After surging away from risk-assets into Friday's close (only to revert yesterday) and once again surging into yesterday's close, broad derisking among most risk-assets finally saw US equities catching-down to that reality in the short-term today - as they broke the EU-Summit/Spain-Bailout/Greek-Election shoulder and ended comfortably below the 50DMA. Short-end Treasury yields made new record lows as belly to long-end all fell notably close to those record lows (with 10Y back under 1.50% and 30Y under 2.60%). The USD rallied back from a 0.3% loss on the week to a 0.1% gain - thanks mostly to EUR's new 2Y low at 1.2235 intraday and AUD weakness (as JPY remains better on the week - more carry unwinds). Commodities plunged - far exceeding the USD-implied moves - with WTI down over 3% from yesterday's highs and Gold and Silver in sync down around 1% on the week. Staples and Utilities were the only sectors holding green today (marginally) as Industrials, Materials, and Energy (all the high beta QE-sensitive sectors) took a dive. It seems the message that no NEW QE without a market plunge is getting through and the reality of a global slowdown looms large. Credit outperformed (though was very quiet flow-wise) but HYG underperformed - cracking into the close - as it just seems like the most yield-chasing 'technicals-driven' market there is currently. Slightly below average volume and above average trade size offers little insight here but a pop back above 19% in VIX (and a 2-month flat in term structure), a rise in implied correlation, a rise in systemic cross-asset class correlation, and the leaking negatives of broad risk assets suggest there is more to come here (especially given the BUBA's comments this morning and a lack of real progress in Europe). The ubiquitous late-day ramp saw aggressive trade size and volume (with a delta bias to selling) as it remained far below VWAP.
HYG and VXX were actually outperforming (relatively speaking) SPY (upper left) until SPY ramped a little into the close (as the VIX term structure flattened to two-month lows). VIX did push higher towards fair (lower left) but remains cheap in our view. Carrying on from yesterday, S&P 500 e-mini futures (ES) remained rich (upper right) to CONTEXT (our broad risk asset proxy) but as the day wore on and cross asset-class correlations picked up (lower right) so ES converged down to CONTEXT's reality and stalled the sell-off for now.
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We will need to see USD extend gains here for some follow through...
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and even though Treasury yields are at or near record lows, 2s10s30s continues to flatten and drag risk off...
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and HYG snapped lower into the close today (while HY/IG remained very quiet and outperformed)...
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but SPY remains rich to credit overall still by around 20 S&P equivalent points for now (given current levels)...
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and while today was weak for commodities (especially WTI) and even Corn lost a little - we note WTI is still up over 8% from pre-EU-Summit (perhaps Iran embargo premium or just hope?) while Copper/Silver/Gold are up between 1 and 2%...
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Charts: Bloomberg and Capital Context
Bonus Chart: CRAAPL had a high volume reversal day at the post-massive-gap-after-earnings level - allowing a few more out...
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Bonus Bonus Chart: Today's move In ES (the 24-hour session version) closes perfectly at the 50% retracement of the March to June swing lower...
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