The headline was simple and right on target,
Stocks Close At Recordest Highs Ensuring 'Confident' Black Friday, Despite Macro Massacre"
Last week when I saw something in HYG that was bothersome, I wasn't quite sure why I was seeing what I was seeing, which is often the case with underlying trade, you can see the cash moving but you'll never know the reason until after it has happened. Clearly the reason HYG was accumulated late last week was to ensure that no headlines crossed over mainstream media outlets or on the ride home from work over the radio with something like "Dow Industrials down 200 points today". That's the last thing politicians or the F_E_D wants to see in front of Black Friday, the official open of the US retail holiday shopping season and a barometer of what retail should expect going in to December, before the holidays. In other words, the historically green week of Black Friday is green for a specific reason, it's just simple Mass Psychology.
That being said, there were still clear messages from the market. The carry trades and Index futures' correlations have broken down, the main lever in ramping the market overnight is now not only broken, but leading the Index futures lower and this is a multi-year correlation.
HYG, High Yield Corporate Credit which was accumulated at the lows of November 19th has not only been tasked with keeping the market either level or higher, but it has also been under distribution showing that its task is nearly or is complete as it sold off hard in to the close today, the first time since the 19th.
The rate of change in 30 year yields has been so sharp over the last week, it has been called "Unprecedented", having never happened to this extent in the market before, remember yields are a leading indicator and tend to pull equities to them, they have been right on at the last several big moves both up and down.
Yields closed near 18 month closing lows with the 30 year closing at 2.95%
Yields closed near 18 month closing lows with the 30 year closing at 2.95%
The VIX is not only behaving strangely, but under accumulation and in the timeframes I said Monday were the only timeframes it was missing, the short term 1 min charts, again VIX which has a buy signal (the 3rd in over a year with the last 2 being dead on) and pinching Bollinger bands and breaking its correlation toward volatility also trades opposite the market.
If I really start this post in this fashion, it will be hard to finish as there are so many ways in which we are quite literally off the chart, in situations that have no historical precedent and I'm not talking about how many days the SPX has closed above its 5 day moving average on low volume and 1/4 percent moves, actually the average is even lower at 0.15%
To prove the motives of this week (and just think about how many different aspects are effected from local government taxes to strip malls, small business, corporations, the treasury's tax collection, an unknown number of negative possibilities for the F_E_D, etc... ) all about doing the best they can to keep sentiment positive in to Black Friday...I think everyone knows why we have used yields as a Leading Indicator for years now, they not only tend to tell us where the market is going intraday, but on a much larger scale.
Earlier in November we knew that 30 year bonds would be rising and 30 year yields would be falling, this has been one of our macro themes. In fact on Friday November 14th, we played the trade, Trade Idea (Swing+) TLT long via TBT Short as the charts were quite clear that TLT and /ZB (30 year Treasury futures) were under accumulation. These charts are from that post...
And the macro theme the case was being made for in 30 year Treasury Futures.
/ZB /30-year treasury futures leading positive divergence.
This has led to the massive 30 year yield dislocation/divergence from the SPX...
This 15 min chart that shows the October lows of SPX (green) with 30 year yields (red) trading tick for tick with the SPX as the rally started, has not only diverged, but of historic proportions. We have always used yields as a leading indicator as they tend to pull equity prices toward them like a magnet. However as recently noted...
The last time yields diverged from the SPX was in late July before the dump to August lows and September which led to the October lows, but look at the size of the difference in divergences.
As the ROC of the downside move in yields picked up...
From NANEX (Eric Hunsader tweet) today...
As Eric points out, ES liquidity is the HIGHEST since the crash in yields which is approximately, November 21st. someone was out buying in force (which I talked about earlier in the day) as all other levers failed to accomplish the guarantee of a green close. After all other levers were tried today, they had no choice but to buy ES to keep the market green.
What is the message of the market other than they don't want a red close before Black Friday?
I'd say the message of the market is, despite all of the levers used today and over the last week, the market is so weak that the PPT likely had to step in to guarantee a green close the last hour of the day before Black Friday as the market is closed tomorrow!
As for the levers...
