Volume Explosion Sends ES Higher As Treasuries End Unchanged

Tyler Durden's picture

30Y Treasuries rallied 14bps from high to low yield today peaking at the US equity day session open and troughing just prior to the late day vertical ramp-fest in ES (the extremely liquid e-mini S&P 500 futures contract) that managed to turn what was heading to be a mediocre day into a headline-grabbing risk-fest. Unfortunately, stocks were the only asset class enjoying this exuberance as Oil lost over 2.5% from its highs, AUDJPY and FX in general drifted lower all day and copper and silver slid after Europe's close. The huge burst in volume which ripped us back to VWAP in ES and several of the financials (as BAC was heading towards a $4 handle) was very notable and dragged ES back away from a critically risk-off performance day in CONTEXT.

The TSY curve ended practically unchanged with the short-end modestly lower in yield and the long-end very modestly higher in yield. The very notable rally and compression in 2s10s30s from the start of the US day session was a major driver (along with the general risk-off sentikent of the TSY rally for today's CONTEXT move).

ES and CONTEXT (dark blue line above) converged all day - from the 13+ point differential when we posted earlier - to as narrows as 7pts in the final hour. ES moved in our direction by 10pts or so only to give most of it back with the last minute volume spike. Risk, broadly speaking, was off all day - and even as we pointed out in the sectoral and financials performance, was lagging badly from only 1 minute after the open.

Credit underperformed equity's close to close shift massivley by completely ignoring the late-day ramp. HYG, for a change, tracked equities very closely, and held pace with equities late day surge with its own high volume ramp up to VWAP (light blue line above).

In corporate bonds, we saw net selling all day long with financials by far the most net sold (29% more buy-side sellers than buy-side buyers). HY secondary bonds were net sold - despite very strong perrformance in HY credit indices - which tracked ES most of the day. Evidently, duration risk seemed to be removed in general in both TSYs and Corps today.

All-in-all a very odd day that will make for some very sanguine headlines but from a professional's perspective, the underperformance all day along with the lack of any follow-through from any other asset-class into equity's last minute surge is worrying. Very heavy volume spikes in financial stocks along with significant net selling by bond managers is worrisome but a +3% day for ES is touigh to argue with when the margin-man comes calling. 1160 remains our HY-based relative-value view of fair S&P cash currently and with the relative outperformance of VIX and implied correlation today, it certainly didn't feel like professionals were re-risking today.

Charts: Bloomberg

UPDATE: By request - updates to our earlier sector post charts:

Sector's performance post 0931ET - nothing odd here at all into the close.

...and the 2% ramp in the majors made perfect sense.

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homersimpson's picture

Reloaded on FAZ today near end of trading today. Couldn't resist on capitalizing again on fake ramp ups on rumors. FAZ it UP!

Chief KnocAHoma's picture



This is all starting to remind me of an old hunting story:


This local guy goes out in the woods one cold afternoon trying to kill some quail for dinner. Unfortunately he runs into a very aggressive bear. The bear attacks and takes the hunter's gun, snaps it over his knee then bends the hunter over a log and screws him in the ass.


Well the hunter is upset and decides to kill the bear so he goes to his local gun shop, buys a new weapon then heads back to the woods. Again, the bear attacks, breaks gun and rapes the hunter.


Determined, the hunter goes back into town, buys yet another gun and heads back to the woods.


And once again the bear attacks and breaks the gun. He bends the hunter over a log and just as he is about to rape the hunter again he whispers into the man's ear, "You're not really here for the hunting... are you?"


Fed and Central Banks = bear

Scared humans afraid to let the system fail = the hunter

Carlyle Groupie's picture

"Reloaded on FAZ today "

You've been doing that for like ever. Did you go to the Corzine school of trading?

CPL's picture

If you don't know how to trade thermo nuclear material, then ask.  Otherwise please continue in your bag holding strategy.

Carlyle Groupie's picture

I see you reloaded on FAG today. Best of luck.

Carlyle Groupie's picture

I mean, I see you reloaded on FAB today. The fabulous ETF. Goods lucks.

CPL's picture

I don't go bear until WTI is over the $100 line.  Timing has to be perfect.  Versus bagholding which requires a basic cable subscription and CNBC.  You've always struck me as Kramer value driven investor.


I would prefer to be called anything but that.

Tegrat's picture

Versus bagholding which requires a basic cable subscription and CNBC.


-lol +1


CPL's picture

If you need a hand with those bags Miss I'm sure the market will help relieve your load.

Nucking Futs's picture

So what exactly is your definition of a "fake ramp up"?  Price right now is saying "if you stand in front of me, I'm going to be the bear previous poster's story and the hunter's ass is going to be your ass".  IMHO I'd wait a bit before going on the short side... let's just take a wild guess and say /ES 1220.

Wixard's picture

I figured last week we'd have an up day today. I was betting on it actually. Tomorrow I think we see the same kind of weird day in reverse. 


There's lots of bad news that really hasn't caught up yet imo. 


I also bought into faz today. 


Forget fundamentals, it's all rumor driven nonsense. 

Tegrat's picture

Good gosh...trigger happys. Cant you wait for some kind of confirmation move?



Hondo's picture

Somebody needs to do a FOIA request to see what is exactly in the FED's portfolio.....comb through every asset and liability account...

