VIX Pops As AAPL Snaps Stops With Action Between US Open And EUR Close

Tyler Durden's picture

As AAPL surges over 3% on the second lowest volume in 3 weeks, the start of Q2 was exuberance-exemplified as stocks, commodities, and Treasuries all enjoyed a bid - though most of the excitement was from the US open to the European close only. A weak start as European credit and equity markets leaked lower (as did ES - S&P 500 e-mini futures) was extinguished as the US day session opened and while construction spending was a bust, ISM managed a small beat. This didn't seem like the catalyst really but we were off to the races as everything rapidly levitated into the European close - except US credit markets which were far less sanguine once again. Stocks stalled at that point and limped on to test last Tuesday's overnight highs before sliding back 6pts or so into the close. Typical high-beta QE-driven sectors outperformed with Energy and Materials heavily bid but even they gave back some advantage into the close as did Tech and Financials. Oil staged a magnificent recovery (best performance from low to high today) topping out over $105 but just outperformed (from Friday's close) by Copper and Silver which ended up around 2.4%. Treasuries rallied 8bps from overnight weakness to their best of the day but son after the macro data, TSYs sold off with the long-end underperforming - though the entire complex ended lower in yield on the day. AUD and JPY strength matched on another providing little support from carry FX as the USD limped weaker - though Gold tripled the USD's performance managing +0.47% and a close above $1675 once again. VIX gapped notably higher at the open but rapidly compressed but from the close of the European session it pushed considerably higher to end the day fractionally higher (oddly on a decently higher equity market performance).

Equities (blue) continue to sustain their separation from a seemingly more reasoning credit market - with high-yield as 'cheap' as it is currently relative to both stocks and vol, it remains odd that those risk-seeking bandits that are backing up the truck in stocks don't dip their toes into HY? or is it simply the same pattern of the last few cycles where credit market's focus on more than simply momentum and the next headline (instead focused on real cash flows for more than one quarter) that is holding back the ebullience in bond-land.

It certainly didn't have the feel of asset allocation or rotation as Treasuries rallied (red) from the US open to Europe close at the same time as stocks and commodities surged. Contrarian-wise, shouldn't the 'strength' of ISM mean less probability of QE? though this action had the feeling of a QE-trade all over it.

Nowhere more exemplified than in the commodity complex but as is clear in the chart above, most of the exuberance in the metals was from US open to Europe close with only Oil continuing to glide higher into the close.

After the European close, Treasuries leaked higher in yield with the long-bond underperforming - but they all closed lower in yield on the day.

But it was VIX that had one of its days today...opening significantly above where one would expect given where stocks traded (up over 16.5% implying more like a 1395 S&P than a 1405) and while VIX futures (red) tracked the S&P (white) tick for tick - even though they also ran ahead of the equity market into the close - VIX (orange below) remained significantly more bearish than stocks would have expected.The European close (red vertical) is the approximate inflection point for VIX underperformance.

The rise in implied correlation (green) on a solid equity performance day combined with VIX's underperformance (orange), Credit's ignorance of the rally, Treasuries shrug in general, and Apple's lackluster volume on its big Q2 'debut' doesn't suggest a wholesale rotation by any means. If you are bullish here, it seems rotating to HY (or HYG) makes more sense, if bearish stocks remain the most expensive.

It's perhaps also notable that the ES managed to test above and fail, closing back below the March 2009 up-trendline once again...

Click on chart to see details...

and the uptrend-line from the 11/23 low on day-session ES also was tested from below and not broken into a new up-trend - still acting as resistance.

Click on chart to see details...


Charts: Bloomberg

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Hondo's picture

Same mistakes as one ever learns

Nobody special's picture

I'm just glad AAPL stock never drops. Lots of upside potential. Certainly not a bubble. Nope.

MillionDollarBonus_'s picture

AAPL has been seriously impressive this year. If we get a close above 650 it's off to the races. My first short term target is 700 (I agree with Goldman) and my next price target is at least 1000. Can you believe the cash balance on this company's books!? Unreal!

brewing's picture

where's robotrader been, i need to know how to play this "market"....

I am a Man I am Forty's picture

I agree and I'm not being a smart ass....iPad excellent review rating by consumer reports.

I wonder what everyone will say when apple does hit 1000?  The same dipshits that said apple wasn't going to hit 600 when apple was at 200 are the same ones saying it's not going to hit 1000.

