Pump Up The Volume

We're now little more than twenty-four hours away from one of the most critical periods of the year. Macro Man is finding it increasingly difficult to contain his excitement at some of the price action he's seeing, but until we navigate tomorrow's ECB tender and Fed announcement, he's trying very, very hard not to go all-in too early.

Still, it was hard not to notice yesterday's breakdown in the SPX, which registered its lowest closing price of the month, as well as appearing to confirm other indices' break down below their 200 day moving averages.

But to date Macro Man looks like he's got plenty of company in keeping some powder dry, as volumes have not picked up to any notable degree, which is what we would expect to see in a true trend reversal/distribution phase.
Eventually, price action will need to attract greater volumes for Macro Man's anticipated scenario to materialize. Still, one sector in which volume has picked up appears to be company insiders; Trimtabs reported yesterday that the insider sell to buy ratio has risen to 22:1 this month. The phrase "watch what I do, not what I say" springs to mind.

Elsewhere, the commodity complex seems to have rolled over en masse, prompting Macro Man to dust off a few of his cherished puns for the first time in a few months. Among the more notable breakdowns was in gold, which cratered through a well-tested trendline.

Regardless of the medium-term prospects for the yellow metal, there is clearly an embedded long position, perhaps from macro punters but quite clearly from retail ETF buyers. If commodities are going to push lower, than one would have to suspect that gold could, if you'll pardon another commodity pun, melt down, if only temporarily.

It's just another interesting piece of the potential "green shoots to brown weeds" transition with which markts are flirting at the moment. How far and how fast this is effected will depend to some degree on whether markets pump up the volume after tomorrow's central bank event risks.
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Anonymous
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June 23, 2009 at 10:03 AM ×

MM, you frequently point to chart of HFRXM vs S&P...note from March Macro hedgies returns clearly been highly negatively correlated with stocks, but appear positively with the recent downdraft....think they got long or maybe just stopped out and losing from other stuff?

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Macro Man
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June 23, 2009 at 10:20 AM ×

I wonder if it's not more to do with rumblings at the short end earlier in the month and/or the lurch lower in commodities, but I think the point is taken; ownership of the equity short trade is probably lower than it's been in a long time.

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June 23, 2009 at 10:33 AM ×

Feels like a lot of this metals move will retrace somewhat but equities not so much - banks should have good earnings so might be better later in the week / next week when Alcoa etc report.

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June 23, 2009 at 10:34 AM ×

Oh and Hang Seng is sitting on its support - just in case you thought the chinachinachina crowd had any conviction to buy at the moment.

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Macro Man
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June 23, 2009 at 10:50 AM ×

Nemo, you've no doubt heard today's RRR-cut rumour, which has encouraged some of the frothier stuff out therer to bounce, kene-jerk style. I am left wondreing how/why they expect to proceed straight to the next up-leg without experiencing any of the presupmtive slowdown that would cause a cut in the reserve requirement....

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June 23, 2009 at 10:58 AM ×

Amen brother. RRR cuts generally mean bad stuff is happening in the economy and that the numbers for this quarter are probably BS. I haven't been doing this that long but I know that much. I'm waiting for the latest ISI nos on RE loans in the country. Aluminum capacity is back on at Chalco and ditto steel mills, disillusion should set before September just in time for everyone to get terrified by the choie of either a

1) Bona fide carbon market globally or;
2) A no-holds-barred UFC style smackdown between the US and China because they couldn't get a deal done.

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June 23, 2009 at 10:59 AM ×

Sorry, I am referring to the Copenhagen summit in December which I think will be the shooting of Archduke Ferdinand when it comes to the trade dust-up we could see.

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Macro Man
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June 23, 2009 at 11:04 AM ×

Yes, I suppose it's not out of the realm of possibility that it's the electricity numbers that are lies (as opposed to everything else) so that China can sit on some sort o high horse in Denmark....

