ES (the S&P 500 e-mini futures contract) tested up to its 50DMA and rejected it early in the day (after some rhetorical enthusiasm from the ECB's new French contingent - surprise!). The 10pt rally in ES overnight into the open was the best levels of the day as we slid lower (within a small range) for the rest of the day making its initial lows around the European close and retesting (lower lows) into the US day session close. NYSE and ES volumes were about average (well below yesterday) as Stocks and HY credit underperformed IG credit (with HYG having a good day - after closing at a discount to NAV last night). The Beige Book took the shine off the day as hopes of QE3 faded (remember its the flow not the stock that counts) and that is when stocks began to leak lower - especially energy, financials, materials, and industrials. FX markets were relatively quiet (aside from Jim O'Neill's comments on the SNB which shook swissy) as the USD closed marginally lower helped by strength in EUR and GBP. AUD lost ground after the European close and JPY strengthened (derisking) which likely dragged on US stocks. The modest move in USD was echoed in commodities (apart from WTI where we broke above $103 and Brent-WTI compressed significantly - not forgetting the $1 handle on Nattie) as Gold and Silver largely went sideways all day with some weakness in Copper. Treasuries leaked higher in yield for much of the morning then stabilized after the European close as the long-end underperformed (steepening). VIX closed back above 20% (though lower from the close) having drifted from below 19% near the open - we haven't closed above 20% two-days-in-a-row since 1/18.
While overnight exuberance on ECB comments juiced oversold stock futures up on low volumes, once US traders started it was rotation from HY/stocks to IG credit...
[7]
ES oscillated around its VWAP all day long closing near the lows of the day-session having tested the 50DMA from beneath (orange oval) and failed...
[8]
And VIX closed above 20% for the second day in a row - last seen three months ago...
[9]
FX markets were relatively quiet for the US session with overnight strength in JPY crosses helping risk-on but stabilizing for much of the later day. EURCHF jumped a little but in the big scheme of things it was not a major move.
Treasuries sold off with 10Y back over 2% and the long-end underperforming (steepening). The selloff did not ho0wever retrace all of the gains from yesterday as the TSY complex remains lower in yield still on the week...
[10]
And while NatGas stole the show for its close below $2 for the first time in 10 years, WTI managed a rally this after - compressing the Brent-WTI spread from well over 20 to around 17. Gold and Silver remain stable while Copper keeps sliding post-NFP.
[11]
Correlations deteriorated this afternoon as stocks leaked lower (and Treasuries stayed high in yield with little comfort from carry FX or Oil). The heavier volume and negative delta blocks into the close should be a little concerning for BTFD'ers as should the VIX and high-beta underperformance relative to Investment grade credit. Oh and by the way, Apple closed down again (sshh) after a green open.
Charts: Bloomberg