After touching four-year highs this morning, the S&P abruptly turned tail and sold back down. AAPL slumped hard off its all-time record high open just shy of $675 - reverting NASDAQ to its peer indices and broadly equities had the worst day in 3 weeks (and only its 4th down day of the month of August). S&P 500 e-mini futures (ES) volume surged to its highest in three weeks - and average trade size was its highest since the lows in early June - along with its largest daily range in three weeks. Volatility jumped (amid some extreme gappiness as AAPL started to lose it) back above 15% (up over 1 vol) - leaking modestly lower into the close as ES saw some intraday covering to lift it 'off-the-lows'. Hovering at the Friday morning/Monday night lows in stocks, Treasuries saw a green close (just) with the long-bond 8bps off its intraday high yields - following the same rip-and-dip pattern of the last few days. Credit traded the same pattern as stocks today - with IG breaking below 97bps only to close back above 98.5bps, HY underperformed (as HYG outperformed in a very narrow range). Credit was busy from our chatter with desks. The USD kept falling but stabilized after Europe closed - though commodities all gained on the day - with some 'leakage' in the afternoon. Stocks led risk-assets in general in the risk-off mode - with financials the only notably green sector as tech underperformed.
ES broke to new four-year highs, but found resistance at the top of the up-channel and fell back to the next support...
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Volume was at a three-week high today but average trade size was considerably larger than recent averages - tending to mark turning points...
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but just a glance at the last few days of cross-asset class performance tells you that things are a mess with bonds, stocks, gold, and FX all moving around - eventually recoupling to some extent today...
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Treasuries remain in the recent range - with some serious swings in between - after touching their 200DMA today
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The swing in stocks, credit, treasuries and AAPL today would likely have scared few weaker hands away but nothing indicates sustained weakness for now - the volume and high average trade size does however suggests pros were covering longs up here more than buying the dips. For follow-through, we will need to see Treasuries come along for the ride now and a little more JPY cross action - especally now EURUSD is back at 'fair' and offering little juice for rate differentials (we think of the lower panes as a 'chaos' premium over rate-differentials that provides 'juice' for carry when EUR is experiencing pain)...
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On a long-term basis, risk-assets (based on post LTRO2 calibrations) have normalized 'up' to equity's exuberance in recent weeks (TSY weakness and commodity strength) but still point to a notable drop in ES to around 1300 (over 120 points of hope)...
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Charts: Bloomberg
Bonus Chart: AAPL and the amazing VWAP close boundaries...
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