The short-squeeze rip extended through the middle of the day today but on
considerably lower volume as we tested up to QE3 highs and sucked in just a few
more traders. It seems retail sales (and outlooks) disappointing, higher taxes
for 77% of us, debt ceiling and spending cuts to come, and earnings outlooks
being slashed en masse was not enough to break the market's spirit... But, when
the FOMC minutes hinted at the punchbowl being removed (even modestly), the bid
disappeared and S&P 500 futures dropped 10 points and Treasury
yields spiked (with 10Y pushing to 8 month highs). USD strength (+1% on
the week) and commodity weakness (though gold and silver remain marginally
higher on the week) weighed on risk assets in general but algos went quiet and
ES depth-of-market plunged as correlations broke. The usual e-bay style close
saw ES ramp off the lows of the day to test VWAP and end the day-session
there (-4pts or so close to close) as VIX was held lower. We said
yesterday this feels fragile and sure enough today showed its brittleness - as
AAPL clung to yesterday's lows staring into the gap. Now
the bulls await NFP hoping for a bad print, we assume?
Bonds snapped higher in yield as the rest of risk assets turned highly correlated and risk-off...
S&P 500 futures ramped to VWAP into the close of the day-session and are fading a little after-hours...
but VIX was held down as we dropped...
And the QE4EVA divide narrows modestly...
with 10Y yields pushing to May 2011 highs - 30Y up 25bps this week...
Commodities rolled over but remain up for the week...
as the USD rose by around 1% with EUR weakness post-repatriation in full force...
And note that 1) the move in TSYs is nothing compared to the selloff into QE3 (this is not the 'great' rotation; and 2) the FOMC's concern at ending QE is not driven their optimism on unemployment or the economy (see their forecasts) - its driven by their fear of the size and impact they are having on the market itself.
Charts: Bloomberg and Capital Context
Bonds snapped higher in yield as the rest of risk assets turned highly correlated and risk-off...
S&P 500 futures ramped to VWAP into the close of the day-session and are fading a little after-hours...
but VIX was held down as we dropped...
And the QE4EVA divide narrows modestly...
with 10Y yields pushing to May 2011 highs - 30Y up 25bps this week...
Commodities rolled over but remain up for the week...
as the USD rose by around 1% with EUR weakness post-repatriation in full force...
And note that 1) the move in TSYs is nothing compared to the selloff into QE3 (this is not the 'great' rotation; and 2) the FOMC's concern at ending QE is not driven their optimism on unemployment or the economy (see their forecasts) - its driven by their fear of the size and impact they are having on the market itself.
Charts: Bloomberg and Capital Context
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