Equity markets did not disappoint today in their automaton pattern today with the 4th day in a row of buy the morning dip and sell the afternoon rip. Gold was stable (as was the USD) and the S&P 500 rotated back to their reality at the close. Treasuries were notable underperformers today. The Dow just inched into the green, breaking its 6-day losing streak.
The S&P 500 e-mini futures continues to trade the same pattern...
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while Gold and the USD held steady as stocks tried and failed - but notable Treasuries leaked higher in yield...
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Across credit and equity correlations were generally high but credit (which outperformed today) remains significantly less sanguine on the week. HYG was red on the day but HY (CDX) was better (as were stocks which popped back up to VWAP into the close after hours)...
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But the credit complex is a mess of technicals right now. The HY credit index is extremely cheap (wide spread) relative to its intrinsics. Single-name CDS in HY are in aggregate cheap (wide) of bond spreads. HYG is very close to its NAV once again but is considerably ahead of stocks over the last month or so. And perhaps the most amazing thing of the day - JNK's volume surge. Before the open this morning a $760mm block went through well above market - given the huge short-interest that has built, we assume it was some forced buy-in but asking around - no-one seems clear. What we found fascinating was the Maginot line at $39.5 in JNK as each time we have crossed it - volume surges!
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And JNK Short-Interest...
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It would appear that there was a desperate need to get back to VWAP at the close today (which can only mean one thing from below - someone had large orders to sell and sure enough average trade size picked up significantly). At the same time as that after-hours ramp, we saw VIX get crushed - first gapping up from under 19% to over 19.5% and then the ramp was fueled by what seemed like massive vol compression as we gapped down to 18.8%.
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And VIX's day was full of gappiness...
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Charts: Bloomberg