The S&P Welcomes Janet Yellen With Best Run In Over 2 Years (But Gold Leads)

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For only the 5th time in the last 25 years, the S&P closed up over 1% on Humphrey-Hawkins testimony day. Today's screamfest seems all about a growing "common knowledge" that the economy is weaker than everyone hoped and Yellen will untaper as soon as possible (despite her saying the absolute opposite of that). Stocks surged (S&P's best 4-day run in over 2 years); Credit spreads collapsed. Gold soared to 3-month highs (+5% from Taper). The USD roller-coastered notably on JPY & EUR weakness. While bonds sold off (not un-tapery) the move was very modest (and bond yields have dislocated notably from stocks). Of course, USDJPY was in charge keeping the S&P over 1,800; and Nasdaq in the green year-to-date - Mission Accomplished (but Dow lost 16k into the close). A massive squeeze of shorts in the last few days has doubled the market's impressive performance. VIX tested down to almost 14%. Why not BTFATH, Yellen said there was no bubble so we are good to go?

Fun-durr-mentals - USDJPY provided the crucial momentum ignition three times and finally stocks caught on and searched for technical levels to find stops... notably EM FX did not play after Europe closed

The S&P saw almost its best 4-day swing from low-to-high since December 2011!!

And the Nasdaq is now up 0.5% in 2014...

But Healthcare and Utilities are the biggest winners snce the taper... (as discretionary managed to pull back up to unchanged)...

Stocks and bonds recoupled intraday as taper vs un-taper correlations broke down notably - the last 2 days have seen 5s30s flatten 5bps - thebiggest drop in 3 weeks

But Stocks decoupled from bonds (and macro data) as bad news is great news for stocks once again...

Of course, the "smash your fucking face in" rally in the "most shorted" stocks of the last few days provided the ammunition...

Gold has been on a tear - up 7 of the last 8 days and back up to 3-month highs...

and gold remains the winner since the taper (+4.9%)

The USD had a rollercoaster day - a big surge on the Yellen testimony release at 830, then recovery as she started speaking at 10, and it just went higher as Janet kept talking (so now we get USD strength on an un-taper?? - looks like JPY and EUR weakness were in charge)

Given today's performance (and the last few days) perhaps Axel Merk's cartoon sums it all up (despite the actual words on staying the course from the dovish Yellen)...

Charts: Bloomberg

Bonus Chart: Who was the consistent 15,000 contract e-mini S&P 500 futures (that's $1.35 billion notional) buyer that kept propping up the market every time we faded? (h/t AY!)

Bonus Bonus Chart: There has been a number of comments today about DeMark's 1929 Analog...oh the bravado whan the market rallies - but - as the following two charts show, it is worryingly playing out exactly as it did before with the last few days' surge marking a bounce top...

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Japan Machine Orders Crumble At Fastest Pace In 22 Years As BOJ Board Member Warns More QE May Not Be Coming

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If you needed another reason to buy stocks, trust in the growth meme, and have your faith in Abenomics confirmed... look away. Japanese Machine orders for December just printed -15.7% in December - the biggest MoM plunge since 1992. This is the biggest miss to expectations since 2006 and what is considerably more problematic for Abe et al. is that YoY expectations of a core machine order rise of 17.4% was hopelessly missed with a small 6.7% gain (and this is data that excludes more volatile orders).

As Bloomberg notes, core machine orders are an indicator of future capital expenditure and it seems, just as in the US, that thanks to "stocks" now being considered central bank policy tools that capex no longer means productive capital use... it means buybacks, dividends, and shareholder recaps in any which way we can. How was the weather in Japan in December?

But while collapsing machine orders are "completely irrelevant", even if a plunge of this magnitude usually portends a recession, what should be far more troubling to the Kool aid addicts is if the BOJ were to announce that just like the Fed, it too is tapering its Open-ended QE ambitions. Considering this is precisely what BOJ board member Kiuchi just did, that relentless USDJPY meltup overnight may not be such a slamdunk.

From Market News...

Bank of Japan board member Takahide Kiuchi, who is against a rigid two-year timeframe for achieving 2% inflation, said side-effects of an additional easing would be bigger than its positive effects if the economy were deviating only slightly downward from the BOJ's recovery scenario, the Nikkei reported. Kiuchi, a former Nomura Securities economist, told the daily in an interview that it is difficult to predict how much a further easing would push up consumer prices, and that wages should rise in line with price gains.

He also said the BOJ "should make a cautious decision as to whether to continue or scale back" the current aggressive easing at the end of the target period to hit stable 2% inflation in about two years from April 2013.

No Panic yet but JPY and NKY are fading...

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