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June 23, 2009 at 11:08 AM ×

There is no running from a climate deal when you're power grid is almost entirely coal. Also, if you want to check power output just pull up SEAG of Hong Kong air pollution (in Bloomberg). I am telling you, the plants are on.

More importantly, its hard for China to do a deal when all the SOEs, half of whose alumni are in goverment are in the power hungry industries: steel, aluminum, cement, yada yada.

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Anonymous
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June 23, 2009 at 11:12 AM ×

could this be that hot money from stocks and commodities are now flowing back into Treasuries which as MM thought a week ago were turning bullish again?

just Look at a Weekly chart of 30-Year bonds - the bounced off the flat 200-Week MA and both with 10-year USTs are going into uptrend on Daily charts - this should help the US to market its debt issuing.

not to turn our attention away from todays GS issuing the following:
*GOLDMAN BETS 10-YEAR TREASURY YIELDS MAY FALL 30-40 BPS
*U.S., EUROPEAN GOVERNMENT BONDS POISED TO RISE, GOLDMAN SAYS
*LONG-DATED BONDS HAVE `DECENT RALLY AHEAD,' GOLDMAN SAYS

*GOLDMAN ADVISES GOING `LONG' 10-YEAR U.S. TREASURY FUTURES
*GOLDMAN BETS 10-YEAR TREASURY YIELDS MAY FALL 30-40 BASIS PTS

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Kaprikorn
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June 23, 2009 at 11:14 AM × This comment has been removed by the author.
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Anonymous
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June 23, 2009 at 11:17 AM ×

MM,

Is HFRXM a relevant bench for the assets run by macro funds? I do not know the composition but imagine it is equal-weighted when surely only 5-10 macro funds run the lion's share of assets?

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Anonymous
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June 23, 2009 at 11:51 AM ×

If you look at the major US banks, they are reversing, i.e. WFC, JPM,
also BARC LN looks to have finished the bull run.

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Anonymous
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June 23, 2009 at 1:42 PM ×

Anon - Goldman is collaborating with the Treasury helping them sell their bonds. As a rule, when Goldman says buy, sell. I went long bonds but now I'm inclined to get out.

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Anonymous
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June 23, 2009 at 4:14 PM ×

MM, I know that you like looking at the SPY US Eqty when you look at volumes, but what do you think of the volume of the SPX index in the last 6 days?... the volume seems to be increasing nicely.
Another thing, to what extent do you think that the big jump on 19june is due to the futures closure?
Txs

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Anonymous
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June 23, 2009 at 5:25 PM ×

interesting moves on the currency markets today....some real EUR strength, now feeding into broad based dollar weakness.

however, treasuries are bid and metals are soft...strange.

I can concoct a reason why EURUSD is strong, given the obvious trendline break, however, why would people be piling in the day before the ECB tender and the Fed? Surely one would wait...

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Anonymous
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June 23, 2009 at 7:27 PM ×

Yup that embedded long gold position reminds me of a song. And the second guy dancing looks alot like Nemos positioning.

http://www.youtube.com/watch?v=9hJqTBLznys

If Metals go, so will equities. If China goes, so will all Westen equities and the USD will get strong again.

There is a reason we have a huge head and shoulders on treasuries.

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Anonymous
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June 23, 2009 at 10:03 PM ×

hilarious vid above. mish discussed the yellow stuff ...

http://globaleconomicanalysis.blogspot.com/2009/06/us-approves-imf-gold-sales-what-does-it.html


eur/usd very odd indeed ... seems like soembody knows something or using post london closing liquidity value to pum up eur. weird thing is, ECB doin the equivalent of a big advertised QE round tomorrow. so why buy the ccy when equity also week? oil going up on the back of iran?!

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Anonymous
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June 24, 2009 at 1:21 AM ×

Don't get ahead of yourself MM. Gold is around 10% off its nominal all-time high. Not bad considering the fabled IMF gold sale gambit is currently worming its way through Congress.

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June 24, 2009 at 2:21 AM ×

Anon, my moonwalking is unstoppable and yes, I am Blackula.

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