Equities and broad risk-assets were generally in sync today until around 1430ET when between rumors of a Euro-wide deposit-guarantee 'scheme' - which we had already dismissed as impossible short-term, very unlikely medium-term, and not a long-term solution to redenomination/insolvency risk - and Kocherlakota's hints as NEW QE if the fiscal cliff arrives - US equity markets took off (as did Gold). S&P 500 e-mini futures (ES) pushed to more than 12pts rich to CONTEXT (our proxy for risk-assets based on TSYs, FX carry, credit, and commodities) on all that hope - stalling at yesterday's late-day heavy volume swing highs. Of course the high-beta momo monkeys were pounced on and AAPL as well as the major financials all popped notably - breaking above yesterday's closing VWAP. Today was a low average trade size day - the lowest in a week (but a relatively high volume day) - after a large average trade size day yesterday which smells like algos pushing to enable larger selling (especially as we expect a denial any moment from Europe). VIX plunged off its highs but closed only marginally down with ES closing very marginally higher on the day - so some context is required to avoid anchoring bias intraday and while TSY yields did pop and EUR rallied after equities got going, they remain notably divergent from that sur-reality. Gold and Silver surged on the QE/EU hopes as well but remain down 2% and 3% on the week.
Trying to gauge equity's performance relative to the rest of risk assets is tough so we use the CONTEXT [9]model below - which stayed nicely in sync until the full-retard hope trade came back in the last 90 minutes or so of the day...
[10]
And digging into some of the detail - equities started the silliness along with Gold (green arrows) and USD and TSYs followed (red arrow) after 30 mins or so - dragged by correlations but clearly a lot less impressed by the 'chatter'...
[11]
Credit markets were not as enthused as stocks into the close (though did get retacked tighter/higher as stocks rallied)...
[12]
S&P 500 e-mini futures saw average trade size drop notably today (lower pane)...
[13]
and medium-term it appears ES managed to rollover at yesterday's heavy volume swing (blue region and green arrow)...
[14]
In the majaor financials, JPM and Citi managed to scramble back into the green YTD, but BofA outperformed on the day - even if Morgan Stanley was the best off the pre-rumor lows (+4.3%!)...
[15]
but while Facebook managed to gain over 3% - it clung to yesterday's VWAP like lint to a hoodie...
[16]
Broadly speaking cross asset-class correlations were rising through the European day into early afternoon in the US but as the right chart below shows - cracked as stocks soared on the full-retard afternoon exuberance...
[17]
VIX also seemed a little rich early on (above chart left), fell towards crediot/equity fair into the afternoon then ended notably below fair (cheap) into the close.
Charts: Bloomberg and Capital Context [9]
Bonus Chart: Gold vs Gold Lease Rates
Based on an idea (h/t @SoberLook), we looked at the rolling correlation between gold and gold lease rates and found that during periods of non-intervention the 'rational' positive correlation between the two holds but once central bank interveners begin (QE1, QE2, Twist, LTRO) then correlations flip and the irrational becomes the new normal...
[18]
Bonus Bonus Chart: European sovereigns did not explode as much as FX, equity, and corporate credit markets might have expected today... perhaps the reason is seen below - as we have talked about recently - there is a growing trade-arb to get short LTRO-facing financials credit against a long credit position in their domestic sovereign - 3 major pushes for that trade here...
[19]