Earlier this week (here) we reminded our readers that equities are stuck in a range and today, before the squeeze kicked in, we pointed out just how much fear was being priced by vol markets (here). On Monday we wrote: “This is how it is supposed to feel; the world about to implode. SPX is down at June lows…” Ranges require the mean reversion mind and it hurts doing the contrarian, but this played out big time today. Max pain market continues…
Refinitiv
The crowd loaded up on puts as fear took over…SPX has done nothing since Friday basically, so those puts bough in panic have managed losing a lot of value already…
Tradingview
Refinitiv
Well, you are not alone. Equity exposure among active managers is at very low levels. Hedge funds show a similar picture. What is the main pain trade from here?
Barclays
Barclays
US recession probability has spiked, leading to people rushing into money market funds. It would be interesting to see what they do should the bounce turn into a squeeze…
Barclays
Goldman says that there are usually two reasons for bear market rallies:
1. longer-term expectations of growth improve, even if in the short term it is still pretty negative; and
2. investors become increasingly confident that they are approaching the peak in the interest rate cycle
With rates still very elevated to where they were a year ago and signs of slower growth proliferating, it is difficult to make a case that either of these parameters have been met, according to GS.
NASDAQ has put in 2 inverted candles in a row, followed by the hammer candle so far today. This indicates a fairly large short term move is around the corner. With tech trading at the lower part of the range, we would play the possible squeeze scenario instead of betting the break down scenario so many fear here.
Refinitiv
Just a quick update of the chart we showed yesterday where the dollar hit the upper part of the steep trend channel. Today’s down candle is huge. First bigger support down at 110, and that would still have the DXY above the 50 day…
Refinitiv
Extreme price action across assets, but the biggest shooting star candle goes to the Chinese FX. Usually you see such big candles in small caps only, but these are special times…
Refinitiv
CDX IG spread stress remains huge. It feels premature, but Bernanke, Yellen and Powell have “reacted” at times when CDX IG has moved like this. Is Powell looking at this chart at all?
BofA
