We came so close. Every trick in the bag was pulled to run stops and get the momos to take us into virgin territory for retail investors following the Dow. Think of the headlines on the news tonight… But alas, we will have to wait for tomorrow’s POMO to see if it comes then. From the moment voting began, equities rolled over and as the slide picked up speed so did volume and trade size. We noted that Bonds and FX markets were largely unimpressed by equity’s lurch for the highs, and sure enough, stocks rotated lower into the close but still green for the month of February (just to ensure the headlines remain positive). S&P futures dropped 1% off their highs into the close and the deadbeat volume of the dribble higher surged above average. Treasuries ended the day -2bps (-8bps on the week so far) with 10Y back under 1.90%; the USD rallied as JPY and EUR weakened taking DXY up 0.6% on the week; VIX’s bearish divergence from yesterday seemed prescient as it snapped higher to 15.5% on the day suggesting caution was high into the close.
S&P 500 futures… paused at VWAP then the real selling began…
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It seems since the Italian election that the markets have diverged…
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The top-tick in S&P futures coincided with the under-side of the up-trend channel from the last three months…
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VIX was not playing along with stocks today…
and nor were bonds… Equities collapse recoupled them with Gold post Italy but bonds remain far less enamored still…
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or FX.. (as EUR and JPY weakness led the USD higher)…
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After adjusting Capital Context’s CONTEXT model (of broad risk-asset perspective) for the disconnect yesterday, it was clear that once again today was another ‘disconnect’ day but the collapse into the close snapped equities back towards reality… over the two days we are still 25 points rich in ES to CONTEXT…
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