1/ after the historic sell-off week maybe I have to rephrase, because it actually can't be a Black Swan. Because that would have been a totally unexpected news /event. The coronavirus was/is known since the alert on weekend Feb1st/2nd, but market shrugged that off
2/ and US markets actually made new ATH. Global cases increased, but it was the sudden spike in South Korea and Italy which somehow "caught" stocks longs "off guard". Grey Swan ? Slow motion Black Swan ? Sounds like an oxymoron
3/ anyways, as every financial analyst is now scrambling with their DCF models using half-empty words from companies' earning revisions, market has to digest something of course. After all, SPX was coming off near x20 P/E and NDX parabolic overbought situation.
4/ so, the technical part is done. in fact, on a pure TA short term view, SPX NDX DOW went from overbought to oversold. The gigantic move in volatilities reflects that uncertainty. Expected weekly and monthly ranges (as of a snapshot of last Friday close) are huge. 
5/ more spiking virus cases in very important areas (LA, NY, LDN etc) will make the uncertainty only greater as global biz hubs would be more affected. Last week historic -15% drop in such a short time will usually attract short term buyers or even long term value investors
6/ hence, wild swings this week. (incl the classical +1000 point rebound "news" on CNBC). Global rate cuts are expected too, although 84% of CBs are already dovish, they may have to act more preemptively to show liquidity and refinancing risk is on their radar.
7/ credit spreads CDX ITRAXX soared last wk reflecting this mathematically higher default risk probability. Corp debt new issuance got frozen last wk, so in the worst case, FED would start also CorpBondQE, same like ECB, BoJ etc.
8/ as stocks got technically oversold and fell like a stone, so was the flight to safe haven bonds rush. They seem overbought, here just simple examples of US10Y or TLT. But, if yields continue to plunge, that's not a good sign for stocks and a Bull-Re-steepening is on the radar.
9/ why Bull-re-steepening ? Because FED would cut a lot or even using emergency cut, and still bid on for bonds on much lower GDP outlook.
Today we have seen the first patch of business confidence, the global Manufacturing PMIs, and they were mixed so far.
Today we have seen the first patch of business confidence, the global Manufacturing PMIs, and they were mixed so far.
10/ Australia and China low as expected, Japan weak. But Europe and US were ok-ish, ISM holding up. March/April would obviously confirm stability or a new weak trend if the media hype translates into real deep business outlook concern.Bonds/STIR painting weakness
11/ the funny CNN Fear&Greed index and their fancy calculation is nothing more than SPX RSI. But what was also shocking, market breadth as % of stocks > 50d MA or 200d MA...
NYA 9/91 & 25/75
NDX 9/91 & 41/59
OEX 4/96 ! & 24/76
SPX 3/97 ! & 26/74
NYA 9/91 & 25/75
NDX 9/91 & 41/59
OEX 4/96 ! & 24/76
SPX 3/97 ! & 26/74
13/end. good luck this week with the volatility x
14/ really end.
Friday's close after the -15% historic 1wk sell-off
weekly vola
SPX 58% = 2765/3137
NDX 60% = 7904/9004
DOW 61% = 23874/26855
monster move expected.
Friday's close after the -15% historic 1wk sell-off
weekly vola
SPX 58% = 2765/3137
NDX 60% = 7904/9004
DOW 61% = 23874/26855
monster move expected.
@threadreaderapp unroll
