Volumeless Equities Limp Along As Risky Debt Rolls Over For Fourth Day

Tyler Durden's picture

For the last four days, HYG (the high-yield bond ETF) has seen a significant underperformance in the latter part of the day. As we noted yesterday, high yield bonds (and investment grade) are seeing the advance-decline line rolling over. Stocks stand notably expensive relative to high-yield credit once again and VIX smashed over 1 vol lower from its gap up open at 16.5% to end at near 5 month lows under 15.25% - its most discounted/complacent to realized vol in over six months. A weak 10Y auction spurred Treasuries to underperform - which helped pull S&P 500 e-mini futures (ES) risk higher (along with oil strength) but in general stocks and gold tracked one another loosely higher while the USD pushed conversely higher - ending the week so far unch. Cross-asset-class correlations drifted lower all day - with credit and carry FX listless while stocks/oil/Treasuries did their risk-thang (though oil tapered back to lows of the day by the close as Gold/Copper/Silver trod water. Three days of terrible volume, even worse average trade size, and the lowest range in five months suggests anyone serious has left the building and perhaps explains why stocks aren't following credit lower.

HYG (and credit in general) has notably underperformed the last few days...


with SPY trading its most expensive to credit in over three months...(lower pane)


As VIX closes at near 5 month lows at 15.3%...notably beyond stocks/credit fair-value which is around 16.5%...


we note that SPY 3 month vol is now at its most discounted to realized vol in six months...


and while 10Y underperformed (up near 1.65% yields), stocks and gold recoupled even as the USD leaked back higher (inverted below) to end the week todate unchanged...



but for now the trend remains your friend - even if it is simply irreconcilable with anything remotely sensible aside from an inane belief that everyone is smart enough to exit right before everyone else and the news is sold...


and the lowest three-day range in five months as volume remains crushed...


...but it does seem by the looks of the terrible volume and three days in a row of very weak average trade size that the big boys have left the building and retail is playing now (which perhaps explains why high yield credit is underperforming so much)... trade accordingly


Charts: Bloomberg

Bonus Chart: The last two weeks of rallying in stocks has been most correlated/driven by the Treasury 2s10s30s butterfly... let's hope 10Y doesn't start compressing a little here since it remains the dominant segment of the curve - as 30Y seems immune to any inflationary fears from the inevitable open-ended QE...

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Stock Tips Investment's picture

One hopes that break ends. The increase in volume can consolidate the rise of the market or can turn it around.

The Monkey's picture

A few weeks back I remember talking to a fella on this blog, who thought we were headed down hard from 1330. Here we are at 1400.

Now that prices are high and the bears have been washed out, we're finally getting ready for that next leg down.

FiatFobia's picture

Yep, said that last week.   Kill the shorts, pull everyone into the pool and then drain it.

Phat Stax's picture

Unusally large de-coupling between S&P & Dow Transports.

SheepDog-One's picture

Just a lone dry tumbleweed left blowing around on the empty casino floor. 

Good luck finding willing buyers when this crap takes a nosedive one of these mornings.

SheepDog-One's picture

Looks like its going to be a rocky 'election season fall' huh with gas headed well over $4 and markets set to roll over like a fat old sow.

Village Idiot's picture

"Just a lone dry tumbleweed left blowing around on the empty casino floor."

Nice visual...


adr's picture

Well if the algo driven wave pattern holds up, we are due for a drop to 1350 in the next few days.

There has been a pronounced 12 dayish pattern to the market. I don't think there are any humans trading anymore and it is just algos fighting to hit predetermined targets. It looks like Priceline found a bottom at $560. The fact that the stock is trading up after hours makes it look like the algos will probably start driving back to the pre-earnings high over the next few days. If you see a large double digit jump tomorrow, go all in.


The economy is at the mercy of speculating algos. We are going to pay whatever Skynet thinks we should pay. We may see $3 diesel and $6 unleaded. Shipping will slow making the algos think diesel demand is falling, but consumer numbers will make it look like more unleaded gasoline is in demand.

Bullshit market does what the bullshit market wants.

Cheshire's picture

Well put. I think the lack of a sentinent being in the room has got to start leading the market haywire at some point. And when a computer becomes "uncertain" I'm not guessing it defaults to buying spree. When the chart starts drawing perfect geometric figures(again!!) people are goin wig.


Remember the SAW toothed IBM and Coke charts. That was insane.

RSloane's picture

That's some serious chart porn. We have nowhere to go but sideways and down.

Hype Alert's picture

...but it does seem by the looks of the terrible volume and three days in a row of very weak average trade size that the big boys have left the building and retail is playing now (which perhaps explains why high yield credit is underperforming so much)... trade accordingly


Somebody has to buy at the top!

Remington IV's picture

Be long or be wrong ???

