US Equities Plunge To 2-Month Lows

Tyler Durden's picture

S&P 500 e-mini futures (ES) just opened down over 11pts from Friday's close and have traded below the 4/10 and 4/23 lows to trade back to their lowest since 3/8 taking out the 1350 stops. The EUR is at its lowest against the GBP since Nov 2008, closing in in the first sub-1.30 print since 4/16 with a little more pain taking us to 4-month lows in EURUSD (now within 20pips of 4-month lows). Gold and Silver (spot) are modestly lower relative to the 0.4% raise in the USD. Treasuries are not open yet but broad risk assets imply a considerably lower print for ES in the mid-1320s at current prices. WTI has opened with a $95 handle crossing its 200DMA to its lowest since 12/20.

In CONTEXT (based on the medium-term correlation of a broad basket of risk-assets), ES should be notably lower...


and sure enough - EURUSD just broke down through 1.30 to its 3 month lows...Feb 16-> 1.2974 and near 4-month lows. Notably, EUR-USD swap-spreads have been pointing to a lower spot rate for a week or so now and as the chart below shows - indicate 50-60pips more downside before we get really excited...

and WTI at its lowest price of the year with a $95 handle and below its 200DMA...


Chart: Bloomberg

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Cassandra Syndrome's picture

Why is Gold dropping substantially?

ouchtouch's picture

Anticipating the Mother of All Margin Calls, perhaps?

flacon's picture

I am comforted in the fact that our central planner has a pH Dee from Princeton University. /sarc

max2205's picture

Omg... It WAS (not) the best time to load up on (squid) stocks. Well played Goldman, well played.

VonManstein's picture

its just usual knee jerk response.. dont think it will last too long.. there is gonna be legit buying on this

Aductor's picture

Maybe from some clueless US traders. The Greek situation is serious, given what they have already thrown at the problem, and can get pretty prolonged. It is not so much the fact that the Greece economy will have an impact in Europe or the US (it won't), but the political impact. Greece leaving the Euro or trying to re-negotiate their bailout terms will increase uncertainty about EU's ability to sort out the bigger problems like an Italy or a Spain.

We should probably test 1340 on SPX, and if I am not mistaken, any close below 1369 will effect a HS-pattern. Seasonality is bad and a topping-pattern emerging.

RoadKill's picture

We are already in a H&S.  Both last week and 3 month.  Neckline on 3 month is 1,340.  If we break that next support is 200 DMA at 1,274 I think...

I'm not a master chartist so if someone has a better read please share.

Aductor's picture

Sorry, I was a bit vague. Yes, we are in H-S but I put the neckline at 1369. In any case, it seems downside potential is roughly 5-7% in the short term.

infiniti's picture

For the same reason that crude and ES are 100% correlated. It's all one trade.

DeadFred's picture

Did I miss the longWTI call by Goldman? LOL someone is unhappy about this move. Hold onto your gold, this too shall pass.

WonderDawg's picture

I'd love to see it drop a couple hundred, be time to starting buying again. I think it almost has to drop to about $1300 or lower before it goes ballistic. But maybe not. Who knows? I guess I'll keep phasing in the purchases slowly, and if it drops hard, then pick up the pace.

RoadKill's picture

If we go into a deflation cycle, or even real fears of deflation, it will drop below SPX like in 2009.  Then you load up.  SPX at 1,000; Gold at 900ish; Silver at $15 and hopefully Plat at $750.  I'd load up on Plat at that point.

thecoloredsky's picture

I might be naive, but I see large demand for BTFD (buy the fucking dips). Maybe it'll get to those levels, but the premiums will be skyrocketed in the fiat world.

Chaffinch's picture

Gold dropping maybe because first knee-jerk reaction is usually in wrong direction. Plus da boyz want to take out the stops on all those newby longs. BTFD.

ZeroPower's picture

Yup, this isn't real action by any means yet.

