AuthorTopic: Big Slide v2.0 Begins  (Read 118607 times)

Offline Palloy2

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Re: Big Slide v2.0 Begins
« Reply #375 on: February 05, 2018, 03:52:31 PM »
<a href="http://www.youtube.com/v/LCnebZnysmI" target="_blank" class="new_win">http://www.youtube.com/v/LCnebZnysmI</a>
"The State is a body of armed men."

Offline Palloy2

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Re: Big Slide v2.0 Begins
« Reply #376 on: February 05, 2018, 05:26:38 PM »
(Part of) https://www.peakprosperity.com/blog/113727/what-crypto-crash-stock-market-plunge-common
Did The Stock Market Bubble Just "Pop"?
Adam Taggart
February 5, 2018

Despite the extreme drop in the stock market over the past two days, any sort of material bubble retracement has yet to begin -- which should give you an appreciation of how overstretched its current valuation is.

Look at this chart of the S&P 500 index. Today's height dwarfs those of the previous two bubbles the index has experienced this century.

The period from 2017 on sure looks like the acceleration seen during a blow-off top. If indeed so, does the 6% drop we've just seen over the past two trading days signify the turning point has now arrived?



Crazily, the carnage we've seen in the stock market over the past two days is just barely visible in this chart. If indeed the top is in and we begin retracing the classic bubble curve, the absolute value of the losses that will ensue will be gargantuan.

If the S&P only retraces down to the HIGHS of its previous two bubbles (around 1,500), it would need to fall over 43% from where it just closed today. And history suggests a full retracement would put the index closer to 750-1,000 -- at least two-thirds lower than its current valuation.
How Spooked Is The Herd?

As a reminder, bubbles are psychological phenomena. They are created when perception clouds judgment to the point where it concludes "Fundamentals don't matter".

And they don't. At least, not while the mania phase is playing out.

But once the last manic buyer (the "greatest" fool) has joined the party, there's no one left to dupe. And as the meteoric price increase stops and then reverses, the herd becomes increasingly skittish until a full-blown stampede occurs.

We've been watching that stampede happen in the crypto space over the past 4 weeks. We may have just seen it start in the stock markets.

How much farther may prices fall from here? And how quickly?

History gives us a good guide for estimating, as we've done above. But the actual trajectory will be determined by how spooked the herd is.

For a market that has known no fear for nearly eight years now, a little panic can quickly escalate to an out-of-control selling frenzy.

Want proof? We saw it late today in the complete collapse in XIV, the inverse-VIX ETF that has been one of Wall Street's most crowded trades of late. It lost over 90% of its value at the market close:



The repercussions of this are going send seismic shockwaves through the markets as a tsnaumi of margin calls erupts. A cascading wave of sell-orders that pushes the market further into the red at an accelerating pace from here is a real possibility that can not be dismissed at this point.

Those concerned about what may happen next should read our premium report Is This It? issued over the past weekend.

In it, we examine the congregating perfect storm of crash triggers -- rising interest rates, a fast-weakening dollar, a sudden return of volatility to the markets after a decade of absence, rising oil prices -- and calculate whether the S&P's sudden 6% rout is the start of a 2008-style market melt-down (or worse).

Make no mistake: these are sick, distorted, deformed and liquidity-addicted bubble markets. They've gotten entirely too dependent on continued largess from the central banks.

That is now ending.

After so many years of such extreme market manipulation finally gives way, the coming losses will be staggeringly enormous.

"The State is a body of armed men."

Offline RE

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Re: Big Slide v2.0 Begins
« Reply #377 on: February 05, 2018, 06:16:51 PM »
The Titanic is Going Down!

<a href="http://www.youtube.com/v/tTJhOHXxa6w" target="_blank" class="new_win">http://www.youtube.com/v/tTJhOHXxa6w</a>

RE
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Offline RE

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"The Vol Market Finally Broke": A Quant Explains What Happened Today, And What I
« Reply #378 on: February 05, 2018, 06:48:41 PM »
https://www.zerohedge.com/news/2018-02-05/vol-market-finally-broke-quant-explains-what-happened-today-and-what-coming

"The Vol Market Finally Broke": A Quant Explains What Happened Today, And What Is Coming Tomorrow

by Tyler Durden
Mon, 02/05/2018 - 21:14


By Charlie McElligott, managing director of cross-asset strategy at Nomura.

