Volume? Check. Spanish Spreads wider? Check. Maria B Saying "Wall-of-Worry"? Check. Sure enough, all the pieces were there for a sell-off today as the S&P saw its largest drop in a month as volumes have resurged in the last three days (of fading markets) and average trade size has gradually fallen from its peak (at the multi-year highs on Tuesday). Cross-asset-class correlations picked up notably and equities caught down to risk-assets (after yesterday's 'rally'). VIX rose once again - back above 16% - with the biggest 3-day rise in a month. Gold has rallied 1% per day for the last three days (something we haven't seen since OCT11) up near $1675. 10Y Treasury yields have now dropped 5 days in a row (something we haven't seen since APR12), down over 20bps from their highs/200DMA. Oil stumbled on the day, now down 0.3% on the week, even as Silver is up almost 9% on the week (and Gold 3.3%) - even as the USD is down 1.4% on the week (leaking lower still on the day after its gap overnight). Materials underperformed by the most today (which smells like QE-off) and was followed by Energy and Financials. Stocks underperformed (though HYG was modestly bid - we suspect on convergence trades) as stocks caught down to credit once again.
S&P 500 e-mini futures (ES) dropped by the most in a month today (on contonued heavy volume - middle pane)...
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Gold has risen for 3 days in row - back above its 200DMA...
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and Treasury yields have fallen for 5 days in a row...
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Can you spot the sell off days (clue - lower pane is difference between volume and its average...)
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and average trade size rose into the peak and has fallen back as we sell-off - so often this pattern of professionals (larger block traders) trading into turning points signals a reversal...
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and after disconnecting higher yesterday, stocks have reconnected and correlation has reasserted systemically with risk assets...
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Charts: Bloomberg and Capital Context
Bonus Chart: Comparing Citi's US Economic Surprise Index with the S&P provides insight but the current market behavior (lower pane - green box) and upper pane (green box) do look increasingly similar - as markets rallied on hope that macro data was improving more than economists' expected (and meanwhile earnings were dropping but that was trumped by the former)... who knows?
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