U-G-L-Y

Well, that was ugly yesterday, and as the schoolyard rhyme goes, the SPX ain't got no alibi for another poor day.   OK, that's not totally true- the perhaps inevitable rumours of hedge fund blow ups and forced liquidations have already emerged- but even there, it was already a bad day before it turned ugly on the supposed liquidation selling.

Regardless of how the SPX got there, yesterday's 2.5% swan dive has taken it bang to the long term head and shoulders neckline identified a few days ago.


Perhaps ominously, the Russell 2000 broke through the equivalent level last week, and has shown little inclination of doing anything but the textbook acceleration through the key level.


At the risk of stating the bleedin' obvious, if the SPX level gives way and confirms the message from the Russell, you'd have to say that the intermediate frame outlook is quite poor, the historical performance of JBTFD notwithstanding.

What's also somewhat concerning is the apparent lack of panic.   Oh sure, the usual bearish "prophets" have been trotted out, and Macro Man can only imagine what the talking heads on CNBC must be saying (he refuses to watch.)  But you might have thought that the worst start to the year in recorded equity market history would be worth a bit more in vol terms than VIX at 25.

Moreover, if we look at skew, it is nowhere near the panic highs of August.   OK, in fairness, we haven't had that bum-clenching day where everything collapsed as it did then, but still....the discrepancy is notable.  (The chart below shows the implied vol difference in 3 month 25 delta SPX calls and puts.)


One thing that is not particularly concerning is the performance of FANG.   That is to say, of course it is if you are long and watching the stocks go down.    But given the degree of outperformance last year, it must be taken as something of a triumph that those 4 stocks have moved sideways against the SPX during the current period of market angst, much as they did in August-October.   If the high-fliers start systematically under-performing, that will be a pretty good signal that the proper flush has well and truly begun.



In the meantime, just remember that times of stress are when you need to play to your strengths;   Macro Man has met very few people for whom "panic" is a state of relative advantage.  Like more than a few folks, it seems, he put on some small pro-risk trades yesterday before the flush.  Needless to say, the immediate performance was less than impressive.  But his analytical advantage has always been measured in weeks and months rather than minutes and days, and in his current seat he has the luxury of playing in that time frame unfettered by the need to make money every day (or, to put it more accurately, to "not lose money" every day.)  Volatility begets opportunity, whether you're a day trader or a proper macro-time frame punter.  The key is to utilize it in a way that doesn't make you look and feel ugly. 

 
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Anonymous
admin
January 14, 2016 at 7:29 AM ×

A plausible reason for the lack of panic, is the old chestnut of Central Banker anchoring. The belief that the FED will step in is still there. Taper tantrum, SNB floor, Draghi's December episode shows how market panics when they feel CB hasn't got their back. Has the FED perfromed well in managing expectations, short term? Europe hasn't recovered from Draghi.

I'm loathe to put everything on CB's, however, it does feel that there's an element of psychology there that thinks the girlfriend that just walked out is coming back. If she doesn't...

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Nico G
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January 14, 2016 at 9:20 AM ×

the lack of panic / religious belief in CB protection is the continuity of 'peak market idiocy' as seen last month: trading up to 2070 on spoos AFTER 4 rate hikes were announced for 2016

peak idiocy is the harbinger of market disaster

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Anonymous
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January 14, 2016 at 9:28 AM ×

Interestingly there is almost no significant bid in any equities market during these falls. We have more downside to come. A 50% re-trace from the 2015 high in spoos would be nice.

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adamantic
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January 14, 2016 at 10:26 AM ×

You could argue junk bonds kicked this whole round off and they had a pretty ugly day. Flipside is $110 billion demand for AB-InBev debt, though maybe it soaks up so much capacity it's a negative.

Re Fang - Amazon was down 6% yesterday. There's a long way to valuation support (even in terms of revenue) for any of these guys, unless you include apple.

Agree the lack of positioning extremes is worrying. Without it, it's hard to see how we get the facerip that everyone's positioned for.

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Eddie
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January 14, 2016 at 10:39 AM ×

AB InBev is investment grade and a 110bn emission should be pretty liquid, not only by bond standards. Pretty much the opposite of what we see in HY right now...

