Overnight weakness in Asia and Europe was shrugged off. The Dow hit all-time record highs (first since July) and the S&P broke back above 2,000 following headlines proclaiming a "stealth QE" from China (which actually hit the news during the Asia session) and chatter from WSJ's Hilsenrath that The Fed will leave the words "considerable period" in the statement tomorrow. Early weakness in stocks was ripped 25 points higher in the S&P on the back of a 97% correlation to AUDJPY (China-driven), the USD dumped to unch for the week (worst day since May), commodities all took off higher (led by Copper and Oil), and Treasuries flip-flopped to end steeper (5Y -5bps, 30Y +1bp on the week). "Most Shorted" stocks squeezed higher. HY credit compressed with stocks rally but decoupled later in the day. The Nasdaq and Russell (nearing death-cross) remain red on the week despite today's exuberance. VIX was smashed back under 13 (which makes perfect sense because there is no uncertainty this week at all). S&P closed below 2,000 and The Dow "off the highs".
AUDJPY was all that matters today...
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Stocks ramped from the moment the China headline hit...
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With S&P tagging 2,000...
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As "Most Shorted" was squeezed into lunch...
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But it was not enough to get Nasdaq and Russell green on the week... (note, just like yesterday, we had a sudden vertical ramp early in the morning before all the China/Fed exuberance)
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With The Russell 2000 nearing the death-cross (50DMA crossing below the 200DMA)...
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US financials push on to new cycle highs (and the meme is that all is clear) except that financial credit is notably divergent and flashing orange for now (just as it did in 2007)
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HY credit tracked stocks as they ramped higher but decoupled in the last hour...
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VIX also decoupled but to the upside...
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Treasuries were mixed with 5Y outperforming... but steepened on the week...
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As The Dollar tumbled on the China news... USD's worst day since May
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And commodities surged... but PMs gave some back...
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With Brent-WTI collapsing to around $4 as WTI outperforms...
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We leave it to Diapason's Sean Corrigan to put a different perspective (as the chart below suggests last time China did this)...
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...on today's exuberance about China QE...
The commodity move today is more a testament to short term oversold condition and proximity of various key technical supports than anything real...
Note that news about this came out before Europe and US were out of bed (and pretty much while Shanghai equities were getting hosed - go figure!)
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...but our markets only reacted to it when Goldman helpfully 'explained' its supposed importance to the rest of us dullards....
Even if this WERE 'equivalent' to a 50bps RRR cut, that might only be a domestic offset to the base money destroying FX-drain which has been underway for the last couple of months and so would only imply neutrality, not renewed stimulus.
Charts: Bloomberg
