Market Shrugs Off Dimon Premium As Treasuries Lead Risk Lower

It seems our warning of yesterday's perfect algo-driven retracement in Treasuries and stocks was spot on. The dead cat bounced just too perfectly for our liking and despite an early attempt to ramp markets on Dimon's testimony (which worked at first and then faded all the way into the close), broad risk assets led equities lower with a horrible close. It appears the 10Y auction was today's catalyst and it is clear from the charts that TSYs indeed turned lower (in yield) before equities woke up. The 1315 level (in September S&P 500 futures) was a stumbling point all day as decent sized blocks were dumped each time we moved above it until the market finally gave in and fell. WTI gave all its Dimon-spike gains back. Gold, Silver, and Copper wriggled along sideways (also giving back all the Dimon-Spike gains) but while the USD retraced higher into the close (-0.3% on the week now), Gold and Silver remain up around 1.5% on the week (with gold the outperformer on the day). VIX pushed dramatically higher to 24.5% (+2.3vols) and as stocks tumbled so equity correlation to risk-assets picked up (with notably stocks finding support as they converged with CONTEXT near the close). A last minute pop into the day-session close took us back to Thursday's close of last week but IG credit continues to point to lower risk appetites.

Treasuries led the risk-off move today...

and yields fell to yesterday's lows (except for 5Y which underperformed)...

and IG credit remains the underperformer...

as ES tried and failed to hold above last Thursday's close and Monday and Tuesday's VWAP close...

as financials gained and lost 1% as a sector with MS gaining and losing 3% from the start of Dimon's speech. JPM held on to 1.4% of its gains from the start of Dimon's testimonay but the roundtrip elsewhere is clear (and JPM's equity remains notably high relative to its CDS)...

WTI also retraced the Dimon-Spike

And all just as predicted by CONTEXT: with notably the highly correlated lift around Dimon's speech after which broad risk assets (proxied by CONTEXT) led the market lower and the almost perfect convergence at the close today...

as gold outperformed with the rest of the QE-sensitive spiked and dived on Dimon's testimonic brilliance...

Charts: Bloomberg and Capital Context

Bonus Chart: Realized volatility - the daily swings up and/or down - in the Dow is starting to pick up again (just as we warned in March) - as it follows a very similar path to last year once again...

Bonus Bonus Chart: Medium-term intraday ES - 1315 seems significant resistance (click for large chart)...