"Bloodbath" - Dow Crashes Over 1000 Points, Enters Correction

Dow crashed over 1000 points today....

All 2018 gains are gone...

 

Time for "Markets In Turmoil" special...

Markets "turmoiled" again today as Treasury yields spiked on a weak auction and the implications of a budget deal that means more supply is coming. This spooked stocks once again and XIV, the Inverse ETF, tumbled at the open - after ramping stocks delusionally into the open. As stocks got monkey-hammered again, so bonds were bid and ended with a relatively small rise in rates as plunges in Risk-Parity funds likely prompted forced delevering in stocks and bonds. Perhaps most notably, credit spreads started to snap wider and rate volatility spiked as equity market contagion spreads.

Investors have swung from "extreme greed" to extreme fear" in a record few days...

Source: CNN Money

While the mainstream media attempts to calm investors that this is a "healthy pullback," one of their pillars of support just snapped. HY credit spreads snapped wider to 10 month wides and even IG spreads spiked...

 

This should not be a surprise as HY and IG ETFs have seen major outflows...

As credit investors fear rising rates more than anything else...

And the last week has seen huge equity outflows from US ETFs...

 

And as Risk-Parity funds see one of their biggest crashes in history...

And Risk-Parity had another ugly day today as aggregate bond and stock returns were negative...

 

So bonds and stocks were sold...NOTE that as stocks dumped, bonds were bid but that never stabilized stock flows...

 

In cash markets the selling started at the open after a gap up...and accelerated into the close!

Dow's lowest close since Nov 30th

 

Futures show the chaotic manipulated swings...

 

All helped by XIV still!!

 

VIX is back above 35...

 

As equity vol surged again...

 

All the major US equity indices have broken key technical support levels...

10% Correction Levels:

  • Dow 23954 - Dow closed at 23860 is in correction
  • S&P 2585 - S&P closed at 2581 in correction
  • Nasdaq 6755 - Nasdaq closed at 6777, not in correction

Financials are now underwater for 2018 (despite soaring rates?) and Tech is also red...

 

While stocks were slammed, bonds actually ended the day with only modest yield rises (though plenty of vol)...10Y and 30Y yields are up on the week...

 

30Y Yields reached new cycle highs and 10Y yields tested them...

30Y INTRA

 

Today's yield spike early on, spooked stocks again...

 

As rate volatility begins to surge...

 

The Dollar Index ended the day practically unchanged after rallying overnight (on Asia weakness) and selling off this morning...before rallying back as carry trades were unwound...

 

But the last 24 hours has seen incredible moves in offshore Yuan... Yuan is 1.3% weaker in the last two days against the dollar - the biggest drop since Aug 2015's devaluation...

 

Despite the dollar's quiet day, crude and copper slid lower while gold and silver trod water...

 

WTI was back to a $60 handle and RBOB back at 1.75...

 

Cryptos were volatile today but Bitcoin ended higher, extending gains from the pre-hearing lows...

Bitcoin held above the $8,000 level but the correlation with VIX remains a worry...

 

Overheard on CNBC this afternoon - "Volatility is here, embrace it, and we go back up again"

Easy eh?

It appears every asset class is starting to "embrace" the vol..

Comments

MK ULTRA Alpha Mr. Universe Thu, 02/08/2018 - 16:20 Permalink

This is a machine driven crash, this kind of volume means machines are selling.

The machine program for making money going down has kicked in, and mentioned it the other day.

Estimates of 70% of the market is machine trading, and much of it is the new AI robot traders.

Money is being made, coming and going. Retail?, a lot of 401k and other 401 type of accounts can not sell off and are left holding the bag. But these long term holders are still in the money because the froth is selling off.

Another good point, a percent of the sell off is making capital gain, this can only be estimated and proven in tax receipts next year.

And we needed a correction, which builds a healthy foundation.

In reply to by Mr. Universe

Zero_Ledge lloll Thu, 02/08/2018 - 17:38 Permalink

I don't think this -10% counts as a correction since the +7% in January was such total parabolic bullshit. So really we are only down about -3%.  I've got a shit ton of cash ready and will wait for at least another 5% before starting to buy.

In reply to by lloll

Crisismode lloll Thu, 02/08/2018 - 17:40 Permalink

Down 1000 points per day

for the next twenty trading days . . .

 

Now we're talking Sweet Justice

for the greed, corruption and lust of

Wall Street banksters and their enablers 200 miles south.

 

If only,

 

If only . . . . . .

 

 

In reply to by lloll

ThirteenthFloor ThinkerNotEmoter Thu, 02/08/2018 - 17:37 Permalink

Real assets?  They sold all that stuff when they went off shore.  Then used the free or low cost credit to buy back there stock.  Nothing is manufactured in US, we have service economy, the bull shit ‘low cost solution’ that caused the shock of 1987.

One look at the US balance of payments, it would take a fuckin miracle to correct this sinking ship.

In reply to by ThinkerNotEmoter

inhibi ThinkerNotEmoter Thu, 02/08/2018 - 17:48 Permalink

Do they though? You would be surprised at how many times US companies have completely destroyed their assets over the years, usually to bump the latest CEO/CFO bonus (isn't it great how America rewards corporate pillaging? /sarc).

Most US companies went from full vertical integration to a rented office space with almost no physical assets of any kind. They outsource everything these days, not just manufacturing, but design work, consulting (market research), etc.

Sometimes I just wonder IF America will wake up. I used to think about WHEN, but after 15 years of waiting the only riots I see are of completely useless stupid shit, like taking down some statue of an already long dead white man.

 

In reply to by ThinkerNotEmoter