Thanks to POMO (and the simple explanation of what everyone already knows from David Tepper), the 18th Tuesday in a row has closed with a bright green shade across the screen. Trannies gained 2% but the 25 point gain off overnight lows for the S&P 500 is the most impressive... with gains sustained by more short covering.
As predicted first thing today, when we said the S&P 500 EPS multiple will increase by at least 0.15x on the back of POMO, we were not surprised to see the closing print result in precisely this amount of multiple expansion:
Today's POMO: $2.75 - $3.50 billion. Should be enough to expand S&P multiples by 0.15-25x
— zerohedge (@zerohedge) May 14, 2013 [4]
A QE-unwind theme was modestly evident in other asset-classes: Treasuries (snapping higher after EU Close); Oil, gold, and silver all down; and credit spreads notably rolled over. But of course, equities don't care; why would they?
A good day for stocks...
[5]
not a good day for shorts once again...
[6]
as the US Open to EU Close was the trading period of choice...
[7]
The worst 8-day run for Treasury yields since Oct 2011
[8]
Credit markets remain notably underperforming here and today's move was even more dramatic...
[9]
Something 'not good' is occurring in credit land that is well worth paying attention to - Citi adds some color:
Monday’s selling included both hedge funds and ETFs. Our HY ETF desk says HYG recorded almost $200 million in outflows yesterday, the fourth largest single day of outflows since early 2012. “No signs that it will cease today, as HYG is now at nearly a 40bps discount to NAV – only 10 times since the start of 2012 has it closed the day at a deeper discount, and every time it has closed at a 30bps+ discount the fund recorded redemptions (outflow – selling HY paper) the next day,”
and while VIX did recover from its early surge, it remains notably out of kilter with stocks once again...
[10]
So equities ramp on 2013 high average trade size...
[11]
...but VIX (protection) bid, and credit (protection) bid, and the rest of the growth-oriented OR QE-sensitive assets all signaling less liquidity... makes perfect sense...
Charts: Bloomberg and Capital Context
Bonus Charts: AAPL and TSLA did not have their normal fun...
[12]