The only people "at work" right now are a few lonely asia pacific people running the desk and are just getting started. Forget about the retail that just joined soon as their e-trade futures accounts allowed them to at 6pm, ready to pile on short, while the big boys are running it down and waiting to go long.


machineh's picture

Gold is the mirror of the dollar.

If the euro drops, so does gold.

VonManstein's picture

there have been many periods where gold and dollar have risen together.. gold is a currenct.. it can b e baught aswell as dollars and this is what we will see increasing more of. sure there will be selling along the way.. but DXY up doesnt mean GLD down

Tenshin Headache's picture

Scramble for liquidity? Central bank selling?

BlandJoe24's picture

Look at what happened late last summer/early fall with gold prices.  When the S&P dropped, gold followed.  Gold drops when people must sell to meet cash needs, in part - as "ouch" said - to meet as margin calls.  This phenomena may accelerate if markets crash, as people become desperate for cash.

RoadKill's picture

I've tried to explain this to you Gold Bugs 1,000 times.  Gold is a bet on inflation and money printing.  If the ECB and Fed print Gold will be a good store of value - as it has been for the last 10 years.  But remember you have to pay attention both to the Monetary supply AND the vellocity of money multiple.  If the Euro breaks up and the PIGGS default - that is a massively deflationary event.  That will crush Gold & Silver and all commodities - hard and soft (IE Oil to $65).

Understand what side of the trade you are on.  Inflation, Deflation or Total Financial Collapse.  If you are in the last camp, then you don't care what PM prices do.  Buy physical and keep it in a safe under your house guarded by your family, a shit tons of AKs and 3 Dobermans.  In #3 all paper contracts and 1s and 0s are toilet paper and its about guns, stores of food, water desalination equipment, solar power etc...  But if you are in that camp STOP ASKING WHY GOLD IS GOING DOWN!!!

If you are in the SANE world - you are trying to figure out if we are going the 1970s route or the 1930s route.  In the 1970s inflation ran amock, the world couldn't grow and PMs were a good bet relative to stocks.  Of course a better bet would be to take out the biggest fixed rate loan you possibly can.  Preferrably in EUR or Yen.

I think we get massive deflation out of Europe as a half-dozen countries default one after the other and the ECB and EUR break-up.  China will have negative growth and revolts, Japan will be brought to the brink - THEN we will get massive inflation.  Then we will try and break the inflation cycle with 20% interest rates.  Or something like that.  I think we are going to have a lot of bouts of deflation / inflation over the next 10 years as we try to work this out.  So I'm remaining flexible and alert.  But personally I'm not in the survivalist camp YET!

Rip van Wrinkle's picture

If half a dozen countries in Europe default, the European banking system goes with it. And the US banking system may not be far behind, Unless they print. You want cash when that happens?

RoadKill's picture

Not that what I want matters - but I want a replay of the US meltdown.  That ended up with SPX at 666 and gold at 700 and Plat at a big discount.  I WANT to be long triple levered short ETFs for the whole ride.  Then I want to get out at the exact bottom and go long triple levered long ETFs right as they start printing.  And if we could rinse and repeat 5x like we did last summer - that would be nice.

Now lets see if I can pull it off.  :)

GCT's picture

Spot on Roadkill.  I have gold I bought at 300.00 and still have it all for long term.  Right now I am out of gold as these elections would have screwed up the markets following Europe reports.  Now these next couple of weeks months should get real interesting.  The only thing stopping the meltdown is the election year, otherwise you may well be correct.


Psyman's picture

The gold bugs are absolutely wrong.  Their market analysis is based on faith, and nothing more.  Gold bugs are like religious zealots.


However, buying gold is buying insurance against the possibility that global fascism and the New World Order will fail.  Keeping in mind that the global Anglo fascist military empire is backed by the collective military power of the Anglosphere, it is not a good bet to make.  I wouldn't put more than 20% of your assets into a bet against the Anglosphere.


After all, who will unseat the Anglosphere?  Nobody else has the military power to challenge us.

Non Passaran's picture

Why is Gold dropping substantially?

