Reasons For A Market Free Fall?
Yesterday, in Panic Selling: Just Getting Started? we covered panic selling, the fallacy of platform value, and how ETF's are NOT banks. Last Friday, I found this comment in a financial news snippet...
Over at a financial forum.. for a multitude of reasons Brother P has been bangin the table for quite awhile, on how valuations and expectations might be just a little bit akin to the video below....
Just for starters, going 400 days without a 5% pullback, which had never happened before, and an extended period of record low volatility, during which in 2017 DJIA +25%, and in Jan 2018 +6%, might have a little something to do with the 11% decline since Jan 28th?
IMHO, it's not just a parabolic bubble blowoff or melt up market psychology. So I went back through some of our recent posts and pieced together the following:
Naybob Jan 24 2018 - FU 1% Bank Toasters! Loved the rant this AM Brother P. This equities and oil party probably keeps going until late Feb along with rising yields, then things might get just a little interesting.
(I meant end of JAN not FEB and apologize profusely for my typo which could have been IV induced? And which the following sequence of comments bears out, pun intended.)
Naybob Jan 26 12:39PM ... P - Draghi and Abe continue to prevaricate. That's what currency values are all about – your currency relative to someone elses.
Trump - populist and Wall Street insanity, eurodollar market decay
Jan 17 (97 $ index) - Jan 18 (87) Change -10 = bubble goes to blow off, this is just starting...
Naybob Jan 29...
Naybob Feb 5 3:27 pm - You've got about 10 more days of this, mid Feb it should subside, unless of course real panic breaks out.
Naybob Feb 6 2018 8:20AM P – "seems like severe lack of liquidity is causing a massive melt-down as people try to sell."
Naybob Feb 6 2:00 pm: Regarding the Donald distortion and a decline in year end economic proxies.
Naybob Feb 8 3:17PM... if we break 2590 and 2550, this shall become much, much nastier and any calls on the VIX will pay huge.
StJL Feb 8 3:19PM "So much for the Tuesday rally – right now people are just looking for the exit!"
P - Feb 8 3:34PM - "VIX is back up so we're not done.... you have to trend lower with this kind of disparity... Ouch, selling off into the close = BAD!...
Naybob Feb 8 3:43PM... [looking 4 exits] and they should, a falling dollar and rising yen is a double whammy on anyone in that carry. Think HKD and RMB as well. The day comes when rolling is not so good, and when margins get called, they must liquidate to pay the piper.
P - Feb 8 3:50PM... This does not look healthy with /YM at 24,000 and /ES at 2,600 as they both look like only those lines are pausing the sell-off. If this dam breaks, we have a long way to fall!... 2,600 on /ES happens to be the 2.5% line for the day – I simply can't believe that's going to fail in a single session....
P - Feb 8 3:55PM... Yet, there it goes – very scary when big floors like that don't hold…
P - Feb 8 4:01PM... Well, we said the dip buyers have to get burned 3 times before they learn. This would be twice burned. Yikes, that was about the worst close I ever saw!
StJL Feb 8 4:15PM There is just no support lines anywhere near. If we breach the 200 DMA it could get ugly.... Looks what happened in 2015 and 2016 when it happened, we lost 250 points on the SP in days.
Naybob Feb 9 5:33AM Nikkei - 2.3%; Shanghai - 4%; Hang Seng -3%; China -5%; DAX, CAC, FTSE all down -0.5%; Futures DJIA +0.6; SP +0.7; NAZ +0.8; RUT +0.9; your going to get a bounce, how long that is good for is another question.
P - Feb 9 6:42AM Well here's the test of 24,000 and we're failing that and 2,600 and 6,350 and 1,470 but those are now the lines we want to play long if we move back up but very ugly if we're failing that.
P - Feb 9 8:05AM What is clear is that the US looks a little scary to investors.
P - Feb 9 4:00PM Wow, doesn't feel at all like that was an up 1.3% day but that's what's going in the books…
Reasons For A Market Free Fall? To be continued in Divergence in Quantitative Tightening and Dollar Assets? So many choices, so much Nattering to come, stay tuned no flipping.
While many are still trying to pin an exact reason to the selloff and wild swings...Regarding said comment, not knowing whether to laugh due to the attempt at humor? Or cry as to the clueless nature? inspires our Nattering theme for this week.
Over at a financial forum.. for a multitude of reasons Brother P has been bangin the table for quite awhile, on how valuations and expectations might be just a little bit akin to the video below....
Just for starters, going 400 days without a 5% pullback, which had never happened before, and an extended period of record low volatility, during which in 2017 DJIA +25%, and in Jan 2018 +6%, might have a little something to do with the 11% decline since Jan 28th?
IMHO, it's not just a parabolic bubble blowoff or melt up market psychology. So I went back through some of our recent posts and pieced together the following:
Naybob Jan 24 2018 - FU 1% Bank Toasters! Loved the rant this AM Brother P. This equities and oil party probably keeps going until late Feb along with rising yields, then things might get just a little interesting.
(I meant end of JAN not FEB and apologize profusely for my typo which could have been IV induced? And which the following sequence of comments bears out, pun intended.)
Naybob Jan 26 12:39PM ... P - Draghi and Abe continue to prevaricate. That's what currency values are all about – your currency relative to someone elses.
