Equity Sell Tsunami 2 5 18
Just a quick update on this record breaking almost 5% down day in the equity markets, but in reality the streak is still intact; the SP500 Index hasn’t had a 5% pull back since June of 2016 the longest streak in history. Today was close but it didn’t bust the barrier as of the 3pm close. However, the futures markets after the cash close extended losses to fall past the 5% marker. Anyway this is just a quick note to our readers who if they haven’t been reading our weekly letter should have been fully aware of this potential. But to calm all fears, the equity markets have merely taken back the initial 2018 run up and a little bit of December depending on your Index du jour. Some funds will no doubt come in and buy here and the market should stabilize, but in no way is the market out of the woods. As our readers know, our equity indicator is actually a U.S. interest rate, yield curve metric and we fully understand when funding rises, so too does leverage costs and it can really creep up fast. Anyway this should just be a warning sign for things to come if the FED continues the rate hike path. The equity volatility is just following on the heels of the Crypto volatility and in terms of Bitcoin all the talk of bubble this bubble that, well those of us who have been involved from the very beginning realize that the ups and downs in orders of magnitudes are just another facet of the new technology. Pension Partners Charlie Bilello captures it best with this analysis of the Bitcoin data which points out 5 corrections over 70%:
Ok here are the futures charts from Keystonecharts.net, the SP500 lost 140 points to 2616.75 and took back 2 months of upside:
The Nasdaq futures lost 288 points and settled 6467.25:
The Dow futures lost 1175 and settled at 24345.7:
If you listen to CNBC dopes they will blame the severity and speed on “algo’s” what is annoying is that they use this term as if the market exists outside of this AI structure. It doesn’t, the market is controlled by the likes of Citadel and Virtu and when funds try to sell the liquidity evaporates and those with the fastest connections pull orders faster than sellers can hit bids, that is the reality and that is the artificial market construct that exists. This doesn’t surprise real traders like ourselves because we know the market mechanics and we understand them. Anyway in our opinion, this market will regain footing, but the terrain is rocky and the road a bit more slick. As we have stated for many months now, when the central banks pull back, so too will the market, they are unequivocally one and the same.
Finally This is a nice warm market welcome to the new Fed chair Powell as the market losses beat the 2.1% drop on former Chair Yellen’s first day in office almost exactly 3 years ago today. Ok that’s it for now, expect a full letter in the coming day, Cheers!