US equities dumped out of the gate from the day-session open - after drifting lower with Europe all night/morning. Regimes shifted as Europe closed with Gold and Silver spurting higher (with the latter outperforming to play catch-up from last week) which led to the start of a correlated risk-on move in stocks (egged on in a 'ignorant' way but Oil strength from its increasing war-premium given the middle-east turbulence.) The levitation on low average trade size and low volume was mind-blowingly algorithmic as ES came to rest for the last hour almost perfectly at VWAP (and EURUSD seemed pegged at 1.25). Just like on Friday though, with a few minutes to go, ES dropped rapidly on heavy volume and average trade size as it would appear institutional sell orders plagued the market. The close took us back into the down-trend channel and back to 10-day lows for stocks. Modest USD strength (and JPY strength on carry-unwinds) left Oil lower from Friday but well off its lows as the rest of the commodity complex surged. Treasuries gained back all of Friday's losses ending at Thursday's low yields with 30Y outperforming. Financials and Energy sectors were worst with the major financials ending down 5-7% from the pre-downgrade close now. HYG (and HY) outperformed in the short-term but as we noted earlier [3] remains a convergence trade than an indication of rotation or strength. The late-day dump in stocks lifted VIX back over 20% ending up 2.3 vols as implied correlation lifted back above the 70 'crisis' levels once again.
S&P 500 e-mini futures (ES) drifted lower early, snapped lower on the day-session open, recovered from Europe's close - magically levitating perfectly to VWAP (red arrow - blue line) and then dumped on heavy activity into the close...
[4]
and while credit did widen (weaken) today, stocks contonue to underperform in the short-term (though as we noted here earlier [3], there is good reason for this and we should see the divergence stall now)...
[5]
Commodities all performed well off the lows (even as Oil closed down on the day more in line with USD strength) as it seemed the rally in Treasuries stalled at Europe's close and safe-haven flows pushed into Gold and Silver...
[6]
and the divergence between stocks/bonds and gold/USD is clear (around the European close here)...
[7]
risk assets in general were very quiet this afternoon as CONTEXT trod water and stocks limped UP to meet its value (and VWAP). We will need to see some follow-through on EURJPY or Treasuries (or a reversion in WTI) for equities to leak more here...
[8]
Charts: Bloomberg and Capital Context [9]