Volumes were above average today but well below yesterday's blockbuster as average trade size also pushed higher as we levitated in stocks (ignoring the afternoon rollover in credit markets - which closed at their lows of the day). ES (the e-mini S&P 500 futures contract) rallied (initially on 'expected' jobs data then a veiled QE-reference from the WSJ) to recover the wondrously mystical 38.2% of the last few days sell-off before limping slightly lower into the close. Financials wentr from worst (yesterday) to first (today) but oinly recovered a fraction of their losses as all sectors ended in the green today. Broadly speaking riskj assets drifted up with stocks (led by stocks) but closed in almost perfect CONTEXT by the end of the US day session as Treasuries limped begrudgingly higher in yield (though the curve flattened modestly), FX majors were relatively stable but JPY weakness pushed FX carry up supporting risk overall, and commodities leaked gently higher (outperforming USD's modest weakness on the day) as Silver and Oil outperformed on the day (with the latter back above $106). Gold limped back up to $1685 (juiced by the WSJ QE story) but Silver's high beta exuberance dominated that. Ahead of NFP and PSI the next 2 days it seems like little real rerisking occurred today and the fact that credit underperformed and implied correlation diverged from VIX tells us that under-the-covers, protection was more bid than embracing risk.
S&P 500 futures recovered 38.2% of the last few days' sell-off and we also note the lower pane shows average trade size which has tended to increase over the last few days (especially today around the European close) which is often a signal of professionals selling into strength as opposed to starting a trend.
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Credit markets stayed in sync (with each other) today but sold off significantly this afternoon - to close at their lows (wides) of the day. As is clear, equities were ignoring this weakness heading into the close after Europe closed.
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VIX dropped (and the term structure stabilized modestly) but we note that as stocks rallied this afternoon (and credit sold off) so implied correlation rose - indicating a greater demand for macro protection than underlying index vol would suggest. This has tended to be a useful short-term turning point indicator.
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Charts: Bloomberg
Bonus Chart: AAPL showed some very interesting resistance and support levels today and closed at its VWAP. This rally up to VWAP suggests algos lifting the bid so that block trades could get executed closer to VWAP - i.e. block sellers looking for best execution. Fascinating how recent past VWAP levels can become support and resistance...
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