Treasuries oscillated in a 3-4bps range all day to end flatter with 30Y -1.5bps and 2Y +1.5bps as stocks flip-flopped around like Charlie Sheen in a Phat Phong whorehouse. Trannies resumed their post-Iraq drop (-0.3% today) but high-beta honeys sent Russell 2000 up 0.4% with the S&P and Dow unchish. Stocks recoupled with bonds after 2 attempts to spark new all time higherer highs. Ahead of this week's FOMC, the USD weakened as EUR gained and oil, gold, and silver all slipped in a highly correlated manner. VIX rose 0.4 vols to 12.6 - notably decoupling from the S&P as Iraq/Fed uncertainty prompted some hedging. The now ubiquitous buying panic took hold at 330ET and Russell closed at highs of the day.
Take you pick - Great Day; Terrible Day; or Flat
[9]
AUDJPY was in charge the moment POMO ended...
[10]
VIX decoupled as it seems Iraq or Fed uncertainty prompted some hedging
[11]
Stocks kept ramping away from bond reality and falling back...
[12]
But Treasuries flattened with the long-end rallying modestly...
[13]
Commodities slipped all day - in a highly odd correlated manner...
[14]
Because nothing says buy small cap stocks like growth estimates being slashed, oil prices surging (and stymying growth), and a Fed day this week (after they already noted stretched valuation in small caps)
For a sense of just how systemically correlated the stock market has become, Capital Context's SPY Arb model (which trades SPY ETF against a weighted basket of Vol (VXX), Credit (HYG) and Bonds (TLT)) [15]saw incredibly tight trading today...
[16]
It's all one trade!
Charts: Bloomberg