Nattering... Get your moment of Zen on... Prevaricate indeed, and Abe shall not tighten, the underpinning for low global rates and dollar carry trades [the YEN] cannot appreciate too much, if it does all hell will break loose.
Since the majority of global transactions and financial instruments are denominated in dollars, when the dollar declines, so does the value [and the attractiveness] of those instruments and ASSETS tied to the dollar.Naybob Jan 27 10:27AM - trade weighted dollar index by President, serial bubbles
Trump - populist and Wall Street insanity, eurodollar market decay
Jan 17 (97 $ index) - Jan 18 (87) Change -10 = bubble goes to blow off, this is just starting...
Naybob Jan 29...
"The bottom line is our net foreign liability position has increased. If spreads widen, and or equities sell off, viz. those dollar assets lose their attractiveness, what happens if the foreign holders begin to liquidate? Food for thought."Jelutuck Feb 5 3:22 pm - I've never watched a 1500 point drop in the Dow before.
Naybob Feb 5 3:27 pm - You've got about 10 more days of this, mid Feb it should subside, unless of course real panic breaks out.
Naybob Feb 6 2018 8:20AM P – "seems like severe lack of liquidity is causing a massive melt-down as people try to sell."
As Nattered in this forum on Jan 29th… a thinly traded market with a high ratio of foreigner holders losing faith, could be a recipe for disaster....Naybob Feb 7 10:22AM regarding the bogus "good times" Feb 2nd jobs report...
On Feb 2nd our jobs report with +200K read, the other part, +2.9% HOURLY wage increase, biggest since the recession, which never ended. So market inflation fears due to "healthy growth" are stoked, bonds sell off and yields rise. But wait, equities are selling off? I thought the growth in those tea leaves was healthy? Something smells bad...
Between the latent year end economic proxy data and that jobs report, somebody connected the dots, and saw through the BLS and MSM BS, thus making those dollar assets not look so attractive. Add in Chinese RMB at a 3.5 year high vs USD, good time to sell, if one is planning on devaluing the RMB again? With six you get eggroll? "(And here's that FRESH eggroll... devaluation started no sooner than the Nattering began.)
Naybob Feb 6 2:00 pm: Regarding the Donald distortion and a decline in year end economic proxies.
"As per Nattering yesterday's prediction". Tail end of 2015 into Q116, which is the last dip anyone NOT drinking the Kool-Aid remembers, was 13.2%. Early 2017 was distorted due to the Donald and all that winning. We are down 7.8% off the SP, so another 5% would be a damn good thing, just for starters because the winning is over, and the whining has just started. And now your moment of Zen…
BTW – for anyone paying attention, here's what already went over a cliff in December, not in any order of importance: M2, IBDD (interbank demand deposits), C+I loans, Reserve Bank Credit. These are all proxies of systemic economic growth, which has NOTHING to do with the markets?Naybob Feb 8 6:42 am: China, CAC, DAX, FTSE all down +1% – US futures down SP -0.5; NAZ -0.8
Naybob Feb 8 3:17PM... if we break 2590 and 2550, this shall become much, much nastier and any calls on the VIX will pay huge.
StJL Feb 8 3:19PM "So much for the Tuesday rally – right now people are just looking for the exit!"
P - Feb 8 3:34PM - "VIX is back up so we're not done.... you have to trend lower with this kind of disparity... Ouch, selling off into the close = BAD!...
Naybob Feb 8 3:43PM... [looking 4 exits] and they should, a falling dollar and rising yen is a double whammy on anyone in that carry. Think HKD and RMB as well. The day comes when rolling is not so good, and when margins get called, they must liquidate to pay the piper.
P - Feb 8 3:50PM... This does not look healthy with /YM at 24,000 and /ES at 2,600 as they both look like only those lines are pausing the sell-off. If this dam breaks, we have a long way to fall!... 2,600 on /ES happens to be the 2.5% line for the day – I simply can't believe that's going to fail in a single session....
P - Feb 8 3:55PM... Yet, there it goes – very scary when big floors like that don't hold…
P - Feb 8 4:01PM... Well, we said the dip buyers have to get burned 3 times before they learn. This would be twice burned. Yikes, that was about the worst close I ever saw!
StJL Feb 8 4:15PM There is just no support lines anywhere near. If we breach the 200 DMA it could get ugly.... Looks what happened in 2015 and 2016 when it happened, we lost 250 points on the SP in days.
Naybob Feb 9 5:33AM Nikkei - 2.3%; Shanghai - 4%; Hang Seng -3%; China -5%; DAX, CAC, FTSE all down -0.5%; Futures DJIA +0.6; SP +0.7; NAZ +0.8; RUT +0.9; your going to get a bounce, how long that is good for is another question.
P - Feb 9 6:42AM Well here's the test of 24,000 and we're failing that and 2,600 and 6,350 and 1,470 but those are now the lines we want to play long if we move back up but very ugly if we're failing that.
P - Feb 9 8:05AM What is clear is that the US looks a little scary to investors.
P - Feb 9 4:00PM Wow, doesn't feel at all like that was an up 1.3% day but that's what's going in the books…
Reasons For A Market Free Fall? To be continued in Divergence in Quantitative Tightening and Dollar Assets? So many choices, so much Nattering to come, stay tuned no flipping.
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