Volumes were pitiful once again and while the range picked up a little (after yet another top-side stop-run) average trade size remains falling as equities appear all gung ho on the surface but the S&P 500 has closed the day session in a 2 point range for the last 4 days - 1518, 1517, 1519, 1520. All this as Treasury yields have actually been bleeding higher (+6-8bps this week), USD flat, Oil up 1.5%, and Gold and Silver -1.5%. Homebuilders remain in a high-beta world of their own +3% on the week with all the other S&P sectors between -0.25% and +0.75% (as Tech is dragged lower along with AAPL again). S&P 500 futures saw quite a drop intraday (9 points high to low) which is sad to get excited about but the ubiquitous VWAP ramp into the close saved the day and limped us into the green on the day (which was oddly accompanied by a huge sell block volume in AAPL). VIX pushed back up to 13% and credit made some more correction back up to stocks right at the close. The last 3 days in ES have seen the lowest aggregate volume in six months - not exactly the new bull market meme?
It seems the sequester is being priced into defense stocks - but the rest of the market (bonds and stocks) are ignoring it for now...
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Volumes are dismal up here in stocks and we are just treading water...
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and close up tody shows that there was some notable institutional selling at VWAP - not something we have seen much of this year...
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as sectors remain highly correlated - aside from the squeeze holding in from yesterday in Homebuilders...
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Treasuries had an ugly day as 10Y broke above 2% once again...
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FX vol remains active - with USD reverting back towards unch on the week (and GBP leaking notably weaker)...
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Charts: Bloomberg and Capital Context
Bonus Chart: HYG is pulling rich to its fair-value as we suspect more of the world is waking up to the long credit short equity arb - at well over 3 sigma rich, it's worth a half-unit risk in our view Buy 3 units HYG, Sell Short 1 unit SPY...
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Bonus Bonus Chart: Equity vol is extremely cheap relative to credit vol currently - suggesting a short HYG straddle vs long SPY Straddle...
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