The early day surge in stocks and commodities (and sell-off in bonds) managed to get S&P 500 futures up to their 50DMA and the pre-NFP levels (which coincides with Bernanke's Bottom). Volume surged on the way up there and once hit we faded all the way back to VWAP (surprise!) retracing the knee-jerk spike as no news was discounted back out (and equities reverted to where risk-assets in general had been waiting). Commodities followed a similar path up but held on to their gains - especially Gold. Somewhat worryingly (given their dominance in fund holdings) for the market, GOOG and AAPL were both red. Today seemed much more about algos and technicals than about election bets - especially given the somewhat anti-consensus moves early on - and on the basis of that, the fade into the close suggests risk-reduction was the game plan for the big boys, even though we end the day in the green in the major indices. The USD is practically unchanged on the week with stocks and commodities up and TSYs down.
S&P 500 futures knee-jerk ramp followed by leak back to VWAP perfectly
Leaving stocks bouncing down from Bernanke's Bottom once again...
and Financials unchanged since QE3 and Healthcare the only sector in the green...
and early equity exuberance faded bacdk to reality across the rates. volatility, and credit markets...
Bonds and Stocks recoupled from yesterday's divergence but Gold outperformed...
Commodities spiked higher as Europe closed and held those gains...
Treasuries are set to rally if seasonals are anything to by - and the rally is even more impressive in election years (blue) relative to all years (green)...
but as Citi note - the difference between a Democratic victory and Republican victory is notable...
And equity market complacency in the short-term is remarkably high in options land - and we note that VIX options term structure is its flattest in over 15 months - as the front of the curve rises (not back-end dropping) dominated by short-term hedging around the election (VIX near is 19.24%, VIX far is 17.42% - i.e. Inverted)...
It may seem odd to claim today was not a risk-on day - as we are being taught by the mainstream media - but ion the basis of the no volume ramp and higher volume leak back, the technical levels of the peak, the weakness in critical leaders (GOOG and AAPL), and strength in Gold (safety) suggests this was not about any size looking to add - in fact we would argue the spike was much more useful for those looking to exit on size.
As Maria B might say 'off the highs'...
Charts: Bloomberg and Capital Context