Keep on junking and keep on being pissed that you didn't buy a long time ago.  Apple is a powerful snowball rolling down a giant hill gaining momentum.  Has it peaked?  No.  Is this just the beginning?  No.  But I'd say we are about halfway. 

MeelionDollerBogus's picture


I like what nakedswantrading had to say:

basically writing puts & calls short-term every 2 weeks & longer-term buying out of the money puts & calls to get some action there. Big big drop projected. AAPL is clearly in a bubble but who cares: buy-and-hold is a dead-era. Today's trading is all about leverage & arbitrage and most important, risk-management.

The AAPL cash balance isn't "real": it can't be used in America, repatriated, without a 35% tax.

I know, I know, it's biting the hook to reply in a serious manner to milliondollarbonus_ HOWEVER I felt this financial advice was so misleading of you that it didn't carry the implicit /sarc your other posts do so... I bit the hook.

HedgeAccordingly's picture

This should cheer everyone up - Bar Rafaeli playing Tennis - 

Squid Vicious's picture

very pretty face, but no ass and she's Israeli... one more strike and... 

swissaustrian's picture

I've shortened my market watching day to a timeframe from 8 am ET to 1:30 pm ET. That's when all the action happens. No need to waste my time anylonger. The only market which makes significant moves during other periods of time is the oil market it seems.

Screwball's picture

Watching a broken market is like watching paint dry, or worse.

LMAO's picture

Yeah, it's more like watching dry paint.

BrokeDayTrader's picture

WTF how can the tape go up with all these people on food stamps?

I'm losing a little every day, since I'm short some big lines right now.

If this market doesn't get slammed really soon, I'm going to go Postal, take the train down to Wall St. & Broad and start punching out some of those smug, Ivy Leaguers trying to cut out of town to go to the Masters.

Hurry up and crash already, dammit I'm tired of waiting!

swissaustrian's picture

Might take another month or two if we look a traditional seasonality.

Jake88's picture

Gee that sounds familiar.  How long have we been hearing that.

YesWeKahn's picture

The food stamp  population chart looks hell like AAPL.

Tsar Pointless's picture

Bull bull bull bull-bull-bullish.

Bull bull bull bull-bull-bullish.

(Sung to the tune of "Barbara Ann" by the Beach Boys)

CvlDobd's picture

I never know what to make of these threads until I read the Tsar Pointless recap.


Thanks, I am lost w/o your guidance sir!



Tsar Pointless's picture

Thanks. I'm here to help.

slewie the pi-rat's picture

snappin appl pops stops, BiCheZ!


JohnKozac's picture
US regulators accuse Royal Bank of Canada of using sham futures trades


WASHINGTON (AP) -- U.S. regulators are accusing one of Canada's largest banks of engaging in hundreds of millions of dollars in sham futures trades to reap tax benefits on its holdings of company stocks.



Village Smithy's picture

When I heard the news this AM I thought they were finally clamping down on this re-hypothication problem because I remembered that ZH had mentioned that RBC was up to their eyeballs in it. But no, this is an entirely different scam from Canada's most regal of banking institutions.  

TradingJoe's picture

Here come 2011 reduxxxxx!!!!

TradingJoe's picture

Here come 2011 reduxxxxx!!!! Forgot to mention....the shift....last year was in late August .... this year might come "earlier":()))!

chump666's picture

100%   Which will be interesting considering the volatility last year lasted three mths.  We get the collapse now then the volatility could last longer.

Lady Heather...UNCLE's picture

...yawn...sell in May and go away

chump666's picture

Two major corrections after CB print job rallies (2010. 2011) encouraging dumb/smart and smart dumb money into stocks.  That an HFTs are supporting tech MA ranges.  They go, this market cracks.  So a third massive correction is due or crash.  Whatever.  When?  is all technical charting now.  News, fundamentals doesn't mean much.  As long as the madmen at the ECB and the Fed keep credit markets spreads down with their printing, more so the ECB, then the risk markets will keep rallying until a HFTs like I said kill the MA supports.  Which is what the long position are trading off.

Danger ahead. F*cking end of the world style.  F*ck Marketwtach those idiots.  Obama rally? WTF do they smoke?

And no is fooled by China fudging and BS.  China spring about to kick in?  Lets go chaos.


chump666's picture

AUD supports crushed.  Another attempt at the "correlation" trade again eg correction.  It's all HFTs, break those supports you f*cking dumb ass machines.  Thanks.


Sathington Willougby's picture


The VIX looks like a decroded piece of crap.  Again.  Low water before the tsunami.  When we get another seismic shift in the fatuous banking "ring of fire", look out.