Legolas's picture

Since the markets are so boring, here's a diversion:




We have to make sure our dogs know the real thing when they see it, so we will make the explosives fully functional.  Not only that, but we have a little over 11,000 dogs we need to train all at once.  Nice.....

govttrader's picture

I was just thinking about how to go home position-wise, and then i read this article.  Until the UST 10yr auction tail today, treasuries were more inline with the model.  So the meat of the question is..did todays auction tail indicate a change in global sentiment..or was it just a result of treasury traders going on their august vacations.  Since treasury market volume was ridiculously low today, I vote for the latter.  I'll bet there are still a few weak hands who need to go home flat and will hit the bid at the last minute..i'll take the other side of that trade...thank you very much...i'll bet this will make 10 10yr ticks by end of the London morning.


The Monkey's picture

Treasuries made such a big move that there was nowhere to go but up (in yield). Maybe we go another 25 basis points higher on the 10 year before we're done.

Hype Alert's picture

Oh my, the things you can do with a printer in your basement. 

Hedgetard55's picture

Bernanke says the student debt bubble is not a crisis because most of it is backed by the Federal Government! Brilliant, Uncle Ben.

Hype Alert's picture

Did he really say that?  That's sad.

That just says we'll steal it from every holder of US$.


The really sad part is trying to have a discussion with the average Joe about this.  Totally lost.

GMan_'s picture

bad news = good news. good news = good news. no news = good news. in the wall street world, red is green and well green is green. BULLISH!!!



Meesohaawnee's picture

but but but the yahoo finance clown hour said that were going to 1450??! they dont lie do they?



cant make this shit up can ya?

chump666's picture

He is probably still long, he will be slaughtered.  Hedge Funds are cutting at 1400,  USD is bid and Asia is the selling cue more so the Hang Seng, which last session recovered of lows and closed nearly in the black (hence a slight risk on last session). But the market is about to pull cash out of equities.  It might end up a panic if there are still larger momo players looking for that 1450+

Greed is a bitch, but this thing is about to roll over hard.  Take guys like that to the cleaners.


orangegeek's picture

Ending to wave 2 continues on the SP500.  The days of brutally low volume continues.




A significant sign of weakness - get ready for the drop.

q99x2's picture

I'm ready for the drop. Still ready since the end of November 2011. I bought a little gold today in case I'm one of the ones to get corzined while I wait. I-Ching said August. Its August.

DeFeralCat's picture

We have it backwards: the bots have taken August off to go to their summer homes in Silicon Valley. They are probably playing video games with their baby bots and spending quality time with their fem-bots.  They realize the market does not move without them. It is the rest of us humans sitting here posting on ZH that are not doing the trading.

chump666's picture

volume-less trades, HFTs trading the 100ma, momo's trying to push some more juice out of this...we are not heading for a correction but a crash.


chump666's picture

VIX now @ 15.32

Prior to July 2012 jump @ 20.47 VIX was 15.45

Danger ahead.

DeFeralCat's picture

Bernake is in a bind. If he prints at Jackson Hole he risks a commodity spike that gets passed on to users squeezing demand; if he does not print, the market wobbles. With industrial production globally heading for the exits, there is not much he can do anyway. Thus, he must do something else which is probably going to be buying underperforming loans from banks. This could be his win-win. He can't cost his boss the election by soaring gas prices to five bucks. However, he has to do something.

slewie the pi-rat's picture

hey, de_fe_cat!

this is the "conventional wisdom" here on zH but that doesn't make it true

b/c currencies and digits from debt-CTRL+Pinfinity are fungible, the FED does not hafta do the LSAP QEIII all by its evil fuking self;  in slewienomics, it needs to finance timmah'sTreasury, so others can loot it

likewiZe the other cBansters in will print to keep their cabalista checks in the mail;  we call this "life insurance for asswipes&psychos"

however, after the immediate needs of the pols and peeps have been messaged/massaged/mysoged away the money has velocity and some momomomentum but not too much at this point due to the fact that the train is in a slow-mo wreck as people rearrange the deck chairs on bigBrother&theHoldingCo's  starship:>  ssbeagleBoyz

this bad moFo is truly greased, btw, with the digitalWizTM reconstituted plutonium&lead-based toothpaste fuel for the ponzifiedhyperwarpdriveRs(TM)

so, to wrap up here:  once the home country gets the checks in the mail, the checks get cashed!  and it doesn't matter who printed the digits b/c they are fungible (spendable for anything;  how mucha want?):>

  • US
  • EU
  • SwitzerLand
  • hamletLand
  • GB
  • india
  • Chine
  • japan
  • mehico
  • hoserLand and so on

people can buy gold, silver, wheat, iron, oil, lumber, e-mini contracts, housing, lipstick...  just about anywhere anytime, with any currency or a bidniss call to the local cabal rep for that FX hedge...