Latest Central Bank Sticksave Halts Futures Slide, Sends E-Mini Soaring After ECB Said "Looking To Buy Bonds"Submitted by Tyler Durden on 10/21/2014 06:41 -0400
To summarize: the S&P 500 is now almost 100 points higher from last Tuesday as the global central bank plunge protection team of first Williams and Bullard hinting at QE4, then ECB's Coeure "ECB buying to start in a few days", then China's latest $30 billion "targeted stimulus", then the Japanese GPIF hinting at a 25% stock rebalancing in the pension fund, and finally again the ECB, this time "buying of corporate bonds on secondary markets", rolls on and manages to send stocks into overdrive. Even as absolutely nothing has been fixed, as Europe is still tumbling into a triple-drip recession, as Emerging Markets are being slammed by a global growth slowdown and the US corporate earnings picture is as bleak as it gets. Because "fundamentals."
AAL, ABB, ABX, ACI, ADI, AES, AG, AGCO, AIG, ALGT, ALK, ALU, AMID, ANR, ANV, ANV, AON, APA, APC, ARMH, ARP, ATEN, ATH CN, ATVI, AUY, AVP, BBEP, BHI, BHP, BMS, BTE, BTE CN, CAJ, CAM, CAT, CCE, CFX, CHK, CLF, CLR, CMC, CMRE, CNQ, CNQ CN, CNW, CNX, COG, COP, COS CN, COSWF, CPG, CPG CN, CR, CTCM, CVE, CVE CN, CVX, CX, CXO, CYOU, DAL, DDS, DE, DOV, DRQ, DVN, EC, ECA, EMES, EOG, EPE, ERF, ERF CN, ESL, ESV, EVEP, F, FLR, FLS, FM CN, FMC, FR CN, FST, FTI, FWM, GG, GM, GOLD, GSK, GSS, GT, GWR, HAL, HAYN, HBM, HCLP, HES, HP, HSE CN, HSIC, HUN, IAG, IGM CN , IMG CN, INT, ITT, JCP, KEX, KGC, LGCY, LIF, LLTC, LOPE, LPI, LPX, LRE, MAN, MCEP, MDCO, MG, MGA, MMLP, MON, MT, NBR, NE, NEM, NGD, NGD CN, NLSN, NOV, NWSA, OAS, OXY, PAAS, PBCT, PCLN, PD CN, PGF CN, PGH, PPG, PTEN, PWE, PXD, QRE, RDS/A, ROK, ROSE, RPM, RPT, RTI, SAP, SAVE, SCCO, SCHN, SDRL, SLB, SLCA, SLW, SSW, STO, SU, SU CN, TAL, TCK, TCK/B CN, TCS, TEN, TGI, TLM CN, TLP, TMK, TOO, TXT, UBS, UNM, URI, UTX, VET, VET CN, VIP, VNO, VNR, VSH, WDR, WFT, WLK, WLL, WLT, WMMVY and ZNGA.
Growing concerns about the weakness of breadth in the stock 'market' where, as we noted here, 47% of Nasdaq Composite stocks are down at least 20% from their highs with the average stock in the index in a bear market (down 24%), continue to be ignored by a market that cares nothing for fundamentals. NewEdge's Brad Wisack adds another "it doesn't matter until it matters" chart to the list of worrisome indicators today by noting that "we haven't seen this before..."
Poor algos: after they got no love on Monday from the overnight USDJPY selling team which took the all important pair back to the 200 DMA, today, inexplicably (it is a Tuesday after all, and if one can't frontrun a rigged market surging higher on Turbo Tuesday may as well throw in the towel on free money and learn about fundamental analysis) the same overnight USDJPY selling team has pushed the key carry pair to below the 200 DMA, and has dragged US equity futures lower with it for the second day in a row.
Another right of perfectly round number supports: while the Shanghai Composite once again dipped below 2000 overnight to as low as 1991 only to close modestly higher, and the Nikkei followed suit, also sliding below the psychological support level of 14,000 to an intraday low of 13,964 only to close just above 14,000 if in the red, it was the USDJPY that has suffered the most technical pain when shortly after 2:30 am eastern time, the USDJPY dropped by nearly 40 pips, hours after the BOJ indicated that not only is it happy with where in the QE process it stands, but hinted there may well be no more QE, and certainly nothing imminent . In the process, the USDJPY fully smashed the 200 DMA, with the next key parallel support being the 200DMA in the EURJPY at 138.08 (which was at 138.34 last). When that too gives way, it is a straight line to double digits in the USDJPY, and the countdown to the end of the Abe regime begins in earnest.
It was supposed to be a blistering Mega Merger Monday following the news of both AT&T'a purchase of DirecTV and Pfizer's 15% boosted "final" offer for AstraZeneca. Instead it is shaping up to be not only a dud but maybe a drubbing, with AstraZeneca plunging after its board rejected the latest, greatest and last offer, European peripheral bond spreads resume blowing out again, whether on concerns about the massive Deutsche Bank capital raise or further fears that "radical parties" are gaining strength in Greece ahead of local elections. But the worst news for BTFDers is that not only did the USDJPY break its long-term support line as we showed on Friday, but this morning it is taking even more technician scalps after it dropped below its 200 DMA (101.23) which means that a retest of double digit support is now just a matter of time, as is a retest of how strong Abe's diapers are now that the Nikkei has slid to just above 14,000, while China, following its own weak housing sales data, saw the Shanghai Composite briefly dip under 2000 before closing just above it. Overall, it is shaping up to be a less than stellar day with zero econ news (hence no bullish flashing red headlines of horrible data) for the algos who bought Friday's late afternoon VIX slam-driven risk blast off.
