What can we say? From the better than expected GDP this morning Gold and the USD (and Treasury yields) diverged from the QE hope trade - but stocks didn't. Then came the statement of the entirely sublime obvious from someone somewhere about Draghi's normal pre-meeting meetings and we were off to the races to test recent highs. Treasuries exploded higher in yield, Gold popped, USD weakened (as EUR popped), and stocks ripped. But...Treasuries reverted back to pre-Draghi-levels, EUR tumbled and the USD ended near the highs of the day, Gold gave back most of its spike gains and closed in the middle of its day's range as stocks just wouldn't give up the dream. For a 2% rally in S&P 500 e-mini futures, VIX fell only modestly by 0.9 vos to 16.7% - which is above last week's close (while stocks end almost 2% above last week's close). Amid the heaviest volume in over a month and the largest average trade size in over a week, ES closed at almost 3-month highs. It appears to us that unless Draghi and Bernanke - who now seem engrossed deep in the inter-continental thermonuclear currency war - both do their bit next week (which the market has now more than fully priced in given the dismal fundamentals) then this is becoming farcical but as Maria B said "a rally is a rally, right?" Ask the ZNGA and FB buyers of the rally on IPO day. Stocks ended the day notably decoupled from risk-assets amid Treasuries worst day in 9 months.
Gold has overtaken the Long-Bond year-to-date now (only the 4th close this year) as stocks just go about their business at 3-month highs...
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The S&P 500 e-mini rallied strongly to its uptrendline but once we broke an intermediate trendline there was heavy block trading into the highs (h/t @eminiwatch) - does make us wonder exactly who was chasing this into that second top of the day...
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10y Treasury yield soared (on a percentage basis) the most in over nine months...tracing back to their 50DMA... (and as an aside the spread between 30Y mortgages and 10Y TSYs is at a six-month tight)...
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Equities and Treasuries recoupled as did Gold and the USD - though the disagreement was clear...
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as Treasuries in general have retraced most of their gains from pre-EU-Summit...
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as despite today's U-Turn in the EUR, the USD ends the week -1%...
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I guess that is the price stability Draghi is looking for..but compared to capital structure (rates/vol/credit - left) and broad-risk-assets (right) we disconnected - especially in te last few hours of retest...
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Charts: Bloomberg and Capital Context [11]
Bonus Chart: Spot The Odd Market Out... This chart shows inverted stocks (black) against VIX, implied correlation, and VIX futures... can you see which one has gone full retard?
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