Admittedly slightly higher than yesterday's year-to-date lows in volume,
today was not much better as S&P 500 e-mini futures (ES) pushed up over
1400, back to three month highs, on decent average trade size (following
yesterday's low average trade size). Treasuries tracked stocks (higher
in yield) but Gold and the USD disconnected (from stocks) into the US
open and never really recovered. ES rolled off its highs late on and
reverted perfectly to VWAP once again and rather coincidentally the 'correction'
occurred just as ES priced in Gold hit the year's highs (which intriguingly is a
critical cliff's edge level from a year ago). Oil's surge (and Treasury's
weakness) were the main risk drivers which pushed CONTEXT to lead stocks higher
as FX, credit, and PMs trod water largely. Interestingly, in ETF-land, our
capital structure models were flashing red with HYG down notably and
credit underperforming broadly, along with VIX (and VXX having an outside
up-close day) not playing along with the rally. With VIX bouncing off
4-month lows, closing back over 16% (and up on the day), the pull to VWAP into
the close on decent average trade size, the plunge in short-interest, and the
underperformance broadly of credit markets (especially the
ever-reliable-for-a-pump-job HYG); we'd be a little nervous up here (especially
after Europe's sovereign and credit weakness today).
ES reverted nicely to VWAP amid low volumes (but notably higher average trade size with blocks coming in at the close); ending up 0.5% with VIX unch at 16%...
Credit dramatically underperforming equities...
With S&P 500 e-mini futures priced in gold at an interesting level...rolling over today into the close...
and close-up...
and Treasuries and stocks clung to one another while Gold and the USD decoupled lower (and it seemed like stocks wanted to get down there into the close)...
and while CONTEXT (based on broad risk assets) was dominated by Oil and Treasury's move today, the ETF-Structure (upper left) saw a major disconnnect (which we haven't seen recently) in HYG and VXX from SPY and TLT...
as is clear from the day's performance (inverted to make 'risk-on' action in stocks optically pleasing); VXX pushed higher and HYG lower as SPY recoupled with TLT on the close...
The last few times when HYG has closed red and SPY closed green two days-in-a-row were: 5/23 SPY fell 3.2% in next 5 days; 4/2 SPY fell 3.4% in the next 6 days; 1/12 SPY fell 0.5% the next day and rallied back 1% in the next 3.
or more clearly...
and as we noted last week, cash bonds appear a little over their skis - with the advance-decline line now rolling over...
If this HYG sell-off (which saw notable chunks of heavy volume in the afternoon) combined with the advance-decline in bonds is anything to go by, then this could get a little ugly given how low inventories are, how dire liquidity is currently, and the over-crowded nature of the trade.
Charts: Bloomberg
and Today's Bonus 'Oh Shit' chart is Priceline now -12.5% after-hours...
ES reverted nicely to VWAP amid low volumes (but notably higher average trade size with blocks coming in at the close); ending up 0.5% with VIX unch at 16%...
Credit dramatically underperforming equities...
With S&P 500 e-mini futures priced in gold at an interesting level...rolling over today into the close...
and close-up...
and Treasuries and stocks clung to one another while Gold and the USD decoupled lower (and it seemed like stocks wanted to get down there into the close)...
and while CONTEXT (based on broad risk assets) was dominated by Oil and Treasury's move today, the ETF-Structure (upper left) saw a major disconnnect (which we haven't seen recently) in HYG and VXX from SPY and TLT...
as is clear from the day's performance (inverted to make 'risk-on' action in stocks optically pleasing); VXX pushed higher and HYG lower as SPY recoupled with TLT on the close...
The last few times when HYG has closed red and SPY closed green two days-in-a-row were: 5/23 SPY fell 3.2% in next 5 days; 4/2 SPY fell 3.4% in the next 6 days; 1/12 SPY fell 0.5% the next day and rallied back 1% in the next 3.
or more clearly...
and as we noted last week, cash bonds appear a little over their skis - with the advance-decline line now rolling over...
If this HYG sell-off (which saw notable chunks of heavy volume in the afternoon) combined with the advance-decline in bonds is anything to go by, then this could get a little ugly given how low inventories are, how dire liquidity is currently, and the over-crowded nature of the trade.
Charts: Bloomberg
and Today's Bonus 'Oh Shit' chart is Priceline now -12.5% after-hours...
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