Forget ‘Rotation’; 2013 Is The Great ‘Risk’ Recoupling So Far

Another day, another epic European close trend reversal (or is it POMO that is driving that odd timing-based shift?). S&P 500 closes at 5-year highs. Today’s ramp was brough to you by the algos that needed to enable high volume exits in AAPL and a Draghi-driven 200pip run in EUR against the USD (as the ECB head basically shut the door on rate cuts anytime soon). VIX slid lower (relatively outperforming stocks) but mid-dated VIX futures actually rose modestly today (to steepest in a year!); high yield credit ETFs tested new highs (but cash never followed) and even that collapsed again at the close; the USD dropped the most in 4 months (even as JPY weakened); and Silver surged (+2% on the week) along with gold (as oil slid in the afternoon). It appears that so far this year risk-assets in general had been less exuberant than stocks – but first Treasury yields, then VIX, and now FX markets (EURJPY today), and increasingly Gold (and Silver) are shifting to catch up to stocks. Today saw equities ramp from the end of POMO on to catch up to EUR-driven risk model perception, with AAPL trading like a penny stock (or HLF). The great recoupling of risk-assets from pre-holidays is almost complete…

New highs made in S&P 500 futures…

As only rates weren’t playing along today – but what was that flash-crash in HYG at the close?

and VIX front-end term structure jumped to its steepest in a year!!

and Internals were down right ugly!!!

The EU Close (or is it POMO-based) trend reversals continue… As a reminder POMO begins at 1015ET and ends around 11ET – few minutes for clean-up and sure enough it appears POMO is back as the trend-reversing driver…

Across broad risk-assets, rates were not totally buying into the risk-on meme (especially in ETF-land) – upper left; but thanks to smash higher in EURJPY, CONTEXT (our proxy for risk assets) led the way today and sure enough stocks followed…

But Gold and Silver are winning on the week (beta 1x and 2x to the USD it seems)…

The USD was slayed today – its biggest drop in over 4 months…even as JPY weakened…

AAPL swung +/-3% testing the 2013′s lows and dump-day VWAPs…

While POMO-based ramps seems unstoppable, the charts below (and the internals above) tend to indicate that there is less and less ammo to drive it as all the major ‘hedge’ assets have been recoupled with equities from prior to the fiscal cliff…

Charts: Bloomberg and Capital Context

The Great Recoupling of Risk Assets…

First Treasuries…

Then VIX (though notably it seems the longer-dated hedges are being piled into…)

Then FX…

Next Gold?