Post After-Hours ES Trade and Other Curiosities

You saw the very abnormal trade in equities after-hours, huge volume with little to no price movement which is in itself the definition of churning when strong hands offload shares to weak hands, also an event that marks a top.

 Here's the 1 min ES futures going in to after-hours. It was interesting as the futures held relatively flat as did 3C as well as the SPY, right at 8 p.m. when after hours trade wraps up, 3C went negative and ES futures started to fall.

This is the 5 min ES chart and it did the exact same thing. The vertical trendline is 8 p.m. , this is when the retail suckers (that's about the only group of people who consistently trade after hours and pre-market and many are working day jobs making this the only time they can trade and making them on average, less then sophisticated investors) trade and 8 pm marks the end.

Futures are now trading slightly negative having lost about 2 points from the close and over 3 points since 8 p.m.

The Euro is also trading solidly below both parabolic trendlines.

In a side note, Treasury and Agency backed paper has seen relentless selling, some of it is a warning from China in response to the Congressional bill labeling China as a "currency manipulator", but much, much more is coming from Europe. As was speculated 2 weekends ago right here, one substantial reason that the EUR has melted up and taken the stock market with it over the last few weeks was Europe selling US dollar denominated assets to recpaitalize their banks. The selling was very evident in the PrimeX market and as the US assets were sold, the dollars were sold putting downward pressure on the dollar and Euros were bought putting upward pressure on the Euro (repatriation of capital) and hence, sending the Euro much higher. It turns out that PrimeX was only 1 asset class; as reported by FAZ CommerzBank has been selling all bonds including US ones. Today's update of international holdings in the "FAD'S" custodial accounts saw $20 billion in sales, $19 billion alone in treasuries making this the second largest sell-off EVER! Furthermore, in the last 8 weeks and think about the timing of this rally as dollars are repatriated in to Euros, the custodial account has seen $93 billion dollars in sales!

Remember, there are several asset classes that are dollar denominated that Europe will sell: PrimeX (the evidence is in on that one), CMBS (Commercial Mortgage Backed Securities), Bonds and other Agency Paper and finally-EQUITIES (STOCKS). As pressure mounts on these European banks to recapitalize (and they have already made clear they will not raise new money through offerings when their share price if less then half of book value) they will continue to sell everything that is not nailed down to the floor. One must wonder when it will be equities' turn? I would guess the minute the market shows weakness (or even more likely they have already been selling in to the rise, thus the ridiculously bearish 3C readings over the last several weeks), watch out below. From an investor standpoint, US treasuries (a safe haven trade anyway) are going to look exceptionally appetizing at these prices and the minute the market goes from risk on to risk off... PRESTO, you have a risk off rally with fundamental underpinnings that we probably have never seen in our lifetimes and the makings of a decline that we have no way of judging just how bad it will be. One thing is for sure, it will be worse then we think, there will be just about zero international buyers as the banks put every cent in to re-caps and the short interest as of this week has fallen substantially so you don't have shorts to put a floor in on a sell off.

This will be interesting.

One last thing, the Japanese currency intervention was an absolute dud, sending the Yen to new lows when it was supposed to do the opposite. Of course the last 4 interventions haven't worked very well if at all.