I mentioned HYG last week, the accumulation at the lows of the 19th and since then I have shown the HYG distribution as they seem eager to get out of the market supporting position at or around Friday or next Monday's open.
VIX...
Even the VIS is slammed in to the close to ensure a green close even after all of the other levers and ES buying in to the last hour, this is how desperate they were to keep this green, and JUST HOW FEARFUL THEY WERE THAT IT MAY CRASH IN TO THE CLOSE.
VIX should be well below the red trendline compared to the normal SPX correlation, despite being whacked anyway, VIX acted that much better than it should have even $15 cents in to the green at one point this afternoon!
Note the SPY/SPX would have closed red today had it not been for the SPY Arbitrage Lever (HYG/TLT/VXX).
In addition to HYG (lever) distribution the last couple of days and selling off in to the close, HY Credit has sold off since the PBoC knee jerk ramp higher Friday.
If the September divegrence in HY Credit, which leads the market, produced that kind of sell-off, what do you suppose the next pivot move is likely to look like. Again, I have maintained since the time we predicted the October lows would lead to a face ripping rally that would be hard to imagine, I have also said that it would simply be a means to a much larger move lower, the "ends".
Strength in the NDX/QQQ today was as a result of AAPL's weight on the index and its strength today, +1.18%, but you also saw today's AAPL analysis and divergences... AAPL Update
AAPL vs QQQ today...
The Q's divergence was so large today it throws everything else out of scale.
And NASDAQ 100 futures...
As for ES, nearly identical...
The averages on the day were not as dispersed as yesterday, but there was clear underperformance in the Dow +0.07% and Trannies -0.08% vs the SPX at +.28, the NDX at +.69 and the R2K at +.36, a big difference from yesterday.
Again, considering how many levers were pulled, not an impressive day. Note how all of the end of day VIX slamming, SPY Arb leading, ES buying effected ES vs it's correlation with USD/JPY, the close is quite clear as having been all about monkey business and Black Friday.
Oil which we'll hear about tomorrow as to O_PEC's decision closed at 4 year lows today on RUMORS again that there would be no production cut. As addressed earlier in Quick USO Update, I really think this one is no better than gambling.
MACRO ECONOMIC DATA today was a miss across the board, normally bad news would be enough to push the market without all of the levers today. Nine of nine misses including: Mortgage Applications, Durable Goods (ex trans), Initial Claims, Personal Income, Personal Spending, Chicago PMI, UMich Confidence, Pending Home Sales and New Home Sales.
Not exactly the kind of stuff record Black Friday's are made of which has to make you wonder about the possibility of a Black Monday.
As for Internals, there was a Dominant Price/Volume Relationship in all of the averages except the Russell 2000 and it was the same as yesterday's but stronger. Close Up and Volume Down, the most bearish of the 4 possibilities with 19 of the Dow, 56 of the NASDAQ 100, and 241 of the S&P 500.
Similar to yesterday, 6 of 9 S&P sectors closed green with Tech leading @+.91 and Energy lagging again at -1.26%.
Of the 238 Morningstar groups I track a similar and slight improvement of 161 of 238 closed green (130/238 yesterday).
Breadth Indicators didn't change much, there was a slight advance in the higher beta/momentum stocks, but the Percentage of NYSE Stocks > 200-day Moving Average has now spent its 18th day in a tight range of 50-54%, that's literally no movement for going on 4 trading weeks and barely above half the stocks above their 200-day moving average despite new market highs.
There's definitely an issue that the market is screaming about, it's yeilds vs the SPX (as well as credit and a number of other things), but yields seems to be what's going to crack this egg.
Remember the market (NYSE and NASDAQ are closed tomorrow and openuntil 1 p.m. Friday, which means a 4-5 day weekend for most traders in the Hamptons.
That may be why US Index futures look so ugly right now, perhaps closing out positions before the long weekend, but I'd think that would have been handled much earlier before they headed to the Hamptons earlier today.
Why now? Perhaps selling some of those contracts bought in to the close to guarantee a Green Black Friday?
Have a Very Happy Thanksgiving Holiday or day off from the markets. I'll be watching for any developments and will post anything of interest, even if I have to fight through the tryptophan and get off the couch!
No comments:
Post a Comment