Mom always said there’d be days like this and SO without further set up, we’ll NOT waste time pontificating about how the GOOD data wasn’t so good. Really, we can’t. Better than expected is just that and SO we ask one simple question: WHAT JUST HAPPENED?
From market news a few moments ago:
09:58 09/30 US TSYS/STOCKS: Voracious bid for S&P Eminis comes in, with some eyeing 40,000 such contracts, which would have been in US$2.3B, purchased of E-Minis at 1148, and up, in one minute, accdg. to trader talk. That would back up the earlier asset-allocation talk of selling from bonds going into US stocks, said some observers.
We’d like to see a show of hands as to who exactly is drinking Bob Pisani Kool Aid on TV that would have us all jumping for joy about how September To Remember UP 10% from lows is how we will continue along into the 4th Qtr. Someone – the buyer of the E-Minis – poured himself a big glass of Optimism? There are MANY STORIES GOING AROUND – BUYER OF E-MINIS AND A SELLER (or two) OF 300,000 10yr CONTRACTS… Before getting overly wound UP on a day like today, we thought it might be helpful to remember where we came from – spx and 10s:
(NOTE TO SELF – SPX WERE DOWN ABOUT 8% AUGUST. SO UP 10% SEPT … WAIT … MONROE IS SMOKING NOW … WOULD BE NET UP 2%. RIGHT. PARTY ON, WAYNE)
And now to bore you with where USTs were at the time:
SO about 10bps LOWER in yield than where they are right now – and OH, not for nuthin, that is just about where they were UNTIL WE GOT Chi PMI. Or should we say not WE, but ‘paying’ (?) subscribers TO Chicago PMI data … check the tick chart out for yourself. We’re NOT making this stuff up. (call us for the visual IF you’d like – we’ve already exhausted ourselves trying to understand all the wiggles of the morning).
SO IN CONCLUSION, when WE do the math with the visuals above – which again offer FACT NOT FICTION OR OPINION – we do NOT think for a moment there was (JUST TODAY) a huge switch OUT OF BONDS INTO STOCKS BUT … as they say, anything is possible. Could be some adding TO what looks to be a very good trade? 10s aren ‘t much changed (up about 10bps since ChiPMI) and the trade appears to be working, so … the beat goes on. Can’t help but mention though, as we were DOWN about 8% in August and SO being UP almost 10% in september is GOOD, but … 2 steps FORWARD – one back? Context is ALWAYS important. IF they were doing this ‘allocation’ back in the end of August to what Pisani dubbed the ‘HOPE’ trade, then we say two things. First, HOPE is NOT a strategy and secondly … WELL DONE, for now! Staying tuned.