Equities managed to rally after slumping on heavy volume to the 1340 level (scene of crime for Greek election, Spanish bailout, and EU-Summit) pushing up to close at the mid-June swing high levels and post EU-Summit close levels around 1358 (back over its 50DMA). Total volume for the S&P 500 e-mini (ES) was just below average but the average trade size was dismal - around the lowest of the year. Whether due to VIX options expiration squeeze sending VXX and other derivatives tumbling (with VIX almost testing a 15 handle intraday); or a safety 'algo' running things up and over VWAP; or a reflexive reaction to bad is good and Bernanke has our backs no matter what happens, equities pushed 20 points off their lows but stagnated for much of the afternoon. The surge in stocks far outpaced risk-assets and what was more worrisome was the notable divergence in gold as the afternoon wore on - if this was QE-hope then the main QE-sensitive asset class of choice was not playing along at all into the close. Gold and Silver ended the day down modestly, Copper worse, but WTI ended the day up 2.3% on the week and back over $89. Treasuries pushed higher in yields (oh yes very QE-on?) - no higher in yield on the week with the long-end underperforming. FX markets were a little more aggressive - like Treasuries - and extended their rallies relative to USD with AUD now up almost 1% and the USD now down 0.36% on the week - which is interesting given Gold is also down around 0.5% on the week.
Gold diverged lower as Equities drank its milkshake...
[6]
As stocks saw the lowest average trade size of the year (aside from holiday days) - lower pane...
[7]
As ES tested the Maginot line of 1340 and auctioned back up to the recent highs of 1360 (with large average trade size into the close)...[click for large chart]
[8]
As ES tore 4 sigma across VWAP (red line) amid far lower volumes (lower pane)...[click for large chart]
Acros models, we note that the support from VXX selling in the equity ETF space was diminat in bringing SPY back up (upper left) and as we rallied so risk-assets in general began to increase in systemic correlation (lower right) which tends to be far less of a QE-on trade. As we plunged (upper right) so equities and CONTEXT (proxy for risk assets) recoupled wioth reality - but as stocks took off once again, so risk-assets in general did not participate as excitedly...
[9]
Perhaps we will get some clarity tomorrow as today's VIX OPEX is over and relieves the massive squeeze in the short-end (that saw VXX hugely rich to its intrinsic value)...
[10]
and we started to see that VIX leaked higher all afternoon even as stocks stayed high. What is clear (hopefully) from the chart below - as the SPY selloff accelerated so VXX stayed considerably more bullish - which dragged SPY higher; and then once SPY and VXX had recoupled - sure enough SPY went dead with no lift - you decide what the driver was...
[11]
Interestingly, Gold and Silver are almost perfectly in sync post the EU Summit at around +0.6%, Copper up around 4.5% but WTI up a generous 12.3% - so much for the cheap gas tax cut...
[12]
Charts: Bloomberg and Capital Context
Bonus Chart: JPM is Unchanged from the pre-EU-Summit ramp's beginning - whereas the rest of the major financials are up around 5-6%...
[13]