Volume Explodes As S&P Loses 50DMA Again

NYSE volume was 20% above yesterday's and S&P 500 e-mini futures (ES) volume surged to its 2nd highest of the year as the last 30 minutes saw heavy volume and large average trade size very active as it pushed up towards VWAP and oscillated around its 50DMA. ES closed below its 50DMA for the first time since Monday but equities notably underperformed Treasuries (playing catch-up to bond's recent rally). Equities hit their lows at around 1430ET as ES coincided with Monday's closing VWAP (and Apple also tested and stayed around Monday's closing VWAP) and with a spike down and recovery in WTI prices (margin calls?). The major financials saw their best levels pre-open and slid lower all day with very little bounce at the close. While there was plenty of volatility in FX and commodity markets, close-to-close changes were relatively benign in the USD (DXY) and Oil, Copper, and Gold (while Silver modestly outperformed). All the action in FX was between US open and Europe's close but the afternoon saw AUD drifting weaker and CAD lose most of its spike gains from yesterday as JPY also slipped relative to the USD reducing some of the negative carry impact. Just as we had noted, and reiterated this morning and afternoon, equities performed the same hope-driven rally relative to broad risk assets as last week, and before the late day VWAP-seeking surge, almost completed their shift to fair-value. VIX also pulled higher to its credit-equity-implied fair-value before falling back as we rallied into the close. Overall average trade size today in ES, given its very heavy volume, was among the lowest of the year which suggests a lot of algos trying to wriggle their way back to VWAP to release some orders and with equity reverting to Treasury's, credit's, and broad-risk-asset's views of the less-than-stellar world, we suspect there is more selling to come here - albeit with OPEX complications.

ES remains below its six-month up trendline and closed below its 50DMA on very heavy volume today...

And from the European close onwards, it was all stocks as Treasuries, Gold, and the USD trod water in narrow ranges and in sync with one another. The flip-flopping early on between USD sync and TSYs sync was fascinating but to be clear, as we noted seconds after the auction, the market saw the actions in Spain for what they were - not good - and macro data in the US hardly helped - despite rallies post the Philly Fed and Home-Sales miss (red dotted vertical line)...

The USD had a little jiggle between US open and Europe close but is generally tracking sideways as the rest of the majors rotate around it. CAD (pink) has reverted its spike gains and JPY and AUD continue to trend lower (up is USD strength)...

Credit and equity markets generally tracked together most of the day with equities a modest underperformer close to close. Notice that IG-HY (orange oval) is decompressing as up-i-quality rotation is occurring. HYG remains rich to NAV and HY - unable to pull away again from its converged equity index...

And as we noted earlier this afternoon, equities were converging lower to the dismal place that Treasury yields are settling but on a broad-risk-asset basis, ES also reverted (just as it did last week) on our medium-term CONTEXT. Equities remain in hope-and-see mode but just keep getting disappointed...

And VIX drifted higher all day as equities leaked lower until it coincided with its equity/credit fair-value and then we bounced in equities...

Correlation picked up into the close but the inability for a market leader like Apple to regain Monday's closing VWAP and the broad market to regain today's VWAP suggests selling pressure was heavier than a first glance at close to close changes might reveal. Yet another day of high range swings in stocks as the last two weeks are increasingly resembling last Summer's chaos.

Charts: Bloomberg and Capital Context

Bonus Chart: A Day In The Life OF S&P 500 e-mini futures and VWAP...

(click for considerably larger chart)

The bands either side of the dark red VWAP line are standard deviations. This gives some scale to the sell-off in the mid-afternoon - over a 3 sigma drop relative to the day's volume-weighted average price volatility is very large.

Comments

[KillerWhale]

buy puts on anything out for jan14, guaranteed crash by then

[HedgeAccordingly]

tick tock tick tock goes the Apple clock - http://hedge.ly/ITcDAC

[Ahmeexnal]

Meanwhile, the system starts to fall apart by the seams. Canada blasts Eurozone for not cleaning up its shit:

http://www.marketwatch.com/story/canadian-german-officials-clash-over-eu...

WASHINGTON (MarketWatch) — The finance minister of Canada and a top official of the European Central Bank clashed in public Thursday over whether the euro zone has done enough to reduce the risk of another round of crisis.

The dispute started during a session on global growth sponsored by the Bertelsmann Foundation on the sideline of the IMF/World Bank spring meeting when Jim Flaherty, the finance minister of Canada, said that the euro zone’s bailout-lending capacity was still too small.

“The firewall that is being constructed so far is not adequately funded in our view by the euro zone countries,” Flaherty said.

“They should seek to overwhelm the problem and not create this clear and present danger that we have that we will have some shocks coming out of Europe,” he added. ”They have the resources to do it.”

European Central Bank Executive Board member Joerg Asmussen shot back that “the Europeans have done their work on the firewall.”

The euro zone now has a bailout lending capacity of $1 trillion, he noted.

