Remember January’s “Goldilocks” market?
Well it’s gone…
The Short-Vol trade implosion has now spread to the rest of the world and all other asset classes.
China had one of its ugliest weeks ever…
Europe was ugly…
But US equities were a bloodbath…even wuith the sudden mysterious buyer of last resort who panic-bid stocks up (after the S&P broke below its 200DMA)…
We’ve seen this pattern before.
Dow futures were lifted 1000 points off the lows today…
Also of note is that this panic-bid lifted the major equities out of correction…
Stocks were on target for their worst week for US equities since Lehman in Oct 2008… (worst 2-week drop since Feb 2009)
But after the S&P hit its 200DMA, everything bounced miraculously…
All major indices remain red in 2018…
The Dow saw well over 12,000 points worth of intraday swings this week…
This the worst swing in momentum… ever…
And the biggest swing in equity flows ever…record inflow 2 weeks ago to record outflow from equity funds this week
VIX was notably higher on the week…
Tagging 40 today before dumping…
Risk started to spread to other asset classes too…
The biggest drawdowns so far:
- XIV (Inverse VIX ETF) -96.5%
- Bitcoin -65% (from Jan highs)
- China ‘Big Caps’ SSE50 -15%
- Shanghai Composite -14.6%
- EM Stocks -13.5%
- WTI Crude -12.9%
- Nikkei 225 -12.6%
- Dow -12.2%
- S&P -11.8%
- Nasdaq -11.7%
- DAX -11.6%
- FANG Stocks -11.1%
- EM Debt -9.9%
- EU Stocks (BE500) -8.7%
- Mexico Stocks -8.1%
- 30Y UST Futures -7.7%
- Brazilian Real -6.3%
- Risk Parity Fund proxy -6.2%
- HY Bonds (HYG) -4.5%
- Gold -4.2%
- Euro -2.5%
- Offshore Yuan -1.9%
This is the worst 10-day drop for aggregate bond and stocks returns since Feb 2009…
Credit markets started to scream today as spreads spiked…
Flashing another big red flag that this is far from over…
Lots of chatter about how “bonds are blowing out” and driving equities lower… well no! only the 30Y is wider on the week! and the short-end is well lower in yield on the week…
The key that is crushing stocks is the 2.85% region…
The Dollar Index was up most in 2 months this week, hovering at pre-Mnuchin Massacre levels…
Some crazy moves this week in Offshore Yuan…
Dollar strength sent commodities lower on the week with crude and copper the biggest laggards…
(NOTE WTI futures were hit every day this week around the US cash open)
WTI dropped below $60 and broke below its 50DMA…
Cryptos actually rebounded notably in the second half of the week after the US regulatory hearings went better than expected, with Litecoin leading…
Interestingly Bitcoin and VIX decoupled as the stress remained in equity markets…
CNBC’s Bob Pisani is “very encouraged” by today’s action.
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