Silver Soars, Stocks Slump As Equity "Fear" Hits All-Time Record High

"smooth sailing", right?

 

Something is going on beneath the covers...

Last week saw the biggest addition of shorts across the Treasury Bond Complex in over 3 years (with record ultra shorts)...

 

And CSFB's "Fear Barometer" just hit an all-time high...

As CS' Mandy Xu notes, typically, an increase in the CSFB is caused by a combination of higher put demand and lower call demand. Interestingly, this time, the entire move was driven by the call-side. The derivatives market is assigning less than 1% probability the market will rise by 10% in the next three months vs. 17% probability it will fall by 10%.

*  *  *

And so while stocks tried (twice) to ramp in the face of faux-ness, they couldn't... Despite a well placed Italian headline into the close...

  • *ITALY FIN. INSTITUTIONS, CDP AGREE TO SET UP FUND FOR BANKS

Just as we predicted...

 

Which totally failed.. as stocks dumped into the red!

 

Who could have seen that coming? An EU banking bailout rumor headline-driven rally and USDJPY ramp crushed by crude's collapse on Russia "no freeze" headlines...

 

Post-Payrolls, stocks are red but crude is soaring with gold and bonds also bid...

 

But again all that mattered was 2043.94... (YTD unch) - VIX tagged 16.00 and was quickly dropped to get S&P back over 2043.94...

 

Goldman was bid on a $5.1bn settlement... (imagine if it had been $51 billion?)

 

Stocks are beginning to wake up to the credit and bond decoupling...

 

Treasury yields ended the day practically unchanged - swinging from bid to offered in the EU session and rallying (lower yields) during the US session...

 

The USD Index ended modestly lower on the day but rallied back during the US session (after the EU close) after some shenanigans around the Silver fix time...

 

And finally, Commodities all ended positively (even copper just) but it was silver that stood out...

 

As the precious metal inched back towards the $16 level...

 

Charts: Bloomberg

Bonus Chart: With Alcoa kicking off earning season, we suspect this won't end well...

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