The VIX shot up from 13.43 this morning to just under 18 this afternoon - this is the index that measures “market volatility.” In theory, markets can be volatile to both the downside and the upside. In reality, when the VIX spikes it’s because the equity market is going down. Reacting to a core CPI that came in hotter than expected (3.9% yoy vs 3.7 expected), iNVeStOrs who have bid stonks to a 26 PE are seemingly coming to the realization that a March rate cut isn’t coming.
By 2:30pm the S&P 500 was down 2% on the day. From then on the index was magically panic bought all the way into the close in what was likely late session rebalancing. On the day, the index closed down 1.37%. The index is now 1.9% off from the highest levels in human history with SPDR S&P 500 ETF SPY 0.00%↑ now trading at prices not seen since last week:
Look, I’m obviously making fun of stonk bulls who are worried about this drop today. But there are serious macro problems that have obviously been completely ignored for a very long time and we are beyond due for a correction as a base case. And these issues I casually mention didn’t get solved in the last 45 minutes of trading today. Here are some things that didn’t get panic bought into the close:
Foreign currencies
Gold
US Debt
On that last one, I think this was a very concerning session for bonds as we saw the 10yr and 20yr yields break out and the 2yr ripped through both 100 and 200 DMAs.
Reminder: when yields go up it’s because bonds are being sold. Equities, metal, and treasuries all getting sold off at the same time is probably not a good sign as it could be an indication of a liquidity problem.
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