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Anonymous
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January 14, 2016 at 11:05 AM ×

I have cast my divining sticks and the portents are ominous to say the least. Either equities find some bid soon or death and destruction await us all. Around me everyone is running to cash, praying that the US session brings some bid, but outside dark clouds are gathering...

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Bruce in Tennessee
admin
January 14, 2016 at 11:07 AM ×

Hey, Lefty!

It is early here and futs aren't too negative...have fun in the office today. I will check and see how much you made when I get back.

http://bruceintennessee.blogspot.com/search?updated-max=2011-04-25T05:17:00-07:00&max-results=7&start=7&by-date=false

(maybe some of the older posts will zen you in the daily battle today....)

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Anonymous
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January 14, 2016 at 11:23 AM ×

Reopening short CNH, o/n rates have 'normalised', spread to CNY is at the lows, CNY fixing higher again

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Belektron
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January 14, 2016 at 11:24 AM ×

Everyone is positioned for a bounce in equities. Maximum pain trade points to market doing just the opposite. We have exactly the same situation as in most of last year, when "smart" money positioned for dips and market continued to grind higher.

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mielke
admin
January 14, 2016 at 11:37 AM ×

Ich liebe. Ich liebe doch alles

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Booger
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January 14, 2016 at 12:12 PM ×

anon 11:23am: me too, Chinese efforts to "punish" the short sellers likely to fail in the long term. CNH interbank rates to 65% the other day indicates the Chinese peg is in serious trouble. Without interest rate hikes on the cards to back up currency intervention it is really not very credible. There is increasing blood in the water and that will get more sellers interested. And of course the whole exercise of this type of devaluation is a bit pointless except to use up their reserves. The logical thing for the Chinese to do would be to devalue by a considerable period and guarantee there will be no further devaluation for a credible period. Or float the currency. Or tighten capital controls much more.

USD.CAD worth watching next week. With a 20% pricing of rate cut next week and May cut fully priced in, this could be a good area for the RBC to chuck in a "surprise" cut for deval effect. Cutting in May, there would be no surprise effect.

The confluence of either or all of the following could make long CAD pairs an attractive proposition next week:
1. increasingly extreme positioning in USD.CAD
2. surprise rate cut next week could bring out a nice 100 pip flush downward (perhaps to 1.45)and subsequently rally because
3. If they do cut next week, they probably won't again for another 3-6 months
4. If oil reached $28 target next week, that would be the icing on the cake for confluence points and a possible short term reversal for USD.CAD.

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Anonymous
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January 14, 2016 at 12:35 PM ×

i doubt "smart" money is positioned for a bounce? I am not and I would rather sell every decent jbtfd rally, than buy the dip myself. I first want to see valuations lower a further 10% before I consider sticking in any money in longer term. in between I'll try to do some shorter-term trading and do research. commodities still stays a short, FI i wouldn't sell, equities I remain short.

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Anonymous
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January 14, 2016 at 12:39 PM ×

"Belektron said...


Everyone is positioned for a bounce in equities"
Speak for yourself. With margin and liquidity levels where they are ...it's all yours and probably staying that way at least until the latter end of 2016.

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Leftback
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January 14, 2016 at 1:09 PM ×

Anon @12:35, broadly speaking we agree with your longer-term view, esp. on valuations, but short-term it's hard to imagine this market behaving itself and not screwing everyone over with some substantial counter-trend rallies this year.

MM, those rates trades we discussed seem to be rising from the grave this morning. So that's something... crude oil prices also showing signs of stabilization. It's not impossible that the bottom is in there for now, although it's not our expectation.

HYG still above its lows of last year, we'll keep an eye on that for signs of recovery. Credit led equities down and it is likely to lead equities back up again as well.

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Anonymous
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January 14, 2016 at 1:21 PM ×

Renault -20% at one stage & Fiat Chrysler halted -11% this morning. More than one cockroache. Impressive bounce in ESX from the initial move all the same.

