Stocks Slightly Lower into Final Hour on Emerging Markets Debt Angst, Technical Selling, Profit-Taking, Tech/Alt Energy Sector Weakness
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 11.74 +2.98%
- Euro/Yen Carry Return Index 145.40 +.41%
- Emerging Markets Currency Volatility(VXY) 7.09 +3.05%
- S&P 500 Implied Correlation 55.38 +.20%
- ISE Sentiment Index 98.0 -2.0%
- Total Put/Call .67 -25.26%
Credit Investor Angst:
- North American Investment Grade CDS Index 62.27 +.39%
- European Financial Sector CDS Index 72.05 -1.01%
- Western Europe Sovereign Debt CDS Index 35.15 +.86%
- Asia Pacific Sovereign Debt CDS Index 78.50 -.38%
- Emerging Market CDS Index 250.76 +1.52%
- China Blended Corporate Spread Index 326.27 -.83%
- 2-Year Swap Spread 13.50 -.5 basis point
- TED Spread 20.25 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -9.25 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 214.0 +4.0 basis points
- China Import Iron Ore Spot $92.10/Metric Tonne +.33%
- Citi US Economic Surprise Index-3.20 +1.6 points
- Citi Emerging Markets Economic Surprise Index -22.10 -1.7 points
- 10-Year TIPS Spread 2.20 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +122 open in Japan
- DAX Futures: Indicating +2 open in Germany
Portfolio:
- Slightly Lower: On losses in my emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
1 comment:
Monday June 2, 2014, marked an inflection point in world economic history, as Credit Investments traded lower, as currency traders sold the Japanese the Japanese Yen, on realization of The Failure Of Abenomics: Domestic Sales Collapse, Inflation Soars, Tyler Durden reports. Investors fear that the monetary policies of the world central banks have crossed the rubicon of sound monetary policy and have made “money good” investments, particularly credit investments, bad; resulting in a strong trade lower in Bonds.
The lower Japanese Yen, FXY, stimulated Nation Investment in Japan, EWJ, JSC, and in Far East Financials, FEFN, to trade higher.
Seeing US Government Debt, that is the US 30 Year Goverment Bonds, EDV, and the US Ten Year Notes, TLT, overvalued, the bond vigilantes called the Interest Rate on the US Ten Year Note, ^TNX, higher above 2.49% to 2.53%, and steepened the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, as is seen in the Steepner ETF, STPP, steepening, and the Flattner ETF, FLAT, flattening.
Risk-on investing turned to risk-off investing. There was a credit market upheaval on June 2, 2014, as the ascending wave of credit that defined the paradigm and age of liberalism reversed. A review of Popular Notes And Bonds, shows Eurozone Credit, EU, Junk Bond, JNK, Global Junk Bonds, HYXU, Longer Duration US Corporate Bonds, LWC, US Corporate Bonds, LQD, International Corporate Bonds, PICB, Emerging Market Local Currency Bonds, EMLC, Emerging Market Bonds, EMB, Mortgage Backed Bonds, MBB, 30 Year US Government Bonds, EDV, US Treasuries, TLT, Municipal Bonds, MUB, and World Government Bonds, BWX, traded lower, on the failure of trust in the world central banks’ monetary authority. Bond Trader Across The Curve posts There was real money selling today and the street had no capacity to absorb it.
The bond vigilantes effected a historic global economic coup d'etat on June 2, 2014, by calling the Interest Rate on the US Ten Year Note, ^TNX, higher above 2.49% to 2.53%. Liberalism’s dynamos of economic activity, creditism, corporatism, and globalism, failed on June 2, 2014, with the result that inflationism has turned to destructionism.
US Government Debt is no longer a safe haven investment. The rally in Bonds, BND, that started in January 2014, cane to an end on June 2, 2014, as the longer duration US Government Debt Debt, EDV, are now starting to sell off faster than the medium duration US Government Debt, TLT, this seen in the ratio of EDV:TLT, trading lower. Bonds, BND, and US Treasuries, TLT, are no longer safe assets.
Credit Investments failed on June 2, 2014, as the Japanese Yen, FXY, traded lower on the failure of Abenomics; confirmation comes from Convertible Securities, CWB, trading lower, and Floating Rate Notes, FLOT, trading lower from its late May 2014 high. Investors no longer trust in the monetary policies of the world central to provide investment gains and stimulate global growth.
Eurozone Credit, EU, traded lower as Zero Hedge posts Here Comes QE In Financial Drag. David Stockman via Contra Corner blog relates the WSJ report The ECB And Bank of England Outline Options to Boost Asset-Backed Securities Market. This as Jenny Cosgrave of CNBC reports Eurozone Manufacturing Growth Slowest In 6 Months
On June 2, 2014, the Inverse Market ETFs, as a group, traded higher; these include XVZ, STPP, EUO, YCS, CMD, DNO, MLPS, SAGG, DTYS, JGBS, GLD, GYEN, GEUR, GGBP, HDGI, YXI, EUM, DOG, SEF, EFZ, DDG, PSQ, REK. These could be used selectively and under wise management to serve as the basis for collateral in a short selling investment strategy.
The sell of the Yen, FXY, on the failure of the Abenomics, as well as strong sell of Junk Bonds, JNK, is a wake up call to stirring investors out of their complacency, that the monetary policies of the world central banks no longer underwrite profitable investment. The short selling opportunity of a lifetime occurred on June 2, 2014.
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