Volume Soars As Rally Ends

As AAPL dominates the headlines for its dramatic 5% reversal intraday and biggest drop in over two months, perhaps it is worth pointing out that the lacking volumes have returned with a flourish. ES (the e-mini S&P futures contract) saw its heaviest volume since this mid-December rally began (30% above average) as our recent pontification on the messages from the credit market (along with the rhythmic periodicity of the rally's size and length) may be starting to wear on investors' risk appetites. After European credit markets accelerated to the downside today, US investment grade and high-yield credit was not buying any of the overnight rally in stock futures and moved wide of yesterday's pre-Samaras rally out of the gate. Stocks surged upwards, tracking uber-stock AAPL but as chatter of a NASDAQ rebalance sent game-theorists scrambling to migrate, AAPL's slump dragged everything down (sadly) with ES stalling at the pre-China rumor level before falling to pre-Samaras levels from yesterday's lows. A lack of rumors and no QE mention from FOMC minutes along with lackluster news from the Eurogroup did nothing to rescue the situation as EURUSD ended on its lows (-1% on the week now) and USD Strength saw carry trades dragging stocks down. Interestingly, post-FOMC Treasuries came off their best levels in the afternoon (even as stocks were tanking) but we saw Gold rallying (in the face of a stronger USD) - does make one wonder on where the safety trade is now. WTI closed near its highs of the day (over $102) and as we noted earlier Brent in EUR closed at record highs as Copper is -1.3% on the week and Silver is tracking USD -0.75% or so on the week.

The highest volume in ES since the rally began and as we point out on the chart (with the 4 same-size rectangles - click to enlarge for clarity), we seem to be approaching some kind of periodic and point-size performance break.

Readjusting the sync between credit and equity for this week we can see clearly that credit did not buy the overnight rally and indeed ended notably lower. ES stalled (dotted orange oval) at the pre-China rumor levels and then fell and boiunced mildly off the lows from yesterday (pre-Samaras). On a longer-term basis (post NFP) credit remains a nagging doubt for risk appetite.

Financials continue to behave very weakly but there is a clear divide once again between the haves and the have-nots as JPM, GS, and WFC are grouped around the financial ETF performance post Monday's open while MS, BAC, and C are all grouped notably lower (down 5-6% from Monday's open). So much for Bank of America's sell CDS protection on this sell-off as CDS continue to widen significantly (+40-50bps from week ago tights now). MS is back over 300bps, GS over 250bps, and JPM 24bps wider than its tights a week ago at 130bps (the largest relative derisker).

Post FOMC minutes (no QE??), Treasuries sold off, stocks sold off, but Gold and the USD rallied.

In FX, JPY strengthened modestly against selling pressure on most of the majoprs as USD pushed to highs of the week (+0.8% since Friday). CAD and AUD are up an equal 0.18% on the week against the USD but all eyes were on EUR today as it tried to retest 1.31 but was rejected shoretly after the Euro conference call ended.

Treasuries saw 5Y and 7Y outperform, 10Y unch and 30Y underperform on the day but broadly speaking all remain -3 to 6bps on the week.

Oil is the high-flier of the week so far in commodities at +3.38% (and over $102 for WTI). Copper is the biggest loser down 1.3% and Gold decoupled a little from Silver today as Silver dropped and Gold rallied.

Risk-off. Perhaps we will see European equities finally start to crack and catch up to European credit tonight and then the race begins for rumors and innuendo as we see large crowds and small doors in many markets currently - but we do note that ES remains well above the post-NFP print spike levels for now (even if credit is well below them).

Charts: Bloomberg