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washedup
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January 14, 2016 at 1:22 PM ×

@MM 'Macro Man has met very few people for whom "panic" is a state of relative advantage'

That is funny indeed - that said, I think the market is telling us something. This is a bit too reminiscent of the Jan 2001 and Jan 2008 price action to inspire comfort. Oil is very key here - it is the only risk asset out there for which the selloff is rather late stage and the crowded trade is on the short side - makes me feel its a better risk reward to own oil (however you choose to) than to play US equities at all - I would outright short spx to 1830 but there is a few wrinkles in the next few days (speeches, earnings, potemtial data improvement in China) that make me feel left's face ripper scenario, however unlikely it seems after yesterday, may still be lurking out there.

Abee regarding MREITS its beyond a WTF now - no connection to anything but agency mortgages, a reduced risk of us rate hikes with the price action last few days, yet here we go - down 7% off the gates - happy new year.

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Anonymous
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January 14, 2016 at 2:21 PM ×

Bullard.

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CV
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January 14, 2016 at 2:25 PM ×

Well LB was certainly right about Bullard. They have wheeled him out to defend the Maginot line. He better be on form!

Overall, UGLY is exactly the word. The biggest turds in my portfolio are simply sinking quietly without a trace on tiny volume, very nasty! A lot of people definitely "waiting" for a bounce to short or to reduce longs ... that is dangerous because that suggests it will just keep squeezing.

Still think Polemic's 19th of Jan fill ya boots call will come in. Could be another hairy week though!

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Anonymous
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January 14, 2016 at 2:28 PM ×


bearish as i had been positioned coming into the new year, i now find myself nibbling at longs and looking for a bounce.the thing is, over the last couple of years after every pullback i sold the bounce and then painfully got stopped out as we got V bounces every single time!
I am sure there are others like me in a similar situation who after getting squeezed a zillion times find themselves playing a bounce-would be funny if it just went straight down! but guess that's trading....
at least nailed some FANG shorts..

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Anonymous
admin
January 14, 2016 at 2:34 PM ×

rofl @ US open

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Anonymous
admin
January 14, 2016 at 3:02 PM ×

On behalf of the HFT community we would like to thank you for donating us your stops.

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Macro Man
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January 14, 2016 at 3:29 PM ×

FWIW, the blog-o-meter is going ballistic today. Already a record number of page views since I switched to the current tracking counter in late August. Granted, there was a link on the FT website today, but it's hardly the first time that's happened. Not necessarily a definitive sign of a bottom/reversal, but it does tell you there is a lot of stress out there attracting a lot of rubber-neckers.

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Anonymous
admin
January 14, 2016 at 3:37 PM ×

As you will all have seen the bottom is in. Now LB's face-ripping rally is underway.

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Anonymous
admin
January 14, 2016 at 3:41 PM ×

You down with PPT? *yeah, you know me*
You down with PPT? *yeah, you know me*
Who down with PPT? *every last homie..."

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Anonymous
admin
January 14, 2016 at 3:44 PM ×

Even Abby is back in the news:

The plunge in U.S. stock markets are an “emotional response” obscuring expansion in both the American economy and corporate profits, said Abby Joseph Cohen, of Goldman Sachs.

“What is happening is really very much an emotional response. We need to put things into perspective. Stocks are probably the best place to be. The fair value for the S&P500 is 2,100", Cohen said.

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Macro Man
admin
January 14, 2016 at 3:44 PM ×

That was a great tune from "Stopped-out by Nature"

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Polemic
admin
January 14, 2016 at 3:54 PM ×

MM - Yes top listed today on FT Alphaville's further reading. Always helps. Good indicator and well reffed.
I m beginning to think they are using that power ball lotto drawing machine for setting SPX prices

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Anonymous
admin
January 14, 2016 at 3:55 PM ×

Pct off high for recent IPOs:
FUEL -96%
GRPO -88%
FEYE -84%
ETSY -80%
TWTR -77%
LC -72%
GLBL -69%
SHAK -67%
FIT - 65%
BOX -58%
APIC -53%

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Nico G
admin
January 14, 2016 at 4:10 PM ×

like the flight of the concords used to say

it's business time

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Anonymous
admin
January 14, 2016 at 4:19 PM ×

Time magazine cover inidcator ?

http://time.com/magazine/europe/

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Nico G
admin
January 14, 2016 at 4:22 PM ×

Estoxx has matched the AUGUST low to the tick this morning. OK one tick lower actually

while SPX prints 1879 vs. 1814 August low another case on why you shouldn't spread Europe vs. US

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Anonymous
admin
January 14, 2016 at 4:30 PM ×

Oil and SPY made day highs in the same minute. Quelle surprise.

