DAX vs SPX: See What I Meant By “Flight To Quality? March 6th Redux

by Dan April 4, 2012 4:24 pm • Commentary

This morning before the open in my MorningWord I suggested that the price action of the March 6th sell off may be fairly instructive for today’s price action.  March 6th had a 2011 feel to it as European equities got worse throughout the day (barely saw an uptick), while the DAX closed on it’s lows down about 3.5%.  Today the DAX also closed on the lows down about 2.84%, also with barely a bounce (chart below).

2 day chart of the DAX from Bloomberg


On March 6th, the SPX closed down about 1.5%, it opened down 1% and then traded down about 2% and then closed 50bps off of the lows.  Unfortunately for my shorts, I had a sneaking suspension that the S&P may show some relative strength today and trade similarly as to the way it did on March 6th.  If u overlayed the SPX chart from the 6th to today you would see a very similar pattern, today we opened down about 90bps went down about 1.4% and then closed down about 1% for the day.

2 day SPX chart from Bloomberg


I have  a striking suspicion that AAPL‘s nearly 1% rally off of its lows of the day today had something to do with the late day relative strength, too bad the DAX doesn’t have any AAPL!

1 Day AAPL chart from Bloomberg


It’s also interesting to note that on March 6th AAPL opened down about 3% only to close down on the day about 50 bps (chart below).

AAPL chart March 5th and 6th 2012 from Bloomberg


Make no mistake about it, today should have gotten a bit sloppy on this side of the pond, and it didn’t which doesn’t come as a huge surprise to me, and a main reason why I didn’t want to press a down opening……Some sectors didn’t show much of a bounce like the banks, with most trading near the lows of the day, while stocks like CAT which have already been down about 9% off its 52 week highs made last month spent most of the day rallying off of it’s morning low to actually close up on the day.

1 day CAT chart from Bloomberg


SO WHAT TO DO NOW?  I want to see Europe bounce a bit tomorrow morning, have SPX up 30 to 50 bps and then try to lay them out from the short side and get a low volume sloppy sell off into a long holiday weekend, so there u have it, that’s the answer key!