Quant-Quake Continues: Momentum Melts Down As Stocks & Bonds Rally

On the day that NBER announces the US Economy officially entered recession in February, S&P scrambled green year-to-date...

Nasdaq 100 and Composite both made new record highs...

Source: Bloomberg

Because fun-durr-mentals...

Source: Bloomberg

But while the surface of the ocean of wealth creation looks "calm" and v-shaped, it is a turmoiling disaster down below as a major quant quake is under way as inflation bets are resurgent.

All momo gains YTD are now erased as the momentum factor tumbles 6 days in a row (this is the biggest 6-day drop on record)...

Source: Bloomberg

And markets are the most 'euphoric' since 2002:

“We are concerned that thoughtful approaches are being overwhelmed by the need to at least keep pace with price moves,” Citi’s strategists said.

“People are ignoring joblessness, trade friction, social unrest, and risks that loom including possible Covid-19 reinfections, the end of bonus supplemental unemployment checks and the upcoming elections.”

Still, who cares - you can buy 5 shares of HTZ and 10x your money in a day (more below)...

Crazy indeed...

David Rosenberg (@EconguyRosie)

"It's the mother of all 'money illusion' rallies. In 3 months, the Fed juiced up M2 by a cool $2.5T, and the S&P 500 mkt cap surged dollar for dollar. Who needs earnings? Who needs productivity? Who even needs buybacks anymore? MMT arrived early and with a Republican in office!!"

Drunkenmiller, 2015

"Earnings don't move the overall market... focus on the central banks and focus on the movement of liquidity"

Druckenmiler, 2020

"I would also say I underestimated how many red lines, and how far, the Fed would go,"

On the day, Small Caps dominated and while Nasdaq lagged it was still up another 0.5% (note the market never really accelerated until Europe opened and dived at the US open only to be insta-bid right after)...

VIX was higher on the day as it appears the call-buying is accelerating as stocks surge (never ends well)...

Source: Bloomberg

The S&P is the most overbought since Jan...

Source: Bloomberg

"Most Shorted" stocks are up 12 of the last 13 days (and 7 days in a row)

Source: Bloomberg

Treasury yields fell for the first time in 6 days (except 2Y which rose 2bps as the yield curve flattened notably today)...

Source: Bloomberg

10Y Yields are back below 90bps (down around 9bps from Friday's highs)...

Source: Bloomberg

Interestingly the bond rally today was against the trend in the momo/value move...

Source: Bloomberg

The dollar fell for the 8th day in a row - the longest streak of losses since 2011

Source: Bloomberg

After nine straight days of higher highs, EURUSD made a lower high today breaking the longest streak since Oct 2010...

Source: Bloomberg

Notably EURUSD has recoupled with its EU and US rates differential...

Source: Bloomberg

Cryptos were largely flat since Friday - managing to come back from a decent selling effort yesterday...

Source: Bloomberg

Oil prices dared to fall today after Goldman suggested things were not quite as rosy as investors hoped (and hedge fund positioning was reduced)...it seems $40 was a limiter...

Gold futures scrambled back above $1700 after Friday's payrolls puke...

Silver was also higher on the day - but underperformed gold - as it pushed back up towards $18...

And finally, there's this utter farce.

Bankrupt HTZ stock is up 681% in the last 3 days and 1450% from its bankruptcy-announcement lows...

And CHK (also bankrupt)...

"Broken markets" indeed!!