

http://markettechnicals-jonak.blogspot.com/

Tue, 08/02/2011 - 14:31 | 1517670 Yen Cross

Thank You... cool Blog..

Tue, 08/02/2011 - 14:54 | 1517761 gmrpeabody

Interesting take, Indian.

It got my attention. Timing couldn't be better. Worth watching.

Tue, 08/02/2011 - 14:28 | 1517655 Caviar Emptor

WS can't count on a put from Treasury Dept a la TARP. So all eyes are on the Bernnake put. Without that we revisit 09 lows. And junk bonds are worth confetti

Tue, 08/02/2011 - 14:28 | 1517658 TraderMark

Mark Faber - the Bear Market is starting (8 min video)

http://www.fundmymutualfund.com/2011/08/video-marc-faber-bear-market-is.html

Tue, 08/02/2011 - 14:29 | 1517660 Archimedes

Bernanke must be in a corner wetting himself. He knows he is now trapped. QE3 wont do anything except push oil to $120-140 a barrel and gas to 5 dollars a gallon. Gas above 4.25 kills the economy it 30 days.

Then the masses will truly be screaming for his head. It is gonna be a very interesting next couple of months.

Tue, 08/02/2011 - 14:33 | 1517681 caerus

bwahahahaha!

Tue, 08/02/2011 - 14:50 | 1517744 Caviar Emptor

See I think he's cool as a cucumber. All he needs to do is support the WS and international banking cartel. That's the one mission. All else is BS

Tue, 08/02/2011 - 15:14 | 1517830 KickIce

Agree, the only time he might break a sweat is the few times he has to address the public. He doesn't even flinch when he has to address congress as he already has them by the balls.

Tue, 08/02/2011 - 14:30 | 1517665 trillion_dollar...

I'm sitting on locking in my new mortgage rate with the 10 yr yield collapsing like it is. The question is though - how low will it go?

Tue, 08/02/2011 - 14:34 | 1517689 Yen Cross

Fixed rates come to mind? Or rent your Guest House to the Secret Service....>

Tue, 08/02/2011 - 14:32 | 1517674 baby_BLYTHE

Let's see the house pass this:

Rep. Paul introduces bill to cancel $1.6T in debt held by Federal Reserve

Rep. Ron Paul on Monday introduced legislation that would lower the federal government’s debt by canceling the roughly $1.6 trillion in debt held by the Federal Reserve.

Paul has argued for the last few weeks that the idea represents a quick way to make the growing fiscal crisis more manageable. Under his bill, H.R. 2768, the $1.6 trillion that the Treasury owes to the Federal Reserve would disappear.

http://runronpaul.com/legislation/rep-paul-introduces-bill-to-cancel-1-6t-in-debt-held-by-federal-reserve/

Tue, 08/02/2011 - 14:36 | 1517695 Yen Cross

That was a rational comment... I'm long the carry Trade/

Tue, 08/02/2011 - 14:52 | 1517752 erik

talk about a positive feedback cycle. Fed buys treasuries via QE, then Congress cancels Treasury debt to Fed, and repeat. all the while, the banks continue to reap huge profits on buying treasuries first, then off-loading them to the Fed.

doesn't Ron Paul realize this bill enables the Fed and other big banks? his only angle is trying to lower the money supply, but the Fed would just do another QE.

Tue, 08/02/2011 - 15:09 | 1517807 baby_BLYTHE

perhaps, but me thinks this is a simple exercise by Dr. Paul to expose the FED's illegitimacy, send a message to the rest of congress after they voted to raise the debt ceiling.

As he has always said, there is no reason to cut healthcare for young children and the elderly, rather go after the FED and the overstretched empire.

Tue, 08/02/2011 - 15:14 | 1517829 erik

it would certainly be an interesting twist. i can't quite wrap my mind around all the possible repercussions.

thanks for posting the link.

Tue, 08/02/2011 - 14:34 | 1517684 KickIce

If your kid can't ride without training wheels you have to put them back on. Or is it more like the unstable 35 year old that will never leave home because he gets everything for free?

Typical DC, the fix just requires more money.

Tue, 08/02/2011 - 14:38 | 1517707 Yen Cross

+`~ Keep posting!

Wed, 08/03/2011 - 00:09 | 1519511 StychoKiller

"The Politicians say, 'Mo' taxes will solve ev'rythang!'", "Ball of Confusion" by the Temptations

Tue, 08/02/2011 - 14:37 | 1517697 SITruth

Back in the Great Depression, the banksters decided to throw in the towel and short their own banks stock and made millions.

Maybe thats what Dimon, Blankfein, and the rest are starting to think about right about now.

Tue, 08/02/2011 - 14:52 | 1517751 Buckaroo Banzai

rest assured, when the time is right, that's what they'll do.

The short interest in Lehman right before it collapsed was EPIC.

Tue, 08/02/2011 - 14:46 | 1517731 oak

http://www.newyorkfed.org/markets/tot_operation_schedule.html

Tue, 08/02/2011 - 14:46 | 1517732 Superslam

Dow, S&P and oil are all testing ascending supportive trendlines started in March 2009 when the equities/commodities bull markets commenced. These current levels have to hold or it's look out below.

Tue, 08/02/2011 - 14:47 | 1517736 Bansters-in-my-...

,,,!!!EXCELLENT...!!!

I love when a plan comes together.

Tue, 08/02/2011 - 14:57 | 1517737 Yen Cross

We have (a a) Zloty trade 1: minus 50:

Tue, 08/02/2011 - 14:50 | 1517743 Sutton

Millions of people sacrificed for the...Yield Curve.

Tue, 08/02/2011 - 14:52 | 1517754 Caviar Emptor

I think he'll expand the balance sheet and do the QE3. It'll be soft peddled. But he made it plain during Humphrey Hawkins: The Fed stands ready. (Warming up the presses...vroom vroom)

Tue, 08/02/2011 - 14:59 | 1517776 Yen Cross

QE~ Tim Timahh...

Tue, 08/02/2011 - 15:01 | 1517780 stormsailor

it broke above a trendline from 10am, i'm out. i was short 20 from 1289.

feels good to get some back i lost in 09. gloat,gloat.

Tue, 08/02/2011 - 15:15 | 1517837 Brokenarrow

ZH is an awesome site. The research is impecable. Tyler is a most sopgisticated dude.

But, in the last two years you would have lost a boatload using the reseach on this site....respectfully.

and, where is pomo, momo, jomo, and homo today? These proped up the market before? Why not today?

the fed turned into a seller? uh? it is a conspiracy to float qe3? uh?

it seems like......i dunno

Tue, 08/02/2011 - 15:18 | 1517849 franzpick

Come in Houston. We have a problem with 6 months horizontal chart support failure on all ax-ees. Please advise.

Tue, 08/02/2011 - 15:27 | 1517887 stormsailor

looks like we're close to gimbal lock.

looks like i'm out to soon. oh well, i'll sacrifice for the greater good, lol

Tue, 08/02/2011 - 15:45 | 1518034 stormsailor

1253.50, looking like a good chance of a close below, this last 15 minutes should be interesting

Tue, 08/02/2011 - 18:19 | 1518666 Buck Johnson

QE3 is coming, they have been talking more about it in the media.

Wed, 09/14/2011 - 04:38 | 1667325 chinawholesaler

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Treasury Curve Pancaking As Stocks Approach 1252 Support

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