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Anonymous
admin
January 14, 2016 at 4:44 PM ×

Nico ... any chance you could explain for a simple punter like me what you mean by "you shouldn't spread Europe vs. US" ? Thanks in advance ...

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Inflection
admin
January 14, 2016 at 5:10 PM ×

it is a cheap soundbite from nico

all of the Stoxx underperformance came in Aug/Sept during the throws of VW-gate

stoxx has actually outperformed S&P since late Sept

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Nico G
admin
January 14, 2016 at 5:34 PM ×

from August 3% underperformance, from late September outperformance if you say so, from March 2009 horrid underperformance so what is your point. It is just a matter to timing and it fails more often than not because you will never adjust your delta to European beta

i am not here to sell anything Inflection, just trying to help. And as i doubt that you are trading at all those days when it takes so much balls, respect the ones who do and still take time to bring input to this forum and shut the fuck up

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Nico G
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January 14, 2016 at 5:39 PM ×

Anon 444

there is no mean reversion for such spread. And if your timeframe is more than a few days you need to hedge currency constantly. You also need to measure European beta on such timeframe and hedge accordingly i.e. you will need LESS Europe than US exposure (this is what i mean by delta). All in all you might get lucky, but in the end such spreads, like all the long/short game on single stocks are still directional bets on the market, the words 'market neutral' are the most dangerous in investing.

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Anonymous
admin
January 14, 2016 at 5:44 PM ×

nico spare us your diatribe, please. oh and maybe leave the 'it takes balls to trade', nonsense at the door. you're sounding like someone with a gambling fix, not a professional trader.

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Nico G
admin
January 14, 2016 at 6:03 PM ×

Anon 544

there is no diatribe there is only testosterone. You need that to trade.

in your view the 'kevlar' punts of some seasoned traders here are more dignified than 'gambling'? It is not about how much science you claim to bring forth to justified a given trade. I have a phd in Actuarial sciences and wrote a thesis on probably the most complicated derivatives ever designed (back in 1996) and could bore you to death on why i am buying this and selling that. To me the poncy jargon in most forum is pure show off. I like it to keep it simple in my posts which might make it sound like gambling to you

everytime you try to pick an entry in a free falling market you always gamble to some extent. Polemic, LB and so many others are all gamblers... with the edge of their own experience (read track record <-> confidence)

anyway im in a good mood so allow me t elaborate further for anon 444

to give you an idea on 'delta' headache as far as i can remember those last 10 years the minimum 'Europe' you could get you for your bucks is 1.7 (to be measured on a bloomy graph)

i.e. at the minimum of European underperformance with the currency cross of that day in notional term 1 Spoo equalled 1.7 Eurostoxx future

today it is close to THREE

so reasoning at the extremes if you held your spread for many years without hedging currencies and without hedging what we will call a 'tail' resulting from ongoing underperfomance of Europe, you would end up being short almost TWICE the notional needed on your outperforming leg.

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Nico G
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January 14, 2016 at 6:05 PM ×

meaning you end up too short the leg outperforming against you.

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washedup
admin
January 14, 2016 at 6:07 PM ×

"you're sounding like someone with a gambling fix, not a professional trader"

oh dear, another one of those beginning punters who think there is an actual difference because they read samuelson in econ 101. How adorable.

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Leftback
admin
January 14, 2016 at 6:09 PM ×

Now now, children, play nicely or Uncle MM will have to take your posting privileges away. Wish the Anons would simply use a handle so we can tell which anon has been tearing us a new asshole. In any case, we wish the gloating Anons all the best, especially if they didn't cover yesterday (I am sure B in T did). Your welfare is obviously important to us.. :-)

Yesterday was an interesting one, the MM Comment-O-Meter was off the hook, yo, which as MM pointed out has been a major indicator of short-term lows and market turns for some time. The LB-Abuse-O-Meter and Gloating Anons Index were also reading at levels we haven't seen since 10y kissed 4% in 2010 and LB went long TLT to howls of derision. Just sayin'...... In this case the trade everyone thinks is mental is long XLE, where of course everyone and their Uncle has been short.

