Monday, October 7, 2013

Stocks Slump Most In 6 Weeks As VIX Spikes Most In Over 3 Months

Weakness at the open last night extended lower during Europe's early session - testing the 11-month trendline levels for the S&P 500. As the US day session opened we bounced gloriously on the shoulders of JPY-driven mania (and absolutely and utterly no news) but as usual that lasted only as long as POMO and the markets stumbled along for the rest of the day - until IB raised margins and then the high volume dump started. All equity indices dived and VIX surged by its most in over 3 months above 19%. Away from the schizophrenia in stocks, FX markets were quiet after an early eruption in vol (USD -0.25% on the day); Treasury yields were 1-3bps lower (but off their best levels); Silver spiked near the open (as did Gold) and held gains. Stocks close at their lows with an ugly dump.

Did IB just burst the bubble?


The S&P 500 closed below its 50DMA (down 10 of last 13 days) and is 3.5% off its all-time highs with the biggest 1-day drop in 6 weeks...



Bonds and Precious Metals outperforming post Shutdown (red line)...


VIX jumped its most in almost 4 months but was leading stocks lower earlier in the day. S&P futures are extending losses from the cash close.


Remember we are very close to that 11-month trendline break here...


The IB margin hike appeared to drive FX carry traders crazy and USDJPY collapsed (with JPY surging back below 97 to 7 week highs against the USD) - Abe will not be happy...


Charts: Bloomberg

Bonus Chart - Still think fundamentals (and not marginal leverage) drives stocks? Think again...