Today wasn't the worst plunge in the stock market so far this year... It was the second-worst by a whisper. And just like that we are one third of the way down to Goldman's target. But everything is priced in? It seems that between the realization that global growth may actually be slowing (between China PMI and this morning's Philly Fed) and the recognition that there is no-QE-without-a-crash, markets began to lose steam early on this morning (led by energy names crushed by the biggest two-day drop in oil in over 9 months). Then Goldman's timely note to short the market if you want Bernanke to act (and the rumors of pending global bank downgrades) sent us over the edge as the S&P lost its upchannel and plunged (down over 40pts from its highs of Tuesday). The Dow is following a very worrisome pattern (echoing last year far too well) as it lost the second most points in 8 months. Gold (and the rest of the commodity complex - led by WTI -7% this week) fell notably as the USD surged to up almost 1% on the week. Gold's and USD's moves suggested further pain for the S&P as Treasuries stabilized at notably better levels and did not plunge on the day (though much of this is equities playing catch up to a longer-term dislocation). VIX jumped over 3 vols back over 20% (as perhaps the jump in implied correlation we highlighted was on to something). AUD (as we suggested) was crushed as risk-on trades drive carry-off and the China trade dumped it by the most in a day since November (almost back to parity). Heavy volume and a big pick up in average trade size suggest this has more to run as broke back under the 50DMA and back inside the down-channel for the S&P.
To summarize all of the above, we go back to our favorite visual description:
[5]
Today wasn't the worst plunge in the stock market so far this year... It was the
second-worst by a whisper. And just like that we are one third of the way down
to Goldman's target.
and if you were wondering why Goldman thinks 1285 is the level...remember this chart from a day or two ago? [6]
[7]
The Dow is following a very ominous pattern with its second largest drop in eight months...
[8]
and today's trainwreck hit all our levels on the way down...
[9]
and medium term we are back under the 50DMA, back inside the downtrend channel and saw volume (and average trade size - lower pane) pick up notably in the S&P 500 e-mini futures...
[10]
Oil's 2-day drop is the highest in 9 months...
[11]
The week so far in commodity-land...
[12]
and the last few days across asset classes...
[13]
Stocks priced in gold have gone largely sideways for the last few months but remain at an important level...
and on a longer-term basis, CONTEXT (a proxy for risk-assets in general) has had a very different tale to tell over the past few months (this is not the day-to-day model we use but a longer-term indication of what global risk markets is saying about relative ebullience or pessimism in stocks)...
[14]
Charts: Bloomberg and Capital Context