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Dow Futures Plunge 500 Points Amid Trump Trade Threat Turmoil

Courtesy of ZeroHedge. View original post here.

Update: Futures markets have just opened and Dow Futures are down 500 points…

All of Friday's melt-up to record high gains, gone…

VIX Futures spiked to 16.8…

WTI Crude futures are down over 2% at the open…

Treasury futures are soaring (equivalent to around a 6bps plunge in 10Y Yield to 2.46% – pre-Fed levels)

What is more problematic, as Nomura's Charlie McElligott warns in an emergency note this evening:

Either this is an epic act “rope-a-dope” posturing and poker-playing from POTUS to collect a (self-perceived) “better” deal “win” thereafter… as the 500-handle rally in Spooz has given Trump enough confidence to absorb a market drawdown and again “lean-into” what some in the administration believe is Chinese “slow-playing” – all in an attempt from to extract additional last-minute deal concessions, after last week’s reported negotiation setbacks -

OR a raging ‘miscalculation’ with “vigilante” markets.

SPX / SPY consolidated options “Gamma” is set to flip ‘negative’ around 2890 as an “acceleration point” where moves could get sloppy with dealer hedging.

Asset managers could turn “sellers” of their very profitable futures length acquired YTD:

There is a very large Asset Mgr ‘net long’ in US Eq Futs, as they currently hold a total $123B net long notional position across US Equities Futures (SPX, NDX, Russell)—with $62.4B / half of the overall position bought YTD alone.

As half of this position then is deeply ‘in the money,’ it would make sense that an extreme ‘risk-negative’ reaction to this news by the market tonight / tomorrow could elicit AM profit-taking to monetize some of this performance YTD

Final point – it was leveraged funds who were finally “forced in” last week (through start of week), covering $9B of SPX futures short positioning…

while we also saw Macro Funds take up their “Beta to SPX” WoW, going from 11th %ile to now 51st %ile into the start of the week. 

Tough timing.

Black Monday?

How long before Trump walks back his threats?

*  *  *

As we detailed earlier, indications across the (admittedly thin) FX markets is that 'pain' is on its way for risk assets after Trump's China Trade deal threats.

Yuan has plunged over 500 pips to 3-month lows…

For context…this is the biggest yuan crash since August…

And USDJPY is down notably (typically signaling derisking of carry-trade funded risk assets)…

We'll see if the algos buy the dip when US futures market open. Also note that China is still on holiday today.


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