LB's trades du jour are XLE calls and TLT puts. Yesterday's action was indeed feckin U-G-L-Y, but the morning has delivered a more sober view of the market to many participants. Late in the afternoon we were tempted to post this again but we were watching the match. It's a tune we have brought out many times on fairly desperate liquidation days. "When the Demon is at your door, in the Morning he won't be there, no more..."

Any Major Dude

As several observers pointed out here, yesterday was an odd one. FX didn't budge, rates didn't exactly explode to the down side, and it was a classic case of Correlation Breakdown. Regular readers will know that FX/equity correlation breakdowns often signify market turns and/or FX regime change. It would certainly be fun to go back to USD down/EEM up, for example. That's the kind of crap we can trade. Today we see USDJPY firmer but that old standby AUDUSD is in lock step with equities. Overall we are much more comfortable with what we are seeing today, and yes we do think a face-ripper is lurking out there.

In any case, we'll let DInah Washington bring the song of the day to all readers of MM.

What A Difference A Day Makes

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Macro Man
admin
January 14, 2016 at 6:12 PM ×

Guys, disagreements are allowed nay encouraged, but please try to keep it civil. Thanks.

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Anonymous
admin
January 14, 2016 at 6:12 PM ×

Anon 5:44, a young "professional trader", perhaps? 25 year old quant and Econ PhD who recently learned to shave?

Listen, Snowflake. We are all f*cking gamblers here, that's why market participants are referred to as "Punters".
Now, Look and Learn!

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Anonymous
admin
January 14, 2016 at 7:05 PM ×

@Anon 4:44 on the "you shouldn't spread Europe US". Nico's logic is spot on. However, if you're a simple simple punter, he means buy one and sell the other e.g. Buy Eurostoxx and sell Emini.

You could be buying Europe for ECB QE and selling US for FED tightening. Sounds simple but it can hurt big time, as explained by Nico.

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Anonymous
admin
January 14, 2016 at 7:07 PM ×

Nico ... thanks very much for your response and all your commentary over the months & years. I for one have always enjoyed reading your missives/views, and really don't understand why you get an inordinate amount of grief from some of the punters out there. In this business there is ALWAYS a difference of opinion, but that is precisely why I come to MM's superb blog ... to learn and learn! Anon444

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Anonymous
admin
January 14, 2016 at 7:17 PM ×

Well Nico is a contrarian, which means if he is right, he wins big. Of course it might mean that he was wrong many times before.

But he has been correct more than anytime since last year. So it says something about this market.

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Leftback
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January 14, 2016 at 7:25 PM ×

It's less Pear-Shaped today, and more V-Shaped.

It's important to watch the action in these retracements. Although a vicious squeeze of the face ripper type can be amusing to market participants and profitable to many such as ourselves who enjoy these things, it is a fact that a monstrous 3% ripsnorter in Spoos is not a mark of a healthy market, but a characteristic of highly volatile bear markets, a fact pointed out by Barry Ritholtz among others in 2008. So if we see a 1.5-2% up move today that might say "V-shaped recovery", but a 3.0-3.5% rip might send a different message that would confirm that this market has adopted more bearish characteristics.

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Anonymous
admin
January 14, 2016 at 7:40 PM ×

Ditto.

Nico - MUCH respect.

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CV
admin
January 14, 2016 at 7:48 PM ×

Well, good to see that we're all getting along now. Bandages are being applied slowly but gently up here, and we await the "follow-through" in Europe tomorrow with some, erm, anticipation.

"It is a fact that a monstrous 3% ripsnorter in Spoos is not a mark of a healthy market, but a characteristic of highly volatile bear markets, a fact pointed out by Barry Ritholtz among others in 2008. "

Well yes, that is the point isn't. I mean, I think we all agree that oil puts on its running shoes here, the whole risk asset complex could have a mighty fine Q1 in the end. But is it a rally to be sold/reduced into? Inquiring minds want to know.