Asmussen called on the rest of the world, including Canada, to pledge more money to the International Monetary Fund so it can combat the spillover from any crisis. Euro-zone countries have already pledged an extra $200 billion to the IMF.

The public spat is likely to be repeated in closed-door meetings of finance ministers of the G-7 richest countries and the G-20 most influential economies over the next 24 hours.

Flaherty said he was concerned about what he called “a very dangerous situation” in Europe.

The European banking system is “woefully undercapitalized,” he said. The IMF cannot use its funds to restore the banks to health, he said.

Asmussen, who was Germany’s deputy finance minister before joining the ECB executive board, said that the central bank had done its part to stabilize the euro-zone situation and noted that economists were now expecting only a mild recession in the currency union in 2012.

The onus was on Spain to address market fear that Spain cannot repay its debt, he said.

Spain has put forward a bold program of labor market reform and has done the first step to clean up the banking sector, he said.

The Spanish government’s made a mistake in relaxing its fiscal targets “but one can regain confidence of markets...by taking significant actions,” he said.

“The ball is clearly with the Spanish government here,” he said.

[LowProfile]

Anybody else notice silver was unusually strong today?

Hmm...

[Fortress_Euro]

It traded in its Fib channel.  No suprises.

[hoos bin pharteen]

Splunk IPO, bitchez!  "Release the shorts!"

[Stax Edwards]

http://www.youtube.com/watch?v=4XMr3QO2Sbc

[Mr Lennon Hendrix]

Canada demnds Europe inflates its problems away - awesome idea, eh?

[Bobbyrib]

Great, guess we know what Canada will do when the property bubble pops there. Dollar strength here we come.

[hawks5999]

AAPL, meet Newtonian Physics.

Oh! You've met before? Do tell...

[Comay Mierda]

buy puts on anything out for jan14

this whole 3 month ramp up in SPX has been up very light volume and in the recent days there has been heavy selling breaking critical supports.

there is HUGE downside risk in the next few weeks.

VXX seems like a good buy here, or just buy spy puts

[Mr Lennon Hendrix]

Fine, but when it comes to risk I would be more worried about holding cash than anything else considering the influx of fiat burning up the system.

[casey13]

QE3 in 3..2...1 

They have already said they will provide liquidity as required.

[spekulatn]

Speaking of whales,

http://www.propublica.org/thetrade/item/whale-of-a-problem-regulators-su...

[Ruffcut]

My eye dr said we can correct your vision but it still will not read into bullshit.

[Dapper Dan]

My auto mechanic told me today he could not fix my brakes so he made the horn louder instead!

[El Oregonian]

... And my ex-stock broker/ investment advisor told me the markets are now all fixed and that Fukushima is only a minor local japanese problem with huge real estate buying opportunities there...

[Thorny Xi]

It's a new moon this weekend ... Tyler's warned about the next few of these given the Israel / Iran thing ... a few people getting liquid perhaps?

[GrinandBearit]

The algos saved it again once the 50 DMA was breached.

[ZippyBananaPants]

Adam Johnson 'bloomberg' is a tool!!

[junkyardjack]

Buying some dip, for my chips. This should be interesting to watch

[Boilermaker]

Don't fret.  You'll wake up to a +10 handle ES.

No fucking problem.  The sandman will jack it up while you snooze just every other fucking night.

But, thanks for the charts also.  I'm sure they'll come in handy during the wee hour ramrodding.

[CvlDobd]

Ive begun referring to my daily trade of buying VNQ @ 10 AM in order to catch the 10:30 REIT spike as the Boilermaker setup in your honor.

It is so obviously bullshit.

[Boilermaker]

The IYR closed flat, again, and refuses to go down.  It's fucking astonishing that they can get by with it. 

It's totally fucking ridiculous.

I'm big fan of the 'bang the close' shit also.  But, hey, that's just me.

[YesWeKahn]

"

US State Revenues Finally Reach Pre-Crisis Peak "

Thank you Bernanke, without you, we would have bankrupted.

[TradingJoe]

Some GS "trader" deepshit got creamed in Cali, according to CNBS(da blow horn), why do they even bother, no GS will ever breathe jail air!!

[DavidC]

I'm as bearish as anyone but the hourly and daily charts are showing oversold to me.

DavidC

[Hot Shakedown]

More ominous that the 50 dma is the 13 and 34 EMAs on the SPX daily chart. The 13 is sitting 2 points above the 34....and vectoring to the downside. The last time the 13 crossed below the 34 was July 29th, 2011. 

[Abner Doon]

Have American legislators and the Federal Reserve
been abusing the dollar’s status as a reserve currency
to avoid overtly raising domestic taxation
by covertly taxing US dollar denominated assets like oil and food,
by over-printing money coincident with masking unintended consequences
by excluding oil and food within core inflation statistics?

http://hartzman.blogspot.com/2012/04/have-american-legislators-and-federal.html

[luna_man]

One thing for sure, if you don't know what's hppening, in these here market's...DON'T BLAME MY MAIN MAN!!

As usual, calls it, like it is!