Fade to Black

The “grey swan” we all have spoken about for years—that being the absurd “tail wagging the dog” potential of VIX ETN market structure (inverse and leveraged products) AND the massive growth in “negative convexity” / “vol target” / “vol rebalancing” strategies to either generate extra income or “systematically allocate risk” (looks good in the prospectus, right?!) –finally “broke” the volatility market, and has now bled-through to the “underlying” spot equities market…as the short vol trade went “lights out.”

The ETNs are the “patient zero” of this current market meltdown.  It is estimated that there was anywhere from ~$125mm to $200mm of vega / VIX futs to BUY on the close from the two main “short VIX” ETNs that rebalance daily (XIV and SVXY).  As S&P traded -50 handles AFTER the cash close from 4:00pm to 4:15pm into the market’s anticipation of the massive rebalancing of volatility (buy to cover) on the close, XIV then saw a delayed and terrifying ~-87 PERCENT move after the close, as some who owned XIV puts as crash protection sniffed this potential and speculated liquidation from the ETN, which is set per a rules-based system to buy back short vega after an 80% “crash trigger”(which again isn’t a certainty because they use a blend of 1st and 2nd month).  The asset pool nonetheless was seemingly / largely wiped-out and the note is guaranteed to “pay out” to their shareholders as set per their prospectus.  It is likely that this thing has indeed been “triggered” and will be forced to liquidate.  SVXY doesn’t have the firm 80% “trigger” but too is seeing its NAV “wiped out” and is trading ~-80% post-close as well.

The issue NOW is the pile-on going-forward across assets, as the systematic “short vol” community’s models are now completely toast, and they too will be forced to cover remaining “short vol” positions that didn’t trade today—i.e. BE PREPARED FOR A MAJOR VIX FOLLOW-THROUGH TOMORROW.

VaR-based models need to be reset across all asset-class strategies, forcing further de-risking over the coming days and potentially weeks, as heads of funds and heads of risk try to figure out how much their models are forcing them to “gross-down.”  Shorter-term vol target / vol allocation strategies (think CTAs) and longer-term models like risk-parity and too will reset and “rebalance” their risk (lower) as realized vols are re-priced.  Structured products, annuities and other vehicles with built-in protection?  Also purging exposure on the vol reset.  Finally, it also shouldn’t be lost on the popularity of “short VIX” trades in the retail community, and the “butterfly flapping its wings” relationship to the recent melt-down in the crypto-currency space.

The “white knight” of corporate buybacks (which by the way were running at 300% of volume today per a competitor as they were pumping the mandates to hold-up their stocks) will be extraordinarily tested with keeping the stock-market “propped up,” especially as the traditional active community is likely to back-away until there is a better sense on how this event shakes out… few will willingly be in there tomorrow prepared to catch this falling knife.

Cross-asset, the trickle-down of unwinds is clearly a focal point from here.  As noted two weeks back in the “Nomura Cross-Asset” piece, I’ve been focusing on the “risk” of positioning asymmetries with consensual “bearish rates” / “flattener” and “short USD” trades primarily, but too, crowded thematic equities position tied to the rates and USD trades (i.e. “long momentum” / “long tech / growth”). 

As such, the +7 Z-SCORE (relative to 90d move) today in the UST 2Y/ mongo bull-steepening seen in 5s30s (+7bps today, +17bps since Thursday) raises a “pain trade” red flag.  Single-stock equities clearly took a hit on the back of the index moves, as thematic trades like “long US high beta”--which was +8.1% YTD on Jan 26th—are now -1.5% YTD after trading down -7.1% the past two sessions alone.  The six-day move in US momentum longs has been -4 standard deviations (across all returns dating back to April ’13), only previously experienced during the “Flash Crash.”

My model equity L/S portfolio experienced its worst day since the early Feb ’16 market-neutral unwind which occurred during the “great deflation scare.”  Net / net, it wasn’t pretty out there.

Buckle-up, because this move isn’t over yet.
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Offline Eddie

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Re: Big Slide v2.0 Begins
« Reply #379 on: February 05, 2018, 08:35:47 PM »
I knew sooner or later all the sooper geniuses trying to short the VIX were gonna get burned. It worked until it didn't.

