Ugly Ugly

Equity markets worldwide dumped 4-8%. Commodity markets dumped. Junk bonds fell 2-3%. Investment grade and sovereign bonds rose a bit. Gold skyrocketed – and then fell (probably the beginning of margin calls). The TED spread is still low at 26 bps – but rising fast. Given zero interest rates for short-term debt – the risk of a global liquidity crunch or flash crash will rise sharply if it hits 40 bps. Still however a long way from a 2008 level liquidity crunch (100-400 bps). S&P500 VIX is at 31.6 – so now in parabolic panic mode. The swissie and the dollar were the only safe havens today – and both are now in full QE mode to debase themselves.

Technically, markets are still ugly. Oversold but no indication that any tradeable bottom has been reached. The S&P500 just hit “correction” mode today (10% off peak). European markets are in full bear market mode. I really don’t see how the massive numbers of serious problems can just be dismissed/ignored by US equity investors as part of a normal “correction”. More pain is due.

On an intermediate term basis, the technicals are as ugly as I have seen since 2008. On a short-term basis, markets are heavily oversold but zero zero indication of any buyers out there. Given the selling today, any short-term bounce is likely 3+ days away. And the risk of a crash is very high. My guess is that the markets will drop until a new globally coordinated QE to debase fiat money is hinted at. Right now, the most oversold/bearish/negative sentiment sector is industrials. That could change – but if it doesn’t and there is a bounce, that is the one that will likely bounce hardest.

Asia is now dumping. Gold is steady. Rumor is that Italy had bank runs today – so unless the ECB intervenes successfully – tomorrow – the euro experiment will end by next week.

Anyone who is using leverage or who has debt or anything is about to discover how painful that is in a deleveraging deflationary cycle.