Recall what we said first thing this week when we remarked the latest surge in Chinese physical gold buying: "As we have said before: keep an eye on the "gold holdings" of the GLD and other US paper gold ETFs, whose drop in holdings for now has offset Chinese accumulation on the margin. Once GLD gold holdings solidly resume their climb higher, that will be the key upward gold price inflection point." Perhaps it is a testament to the power of paper of physical gold (if only for now), that while yes, we were correct, and gold is now indeed soaring, having finally broken above its 200 DMA as we reported yesterday, all it took was the predicted rebound in gold ETP holdings which have finally ended their liquidation cycle. As Bloomberg reports "Assets in the SPDR Gold Trust expanded 1.2 percent to 806.35 metric tons, the highest since Dec. 20. The biggest ETP backed by gold, which shrank 41 percent last year, is up 1.2 percent this week, headed for a third weekly advance."
The first trading session of previous years has always been a whopper for those betting on central planning and capital flows. In fact, if one adds up the S&P performance on the first trading day of each year going back to 2009 (i.e., 1/2/13: + 2.54%, 1/3/12: + 1.55%, 1/3/11: + 1.13%, 1/4/10: + 1.60%, and 1/2/09: + 3.16%), one gets a whopping 10% return just on that one trading session. Which is why the fact that futures are glowing read, if only for the moment, may be disturbing for index investors and all those others who put all their faith, not to mention money, in St. Janet. Today's red open is hardly being helped by the 10 Year which continues to drift lower with the yield now at 3.04%, even as the Spanish 10 Year yield just got a 3 handle as well. At this rate the two streams should cross some time in the next two months. Just what a higher yield in the US vs Spain would imply for fair and efficient markets, we leave up to readers to decide.
In the "west", the higher the price of gold rose, the more demand there seemingly was by momentum-chasing gamblers investors, if only for paper certificates claiming to represent gold, or GLD as the case may be. Conversely, once the momentum turned, the same investors couldn't be bothered with gld (sic) even at 30% lower. At the same time, in the "east" the higher the price of gold rose, the lower the demand was for physical, which for that extinct breed of deranged gambler known as "value investor" is a familiar concept." And now that gold's price is not only back to early 2011 levels, but is essentially below production costs, demand out of China is off the charts. Demand in India - traditionally the greatest in the world - continues to also at unprecedented levels, although now that official purchases of gold are regulated and limited through capital controls, it is forcing the local population to smuggle in gold through the most innovative of schemes. But while the west is the west, and the east is the east, and no amount of adaptive behavioral modifications can change that, much to central bankers' chagrin, what lies in-between? Courtesy of the Saudi Gazette we learn that the uber-rich middle eastern kingdom, which floats on a sea of oil has picked its side... and it has chosen to take advantage of the ongoing paper-driven price collapse and load up on as much gold as possible.
Today 3:00 pm nomination by Obama of Janet Yellen as the next Fed chair was hardly news (certainly wasn't news to stocks which briefly dipped below their 200 DMA) in the aftermath of Larry Summers' self-elimination, but nonetheless the sellside brigade was quick to praise her now official nomination for one simple reason: it means more of the same Bernanke policies that have done nothing to benefit broad America, but more importantly have resulted in year after year of near-record Wall Street bonuses, and unprecedented asset bubbles. Why shouldn't the banks then be giddy with excitement that the status quo will not only continue, but the monthly $85 billion in liquidity may in fact increase in time? Below is a selection, courtesy of Bloomberg, of the most vocal praises sung on behalf of the former San Fran Fed president byt the numerous banks that currently exist only thanks to the Fed's actions in 2008.
It was bound to happen: after the Tuesday "winning" streak was lost 8 days ago on the 21st unlucky week, it was the turn of the "BTFD mentality" that had prevented a 3-day losing streak in the Dow Jones since December. And while today's selling was still somewhat contained, it did not prevent the DJIA from closing below the psychological 15,000 support level, driven according to some, by the breach in the 200DMA of the USD index.
Another session in which the market continues to be "cautiously optimistic" about Europe, but is confused about Cyprus which keeps sending the wrong signals: in the aftermath of the Diesel-Boom fiasco, the announcement that the preciously announced reopening of banks was also subsequently "retracted" and pushed back to at least Thursday, did little to soothe fears that anyone in Europe has any idea what they are doing. Additional confusion comes from the fact that the Chairman of the Bank of Cyprus moments ago submitted his resignation: recall that this is the bank that is supposed to survive, unlike its unluckier Laiki competitor which was made into a sacrificial lamb. This confusion has so far prevented the arrival of the traditional post-Europe open ramp, as the EURUSD is locked in a range below its 200 DMA and it is unclear what if anything can push it higher, despite the Yen increasingly becoming the funding currency of choice.
Ironically, the very success of stock market manipulation only thins the market of legitimate participants and thus increases the probability that risk that has been suppressed for years will erupt uncontrollably. That the stock market is manipulated is no longer in question. One explicit goal in the Fed's zero-interest rate policy (ZIRP) is to drive capital into risk assets such as stocks. That is a first-order, transparent policy of manipulation, i.e. a centrally managed policy aimed at managing markets to meet a key central-planning goal: creating an illusion of prosperity via an elevated stock market and the resultant "wealth effect" for the 10% who own enough stocks to matter. Indirect manipulation is hidden from public view lest the rigging of the market taint the perception that a rising market is "proof" that Federal Reserve and Administration policies are "succeeding." Indirect manipulation is achieved via Federal Reserve quantitative easing operations, unlimited liquidity and lines of credit to fund bank speculations and masked buying of market futures. This multilevel manipulation creates a Boolean either/or for any Bear market: either it is a planned "panic" that profits the banks or a systemic failure of the orchestrated campaign of market manipulation.
No politics, no "death crosses" - just simple fundamentals.