As headline-makers from every mainstream media outlet attempt to fit today's spectacle to their cognitive biases, we note the massive surge in volume at the close in ES (the e-mini S&P futures contract). Financials closed at the highs of the day and stocks managed to retrace almost all of yesterday's drop (with seemingly everyone waiting for the ETF-moment at the end to transact?). We noted the disconnect earlier (and potential QE chatter) and while the break between TSYs and the synced USD-down-ES-up was incredible, the 5.5% rally in Silver off its earlier lows was none too shabby as Gold also managed to get back to $1550. Investment Grade credit outperformed high yield and stocks today (not exactly a bullish risk-hungry indication) managing to close tighter than Tuesday's close even as HYG (our trusty high yield bond ETF) shrugged off a little more of its NAV premium and underperformed all afternoon as the equity ebullience struck.
The disconnect continued all afternoon. 10Y TSY yield ended under 1.90% as the dollar sold off (with EURUSD getting back into the green) and stocks at their best levels of the day.
After touching the 200DMA from above yesterday, ES leaked higher overnight - notably back in perfect sync with CONTEXT (our broad risk asset proxy - dark blue in chart). This proxy has seen ES pull higher and then retrace to it over the last two weeks or so but today was different. CONTEXT pushed gently higher all morning until Europe closed and then ES managed to pull up to CONTEXT and traded in sync with risk assets in general all afternoon. This despite the obvious disconnect with TSYs (levels and curves).
HYG was the standout disconnect in the credit space with IG outperforming modestly.
In corporate bonds, we saw short-dated 1-3Y net buying dominating the action as TSY curves flattened significantly (30Y now -16bps from Christmas Eve).
Silver managed a wondrous 5.5% rally off the lows of the day, Oil seems pinned at unch on the week and Gold managed to regain $1550 before closing marginally below it. The rally back in Silver was notable as it reverted the Goild/Silver ratio back to its 'stable' 55x ish level of the last two weeks.
The scale of the moves in DXY are not so clear when judged against the massiv beta of commodities but the bounce-back in FX major vs the USD this afternoon was impressive (though admittedly on low flow). It is notable though that JPY is still the only major to be higher against the USD from the Christmas Eve close. Interesting also that cable (GBPUSD) is the worst performer - disconnecting from EURUSD after the European close today.
Charts: Bloomberg and Capital Context