Stocks Shrug Off Ebola, Surge Most Since 2011, Still A Red October

Ebola in NYC, no problem. Crappy housing data, all good. School shooting in WA, buying opportunity... and that is how the S&P 500 broke back above its 100-day-moving-average (proving the world is fixed again), and had its biggest low-to-high swing since Dec 2011. It wasn't all great BTFD news today though as small caps underperformed - though still green (just like last Friday), and only Trannies and Russell are green in October. Despite equity exuberance, Treasuries rallied modestly today (ending the week up 8-9bps on the week). HY credit slightly underperformed stocks but compressed 27bps - the biggest weekly drop in spreads since July 2013. The USD rose for the first time in 3 weeks led by JPY and EUR weakness. Oil fell once again, copper rose (since China data), gold and silver mirrored USD's gains. VIX closed down 5 from last week's close just above 16, but like small cap, and JPY carry, decoupled this afternoon. The last 2 weeks were the biggest squeeze of "most shorted" stocks since July 2013.

For old time's sake... as we await the very last POMO (or not) on Monday...

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Before we start... next week is last POMO and a press-conference-less FOMC statement... so why aren't bonds loving the growth implied by stocks? Especially if as everyone claims last week saw the capitulation of shorts... We note the 3 blue boxes where equity traders were wrong footed... and now we are back at that level...

 

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Small Caps notably underperformed today...



The S&P had its best week since Jan 2013 and biggest 2-week low-to-high swing since Dec 2011...

 

Ripping back above its 100DMA...(and almost 50DMA)




On the week, Nasdaqwas the winner...




And off the Bullard lows...



Only Trannies and Russell 2000 are green for October though...

 

And here is the last 24 hours...

 

VIX dropped from 21.99 last friday to just above 16 - but notably decoupled

 

So looks like longs are hedging into the ramps and the rally is short covering as "most shorted" stocks have the best 2 weeks in 15 months...




HY Credit's best week in 15 months...




Treasuries were unchanged today but ended the week 8-9bps higher in yield...



The USD rose for the first week in 3 led by JPY and EUR weakness

 

JPY carry decoupled from stocks...

 

VIX decoupled (but was punched lower to ensure S&P success above its 100DMA)



USD strength weighed on commodities as gold and silver mirrored its move. Oil slipped further ending just above $81 and copper rallied after China PMI data...



Charts: Bloomberg

Bonus Chart: Thank the lord for QE3...