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Markets Turmoil As Easing Omicron Anxiety Battles Surge In ‘Technical Default’ Fear

Courtesy of ZeroHedge View original post here.

Markets… everywhere… are turmoiling. Volatilities across every asset-class are spiking higher as the Powell-Put gets restruck lower…

Source: Bloomberg

You can't un-cut the rope Jay!!

A very technical buying panic to start the day but news that a second Omicron variant carrier had been found in the US (Minnesota, but traveled to NYC) initially sent stocks lower but once again he was said to have had only mild symptoms and was fully recovered. That sparked a serious relief rally (back above the technical levels). Late in the day a third Omicron case was reported in Colorado, stonks didn't care until the last 5 minutes. This was Russell 2000's best day since March until that last few minutes…

The battle took place around S&P ~50DMA, Dow ~200DMA, and Nasdaq ~50DMA (Small Caps are well below their 50, 100, and 200DMA)…

In case you were wondering why the sudden panic-surge today, Goldman has a clue:

"The GS Prime book was heavily net sold to start December (largest 1-day $ net selling since September, -2.5 SDs vs. the average daily net flow of the past year) , driven by continued short sales and to a much lesser extent long sales (9 to 1)"

Today was the biggest short-squeeze since the start of November…

Source: Bloomberg

It's worth noting that Nasdaq is still -2.5% since the Omicron scare on last Friday and Small Caps -5.5%…

On a side note, @AndrewThrasher notes that the average Nasdaq 100 stock is down 17%. The spread between the average stock & the index is now wider than the peak in 2000.

AAPL had an exciting day, puking all the 'safe-haven' gains on iPhone 13 demand fears, but BTFDers did their best during the day session…

'Recovery' stocks recovered their relative losses versus 'Stay at Home' stocks since Omicron's arrival…

Source: Bloomberg

VIX compressed today but remains stuck above 28 for now…

But Vol of vol signals more pain ahead however…

Source: Bloomberg

Fed Speakers went full hawktard today…

  • *DALY: MAY NEED TO TAPER ASSET BUYS FASTER THAN ANTICIPATED

  • *QUARLES: I'D SUPPORT FASTER TAPER OF BOND BUYING

  • *BARKIN: I'M SUPPORTIVE OF NORMALIZING POLICY AS WE'RE DOING

  • *BOSTIC: FED NEEDS TO BE ABLE TO RAISE RATES SOONER IF NEEDED

And that sent rate-hike odds notably higher…

Source: Bloomberg

Treasury yields were all higher on the day with the belly notably underperforming but as the last hour hit, bonds were bid…

Source: Bloomberg

The yield curve was a shitshow today, bear-flattening dramatically…

Source: Bloomberg

The dollar ended flat on the day, trading in a narrow range relative to the last few days (intraday, the pattern remained the same)…

Source: Bloomberg

Cryptos were relatively quiet with bitcoin unch and ethereum only modestly lower…

Source: Bloomberg

Gold fell back today to its FOMC-Taper-Day lows…

Oil prices rebounded strongly today after plunging on OPEC+ production plans…

Having tested down to one…

Finally, under the surface, fear of a technical default for US Treasuries (between 12/15 and 12/23) is growing.

The kink in the T-Bill curve is now as extreme as during the peak of October's chaos…

As Jim Bianco noted, the market's message … "buckle up, it's coming." And every day, this fear grows and grows.

Can This Really Happen?

The Democrats hold unified power with a majority in the House and Senate. Together with the president, they can increase the debt limit themselves. Since they are crafting the spending and budget bills without Republican input, the GOP has decided to sit this out and will vote no on all of this. Since raising the debt ceiling is unpopular, the Democrats really want Republican votes to give them cover as a bipartisan bill.  But since the Republicans are shut out of everything, they are not voting for an unpopular debt ceiling increase.

Can the S&P rally despite, or thanks to, all the high volatility?

Oh and then there's San Francisco Fed's Mary Daly who uttered the following total crap: "Long-run inflation expectations have been remarkably stable, giving her confidence that people still believe the Fed is credible."

Does this look 'remarkably stable' to you? The Fed's own index of inflation expectations is exploding higher…

And market expectations for inflation are anything but stable…

Maybe this is where The Fed's faith in its own credibility finally jumped the shark.


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