Of course, I have my eye firmly on the U.S. 5Y here and as long as that sits in a range, I will remain in the mindset that the path of least resistance is choppily up. Did buy a tad of Rep today ... looking nice for a break and a countermove. Elsewhere, has anyone else noticed that EM has been trading oddly resilient. Suddenly no-one is talking about the turds of turds anymore, now that Spoos have had a date with gravity, funny that ;).

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Anonymous
admin
January 14, 2016 at 7:59 PM ×

The machines were really nasty today with TWTR down to 17.27, now 19.08, GOOGL touching low of 705, now 739... i can go on, but you get the picture. Capitulation.

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Leftback
admin
January 14, 2016 at 8:23 PM ×

It was a classic early puke and capitulation bottom today, followed by a scramble to cash in the winnings ahead of expiration. Now we can only state that this must be very painful to those unwise enough to try to re-establish shorts during the day. We have been waiting a while for this, but we can now state unequivocally that it is definitely COLD STEEL time for Mr Shorty...

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MrBeach
admin
January 14, 2016 at 8:28 PM ×

@LB:

Casino Royale [9s] video: https://www.youtube.com/watch?v=9VaoX6X9l8Y

Thankfully, I am not enduring such pain today. Next week is another story...

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Anonymous
admin
January 14, 2016 at 8:53 PM ×

Dare we stay long over the 3-day holiday weekend after tomorrow's continuing rally?

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AL
admin
January 14, 2016 at 8:55 PM ×

After having moved to benchmark last friday (buying), we have been sitting tight this week watching the events unfold. Key levels are holding so far, but it is probably too early to call the all clear. Today we are reducing the exposure in Nasdaq, while switching into Brasil (unhedged). The resilience in EM has been surprising indeed like the inability of Bunds to move below 0,50% ... Which I find very telling.

On a longer term picture I like to look at the S&P500 monthly chart with 10 and 20 simple moving averages: if things do not change dramatically between here and the end of January we will see a bearish crossover with the monthly close. This will change our strategic setup to a structural and probably significant underweight in equities by selling into the strength which we will hopefully see towards the end of Q1-beginning of Q2 ..... Now, this is the A-Team plan, but I admit that timing can go awfully wrong and it is therefore uncertain and subject to a very close scrutiny.

On FX, I notice that one of MM's darlings (AUDNZD) is carving out a nice chart and looks nice on the long side. I also like short EURNOK, Norges Bank permitting ....

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Leftback
admin
January 14, 2016 at 9:00 PM ×

We are thinking about staying long but slapping on a few hedges for next week's post-expiration trade. Let's see what price action tomorrow brings, but if Price is News, the news is better and the rally was a constructive one and not a textbook bear market rally/squeeze. We'll see.

A monster move up in BP today, that was telegraphed by the stock trading well even amid yesterday's carnage...

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CV
admin
January 14, 2016 at 9:00 PM ×

" like the inability of Bunds to move below 0,50%"

Yes, yes, yes ... another nice one for the punters to chew on. My bet; its going to 1.3%. We just need to father Draghi out of the way next week, and the runway will be clear. It will the FI trade of Q1 I think.

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Corey
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January 14, 2016 at 9:09 PM ×

As Dr. Black Swan says, suppressing volatility only leads to it erupting later on in size. Yet Fed's steady asset base doesn't mean it is necessarily skewed to the downside per se. The fractals look to be expanding to me, everything on a larger scale. Despite it's start, 2016 may end up being a great year for those that know how to trade and a great lesson for those that don't.

Those who've recently gotten hooked on the newcrack going though a bit of withdraw today. Maybe I've lost it but selling that seems to offer an interesting risk/reward. Perhaps too much of a gamble..

GDX getting close to the Maginot line as well.

Bullard right on time. And there are those that say they're out of ammo? Looks like they dont need any at the moment and if they do, a little gee golly I guess we don't need to hike four times, maybe two will do. Take your protein pills and put your helmet on, its going to be a wild year.

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Skyguy
admin
January 14, 2016 at 9:10 PM ×

I dunno. Not a 3% face ripper heading into the close, but TLT seem pretty placid, and HYG/JNK aren't getting a lot of relief. It feels like a relief rally to me. I don't have much conviction in that though, and frankly even if I wanted to short this, I'm not feeling too good about the shorting strategies I'm familiar with. I'm sitting tight for now.

