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Dow Futures Plunge 500 Points As Markets Adjust To Trump Trade Threats

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…

WTI Crude is down over 2% at the open…

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

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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