CPL's picture

I think if you wanted a trip to cuba with aghani prisoners, sure.


You make it sound like TPTB care anymore about even pretending about anyone that makes less than 10 million a year.

Dr. Engali's picture

Ah nothing like the fed buying up SPY to goose the markets.

slaughterer's picture

Momo ES traders love strong closes.  Late-day ramps will suck in the beta chasers. Give it a few days, watch and see.  

French Frog's picture

This page is quickly turning into one of my favourite daily read here on ZH.

I know it's posted by TD but are you also the author?


mynhair's picture

Capital Context.  Go thru old articles.  They even have charts during the day.

The fun is in anticipating what the chart will tell you.

AGoldhamster's picture

Next 3-4 weeks risk on ... everything north ... PMs more then indices ... of course with ups and downs.
Next turndate around 3rd week of december.

Ellesmere's picture

Concur with Dr. Engali .... pretty f*cking obvious buying 

Manthong's picture

My appreciation for Robespierre as a sympathetic historical figure grows each day that I watch this aristocratic joke of a financial market played out.



Trying to make sense of this market is nonsensical. 

mynhair's picture

Learned a major bunch from these CC posts the last 8 months, tho.

slaughterer's picture

Tracking HYG against SPY and making compression trades when they diverge widely is probably the safest way to make steady income.

mynhair's picture

HYG made me underbid TZA, dammit.  2.1 cents in the pre-noon action.

I am so hacked at myself.

oh...oh...but it's all HYG's fault...lol.

monopoly's picture

Took a little FAZ myself here, giving my miners some company. Is not GRPN just amazing. 0

slewie the pi-rat's picture

hard-to-figure, dream-like day

i wonder if the professionals are changing the dream-scape...

correlation soup in cloudy broth

maybe people are buying ETFs to give as gifts, this year? 

my sense is that the rumors of IMF second helpings for EFSF for italy and spain are being sold to retail, but, overall, i prefer the egg nog here, bIcHEz!

Mark123's picture

One really has to ask where the liquidity for any real rally is going to come from?  It would be interesting to get an update from Trimtabs.


Needless to say, today seemed like groundhog day.  Announce Eurozone solution on Sunday, stocks gap up....no action all day other than slow decay and then one final massive ramp job into the close to get a good headline.  This is all about maintaining confidence in the markets - the question is, are the big guys just propping it up so they can safely cash out, or are they really going for all out inflation with money printing madness.  Either way is bad, but it sure impacts how you position yourself.

dcb's picture

dear mark. trades sell, then they buy lower. that's all the liquidity they need.

Everybodys All American's picture

Sure do long for the day of "free" capital markets. I'd venture to guess 75% of up moves are now pre-market ramp jobs with the rest of the day trading sideways to down. Broken markets plain and simple will evetually never end well.

Mr Lennon Hendrix's picture

silver slid after Europe's close

If sliding is down 20 cents after a blow out day

The Fonz's picture

For my part, a close over 1220 means I am wrong, and I need to get off my shorts. I am so baffeled by everthing else I have to assume I am ment to be. I am greatful for the speed of this rally however, if it is going to bang into the 1200-1215 resistance area, and the 50 DMA at least I can be thankful it is happening quickly, so as not to waste too much time value and increase the implied volitility of my options. Also this rate of assent cannot persist for long at this angle, won't be more than a couple of days to figure this out one way or the other.

dcb's picture

can someone tell me why that isn't painting the tape and illegal

dcb's picture

it made no sense at all where we bounced at the end of the day today except painting the tape. yes we were very overslod on the hourly. but the gap should have closed much more like treasuries then buy. honestly, until the bernanke speaks about getting rid of these hft algo crap he shouod be boiled in oil

dcb's picture

so we didn't drop back to the base we shouold have today, and what is going to happen tomm in the am is the stop losses will be triggered for the shorts, but then there will be a sale on es, and I expect iot to drop back to  1180 and time to reshort5 is about 1223 or so

quacker's picture

I don't get it. It was risk-fucking-off as far as the eye could see .. 3 DAYS AGO!!

So if the market goes down tomorrow are we back to risk-off, game over?

chump666's picture

Just meltups, nothing major, no new highs but oil extending gains again - which the market seems to not want to deal with the middle east, Pakistan, Egypt and yes Europe all ready to erupt war/riots and total chaos. Oil is the nail in the coffin. And it is getting closer.  The Italians are going to love that bid oil price, oh and Libya is going to implode again...The world is truly f*cked.  But, we have top ranges kicking in, you got  nice trades on short positions and narrow trading ranges = volatility/swing trades/scalping.  Possible end yr rally if those insane Europeans can con the markets and prop Wall Street till the absolutely end game, which is the start of 2012

And then there is China...

disabledvet's picture

So can France just decide "we're gonna QE here" or is there some type of regulation that prevents that from happening?

kamikade's picture

Hello everyone,

Sorry for dumb questions but can anyone explain for me how HYG and LQD work please? (ie: how their price are calculated, how are their relationship to equity market) And how is the ESZ1's price calculated?


Yen Cross's picture

 I'm studdiin!g ES!   From the OUTBACK!   The spread if spyders/ ETF,s ?   That exit door looks tight!!!