I think I'm sorta positioned like CV, so not taking extreme damage in my risk assets. But it's all red ink, glad to have a green day to take a breath and figure out how I want to hedge this beast.

I hope BnT took profits on his SDS, or at least had a tight trailing stop.

I have a small position in mREIT space, glad I'm not the only one wondering why it was being taken to the woodshed. Thanks to the commenters who pointed out it was likely a sector specific technical (cheap funding) issue.

I don't like being on the wrong side of LB, Pol, and MM at the same time. So I'll shut up now.

Regards,

Skyguy

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Leftback
admin
January 14, 2016 at 11:12 PM ×

No single indicator is perfect, but when several stars are in alignment, one is usually persuaded that a change is imminent. Here is one of many people's favorite contrarian indicators, AA II Bulls:

BULLISH: 17.9%; NEUTRAL: 36.6%; BEARISH: 45.5%

18% Bulls is a fairly extreme reading. Note that the MM Comment-O-Meter peaked yesterday and declined today. In addition, the VIX made a right hand shoulder. LB often likes to buy on this signal, and the rest of the time he wishes he had waited for it...

Since we didn't see blatant evidence that today was a pure squeeze (3-4% up day), we are forced to assume that more than a few participants finally came off the sidelines and entered the fray today on the long side in addition to shorts who covered early.

Overall this looks more like late September than August in terms of fear levels [VIX peaked just above 27]. If that's true, then don't be surprised to see vol fall again for 3 weeks or so, or even longer, perhaps as low as the sub-15 level on $VIX.

The "Bullard Call" I made yesterday was in jest, but sometimes LB is an idiot savant of the markets as many regular readers are aware (the idiot part, anyway). What an unwelcome prospect the Rising Bullard* must have been for Bears at 7am...

*Note to the Management: We should adopt perhaps consider adding the RISING BULLARD to the MM lexicon as a special new form of trading hazard for Mr Shorty, along with COLD STEEL. In English pedestrian streets there are things that come up out of the ground when police/ambulance vehicles have gone through, that are called Rising Bollards. If one happens to be walking along the street unaware when one of these elevates, the results can be quite unfortunate for one's private areas. Recently a friend of LB was unfortunate enough to encounter one of these along Lord Street in Southport while inebriated, and the gentleman has been singing in falsetto for some time as a result.

[We await the use of RISING BULLARD as a post title, and perhaps seeing it picked up by the ink-stained wretches of the pink blog, who love to cherry pick quality jokes from around the blogosphere. Go on, you know you love it.]

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Nick
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January 14, 2016 at 11:29 PM ×

LB, you are one of a kind.

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Macro Man
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January 15, 2016 at 1:55 AM ×

Sorry, "Hollywood" Bullard isn't getting any credit or named for some sort of phenomenon. He is like the novice broker or salesperson who looks at the last 2 weeks' price action and extrapolates it ad infinitum into the future. This is the guy that hosted CNBC in the foyer of the St Louis Fed on a payroll day a few years ago. Dude's a joke.

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Rossco
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January 15, 2016 at 2:57 AM ×

fx in the Asian time zone is remarkably un-fucked up today by recent standards. One suspects that if the vol sellers who've been lurking in their filthy lairs sniff 3 days of carry from a Vix thats been knocking up against 25 on the hourly charts, then they may emerge to earn their ill gotten lucre and give shorters the poker they have so far avoided.

The issue I have with "positioning" for a squeeze though is that its hard to know when to fade it and nigh on impossible (for me) to size appropriately for it. Isn't the higher risk-reward just to play relatives in this environment or scrounge around for upside stops to sell into ?

@Nico - really enjoying your posts of late

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Nico G
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January 15, 2016 at 3:32 AM ×

cheers Ross

i am titillated by the remembrance of January 2008 expiry

market weak all week, they tried to find some footing on expiry day but closed at week low

then came Kerviel week end and THAT open on Martin Luther King Monday... while Bernanke was busy grilling sausages and not answering phone calls, SocGen absolutely nuked European indices and sent Globex spoos limit down

that 1250 on spoos was such a pivot for so long

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