Tomorrow, or possibly Wednesday will likely be an intermediate cycle bottom in the stock market.

You heard it here first. Sorry, but the Stockapocalypse is not about to happen. Buy Kohls, or better yet MEDFF.


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Offline K-Dog

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Re: Big Slide v2.0 Begins
« Reply #380 on: February 05, 2018, 09:17:21 PM »
I knew sooner or later all the sooper geniuses trying to short the VIX were gonna get burned. It worked until it didn't.

Tomorrow, or possibly Wednesday will likely be an intermediate cycle bottom in the stock market.

You heard it here first. Sorry, but the Stockapocalypse is not about to happen. Buy Kohls, or better yet MEDFF.

Could be that corrections will happen which don't result in an out-right crash but steadily erode assets over time.  That or we crash and burn.
Under ideal conditions of temperature and pressure the organism will grow without limit.

Offline RE

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Re: Big Slide v2.0 Begins
« Reply #381 on: February 05, 2018, 09:41:23 PM »
I knew sooner or later all the sooper geniuses trying to short the VIX were gonna get burned. It worked until it didn't.

Tomorrow, or possibly Wednesday will likely be an intermediate cycle bottom in the stock market.

You heard it here first. Sorry, but the Stockapocalypse is not about to happen. Buy Kohls, or better yet MEDFF.

I don't think we have hit bottom yet.  I'll wait a bit before I BTFD.  How are your pot stocks doing?

RE
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Offline Palloy2

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Re: Big Slide v2.0 Begins
« Reply #382 on: February 05, 2018, 09:42:47 PM »
Quote
Eddie: the Stockapocalypse is not about to happen.

Are the Fundamentals sound?
Is Apple really worth  796 billion dollars?
Is NetFlix really worth a P/E of 203.41?
"The State is a body of armed men."

Offline RE

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💲 Dow futures point to a more than 1,200-point fall at the open
« Reply #383 on: February 06, 2018, 12:21:00 AM »
As I said, it's not OVAH yet.

Here they come to sell 'em again!

RE

https://www.cnbc.com/2018/02/05/sell-off-continues-after-hours--sp-500-futures-now-down-6-percent-on-the-day.html

Dow futures point to a more than 1,200-point fall at the open
Patti Domm   | @pattidomm
Published 8 Hours Ago Updated 1 Hour Ago CNBC.com


Bob Pisani
So what happens next? 
3 Hours Ago | 01:58

Stocks looked set for another rocky opening and a volatile trading day Tuesday.

Stock futures slid into negative territory in Monday evening trade: Dow futures were down 826 points, and S&P 500 futures were lower by 76.5 points as of 11:25 p.m. ET.

The implied open for the Dow, based on futures, was a decline of 1,203.75.

Futures are volatile and late night prices may look far different from stocks at the opening bell.

The S&P 500 was down 113 points, or 4.1 percent Monday in its worst day since August, 2011. The futures, which typically match the spot market's decline, fell even more in the earlier session, off by 5.3 percent.

The cash S&P 500, which closed at 2,648, touched 2,638 in afternoon trading, and that is the level traders are watching to see if it can act as support or signal more selling.

Scott Redler, partner with T3Live.com, said the best set up for the market would be a down open, and then a reversal on large volume. "That could create a 'turnaround Tuesday' which would relieve some pressure," he said.

"It's too early to say the highs of the year is in. But it's also too early to say a 10 percent corrective move off the highs will be enough," said Redler, in a note.

A major source of pressure for stocks in the past week has been the bond market, where yields have been spiking with higher inflation expectations. That triggered speculation that the Fed could raise interest rates more than the three times it forecast for this year.

But Treasurys reversed sharply Monday, with morning selling giving way to buying by investors worried about the sharp drop in stock prices. In an unusual and stunning turnaround, the bench mark 10-year Treasury yield plummeted to 2.70 percent from a four-year high of 2.88 percent reached in morning trading. Yields move opposite price.

"That to me felt algorithmic and a pairing between equity futures and Treasury futures. It seemed technical in nature," said George Goncalves, head of fixed income strategy at Nomura. Goncalves said initially there was only buying at the short end, like 2-year notes.

"The rate market went from being the culprit, to the place for a flight to quality rather quickly. For the next couple of days, the auctions are going to be important to watch. If there's continued pressure in the equity space, money will continue to move into fixed income," he said.