Because to a moron, anything over 0.2% is "substantial".

jmcaule4's picture

Anit-austerity governments and it's implication for future money printing in the Eurozone.

Alf Fields, King World News + More!

jmcaule4's picture

S&P 500 timing system returns 289.81% over the past five years.

lizzy36's picture

I have full confidence that by tomorrow Hilsenrath will "break news" about how QE3 is "still an option", and the FT will break a story about LTRO 3&4 being on deck.

Also aome story about the Chinese buying french bonds. Lots of frog bonds.

Wait for it.

EscapeKey's picture

Time to print some more clownbux.

Fixed all problems last few times around (for a handful of connected insiders).

max2205's picture

Expect an awesome covering rally......

DeadFred's picture

At some point they will want the market to fall and it will. Is this that time is the important question. I am curious about the market's reaction. What part of this is a surprise? The probabilty of these events was obvious, at least to ZH readers, for weeks and now people are reacting as if something unusual has happened. 

i_call_you_my_base's picture

I was sort of thinking the same, but on the other hand, if it's a sure thing, from "their" perspective, why tip your hand? Might as well act as if it's an unknown and exploit the fact that others will believe it.

CrashisOptimistic's picture

Yup, 14-15 hours for someone to be marched out in front of a microphone and talk about the ECB's ability to take emergency action.

RoadKill's picture

We are nowhere near that level of panic yet!!  Let the Itai's and Spanish bonds open.  They prob won't break 7 on this TOMORROW.  Once those are firmly over 7 look to see if interbank lending is starting to freeze up.  That will take at least a week, probably 3-4.  Don't look for the big guns to be rolled out (LTRO 3 & 4) till the DAX is well in the mid 5s.  Fed isn't going to really start talking about QE till June and only if the SPX is down 20%.

We were down 2.5% on Thursday and Friday.  Tomorrow MAYBE we are down 1%-2%.  If these guys broke out the fire hose everytime we were down 5% they would loose all credabillity.  You have to let the PPT make some money buying low.  5% doesn't make anyone rich.

stocktivity's picture

CNBC will provide a day long march of talking heads.

Dollar Bill Hiccup's picture

I think you meant to say, by tomorrow Hilsenrath will "break wind " about QE3 etc ...

Seafarer57's picture

New diversification strategy:

40% 12 Gauge slugs

40% .308 rounds

20% silver coins


Jake88's picture

12 gauge buck shot will give more killing power in close

razorthin's picture

10 guage suits me when hunting turkey.  And turkeys we've got.

Paul Atreides's picture

They're going to have to overclock the HFT's to keep up with this mess tomorrow...

I am Jobe's picture

Waiting for Buffett and Munger to say US equities are safe.

junkyardjack's picture

Exactly they should have bought gold its flying right now, oh wait...

tallen's picture

I wonder how his "productive" businesses will do when Europe explodes.

Snakeeyes's picture

As Euope back slides into total Socialist chaos, the equity markets will suffer.

French Elect Socialist President and Click Ruby Heels Saying “There is No Place Like Greece” – A Pictorial Guide

DosZap's picture

The  UK has seen a 19% increase in Frogs, rich ones, inquiring about real estate,over the  year before............their moving out while the gettins good.

New Diktaker of Fronce, wants to tax at 95% all $$$ over a million Euros.Better shut down the immigration, and start paying Frogs to repro, or they will be a Muslim state VERY soon.

Female genitalia will be removed post haste.

blindman's picture

Snooks Eaglin - Reality (Formerly "Wake Up")

razorthin's picture

WORLD QE bichez!  Or should I say the Fed will actually publicly admit they've been doing all along, and will now go full retard.

Monkeyfister's picture

Oh, EXCELLENT!!! My sweet, sweet dream of DOW 9,000 just might become reality this time!

I don't think there is any more patience or support for a QE3 anywhere outside of Bankster offices.

Another round of shipping out pallet-loads of Free Money for Banksters to set on fire, while pushing Austerity on everyone else, will be like dropping a tanker of gasoline on this fire.