Daily market review Aug 5, 2024 (VIX spike to highest level since Covid pandemic crash, market plunge across the board )
Daily market review Aug 5, 2024 (VIX spike to highest level since Covid pandemic crash, market plunge across the board )
Over the weekend, If you thought you have seen the end of market collapse on Aug 2nd, v think again. Because market wake up to another earthquake again on Monday from opening of Asian market hours to the close of European session, this EPIC damage is one that will go down in market history milestone.
We still have to look at USDJPY and Nikkei 225 movement for hints of directional movement, since USDJPY and Nikkei 225 Co-movement or Yen strength (Yen short unwind => Risk deleveraging ) is the cause of epicentre of the earthquake, it matters until it’s not.
Nikkei 225 and USDJPY movement is still an important contextual info
Scenario 1 : if USDJPY and Nikkei 225 co-movement is strong/ positively correlated, then everything is subservient to Yen short unwind positioning risk
Scenario 2: if USDJPY and Nikkei 225 Co-movement is broken/exhibit initial signs of negative correlation, then market may likely get relief rally, and possibly emerge from Yen short unwind stress.
Broad market overview
There are panic selling across the board, everything is being dumped. You know it’s extremely bad, when the Candle bar drop to volume bar location, yes it’s that bad.
Yet if you examine closely, there’s a difference between Tech and non tech, Tech heavy sector such as Semi, Nasdaq 100, QQQE, S&P 500 gap lower but attempt to close higher, while all the other thing gap lower and close lower. This difference ( although occur only on 1 day basis ) is something noticeable on Aug 5th trading session. But don’t read too much into it yet.
Overall, Equal weighted indices outperformed cap weighted counterpart.
S&P 500 11 sectors overview
Wouldn’t read too much into it until the dust settles.
MOVE index
Move index spike to 121.26,close to 19% rise over 2 days. If bond volatility continue to break higher, it would not augur well for market. Conversely, if this spike fade subsequently, then market will get a relief rally.
bond price implied volatility is expected to be around 12.13% per annum. Higher MOVE points to (implied) higher bond market volatility going forward.
Bond volatility moving higher translates into more haircut to bond, in which less liquidity can be extracted from the collateral pool.
VIX index
VIX has spiked to the highest level since Covid era, exceeding 2022 stock market rout. On 2 day baisis ( Aug 2 & 5) It has spike to 225% from low to high , or 86% from from close to close.
The difference in degree of stock and bond volatility has inspired me to do additional investigation for Paid subscribers. So for all the Paid subscribers, check out the paid subscriber section behind the paywall.
NYSE & Nasdaq market internals
There are tons of decliner vs advancer, occurring at a high volume, and it’s a 90% downvolume day in NYSE.
On August 5 2024,
12.84 to 1 NYSE Decliner to Advancer ratio (2658/207 )
6.3 to 1 Nasdaq Decliner to Advancer ratio (3751/595 )
% of SPX stocks above 20D 50D 200D moving average
Breadth declines as price plunge
% of SPX stock above 20D MA : 32.2%
% of SPX stock above 50Day MA : 44.2%
% of SPX stock above 200Day MA : 62.8%
SMH
SMH gap filled, Will closely monitor for the pay out of the following scenario,
Scenario 1) undercut the gap and 200D MA before bouncing
Scenario 2) breach through the gap, 200D SMA, and fall further
Also FYI, Down day occur at higher volume than Up day leading to Aug 2, Aug 5 sell off
XLK
XLK Gap filled, will monitor closely for which of following scenario play out,
Scenario 1) undercut the gap and 200D MA before bouncing
Scenario 2) breach through the gap and 200D SMA, and fall further
Bitcoin
According to the foremost Global Liquidity Expert, Bitcoin track the Global Liquidity relatively closely, lagging only by about 6 weeks, it display the quickest responsiveness to changes in liquidity conditions.
Bitcoin daily chart
Currently it has breached below 200D MA, and made a new swing low at 49.2K.
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