Goncalves said the government's auctions of 3-year, 10-year and 30-year bonds will be important this week. He said the $26 billion auction of 3-year notes should do well Tuesday.

"The irony of it is [stocks] were getting nervous around higher rates, and it quickly got undone. It does show you the ultimate pin prick to any sort of bubble would be rates," Goncalves said.

As yields came down, so did market expectations for a Fed rate hike with the market less convinced the Fed will raise interest rates three times this year.

Fed chair Jerome Powell was sworn in to head the Fed Monday, with a more than 1,100 point Dow drop on his first day of work. He is not alone in seeing a decline on his first day. The S&P 500 fell more than 2 percent when Ben Bernanke started at the Fed, and it dropped almost 1 percent for Janet Yellen.

Michael O'Rourke, chief market strategist at JonesTrading, said he expects stocks to be highly volatile Tuesday. He said the sharp selloff in ETFs that short volatility could have ripple effects in the stock market since holders have been forced to liquidate.

"They're liquidating their positions after hours," he said. The VIX, the Cboe's volatility index, jumped 117 percent to 37.32. The XIV, VelocityShares Daily Inverse VIX Short-Term ETN, which shorts the VIX, was down 85 percent in late trading, and investors who shorted the VXX, the Barclays Bank iPath S&P 500 VIX Short Term Futures, were being squeezed.
« Last Edit: February 06, 2018, 12:29:12 AM by RE »
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Offline Eddie

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Re: Big Slide v2.0 Begins
« Reply #384 on: February 06, 2018, 05:31:19 AM »
A gap down this morning followed by a close above that level will signal the bottom.

No, of course fundamentals are lacking. They always are in the stages leading up to blow-off tops. After this correction, the stock market will really shift into parabolic mode.

Did you notice we didn't break the prior top on the 10 year yield yesterday? Instead, it took a breather, even though Uncle Buck was still headed north (for the moment). Today, most likely, we'll see one more surge, right up to 3.03%....but chances are that's it, at least for now.

Today is the best buying opportunity of the year, most likely. Unfortunately I'm out of powder already.

I had a green day yesterday in pot stocks, but I expect to see some more red today.
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Offline Palloy2

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Re: Big Slide v2.0 Begins
« Reply #385 on: February 06, 2018, 06:22:22 AM »
Markets in Asia fell, markets in Europe are falling, so markets in US will fall in a few hours.  Those who have margin calls will have to sell, and the only buyers will be rusted on BTFD-ers like you, who sees the stock market going parabolic on the way to its final top as a splendid buying opportunity.

I don't see the point of posting red flag-waving articles if you are just going to ignore them.  We are close enough to the top (I think it will prove to have been Jan 27) for you to move gracefully onto the sidelines while this chaos plays out, and the lights go off.
"The State is a body of armed men."

Offline RE

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Re: Big Slide v2.0 Begins
« Reply #386 on: February 06, 2018, 06:44:04 AM »
I don't see the point of posting red flag-waving articles if you are just going to ignore them.

:hi: to the club.  Eddie ignores my advice all the time also.

RE
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Offline Eddie

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Re: Big Slide v2.0 Begins
« Reply #387 on: February 06, 2018, 06:44:28 AM »
If 10 year UST's break much above 3.03 (other than an intraday spike) then I will change my thinking. I've been listening to people call tops for years now. We shall see.

I do appreciate your concern. I am not stupid, believe it or not. If I am wrong, I will indeed step out on the first bounce. The stock market will not go to zero in one day. Even if credit markets collapse, this would take some weeks to play out.

When you wish for collapse, it does introduce confirmation bias into your thinking. I know, because I've been faked out myself.
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Offline Eddie

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Re: Big Slide v2.0 Begins
« Reply #388 on: February 06, 2018, 06:45:17 AM »
I prefer to do my own thinking, unlike most people.
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Offline Eddie

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Re: Big Slide v2.0 Begins
« Reply #389 on: February 06, 2018, 06:48:30 AM »
I'm only holding two stocks. They are both Canadians, and they are lit up green so far today. I do expect more volatility, and would not be surprised to see the day end red for stocks. That doesn't mean much, compared to the break in a 36 year trend line on the 10Year UST, in my book. I have my eye on that one.
What makes the desert beautiful is that somewhere it hides a well.