QuiCQ 11/03/2025
Skinny-Dipping
“Only when the tide goes out do you discover who's been swimming naked.”
— Warren Buffett
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Let’s start by summing up yesterday’s session in one Emoji:
Exactly.
Now, I will follow up with slightly more details, but beware, the following is not for the faint at heart. Remove any sharp objects in your immediate vicinity and pour yourself a stiff drink … I am sure it is already twelve o’clock somewhere …
It took the S&P 500 only a few minutes to slash through those delicate tipping points we had highlighted in yesterday’s Quotedian “Clear and Present Danger” (click here):
The above is one version of the several charts we studied yesterday, showing the break below the 200-day MA (black line) and the negative break out of the Megaphone pattern.
But despite the ugliness of the move, it was not all about panic yesterday. Three out of eleven sectors still eked out small gains and 155 stocks managed to close higher on the day. Yes, the market heat map is a sea of red, but pay close attention and you will find Wally place to hide:
As a matter of fact, the Invesco S&P 500 Low Volatility ETF (SPLV) closed basically unchanged on the day,
showing that is still all about “Rotation, Rotation, Rotation” (click here).
Going back to the more frothy parts of the market, and we all know they have been frothy for a long time now, we saw some early signs of liquidation going on, as much in retail cohort (e.g. GS Retail favourites -5.5%) as in the hedge fund space (e.g. GS HF VIP stocks -3.9%).
Which brings us full circle back to our Quote of the (Day QOTD) … it will be interesting to observe the name of the fishes coming belly up over the coming days (too early for Whales for now).
In another sign that equity liquidation may be contained to most frothy parts of the market for now, and hence turning to the interest rate space, is that bond yields did not panic sell-off yesterday.
Open to close, the US 10-year treasury yield was down only four basis points, which is an absolute non-event in relation to the recently observed volatility. Hence, it is another clue for the equity bulls that it is more about rotation than overall liquidation (read: panic) for now. Only a sharp drop below 4.15% should raise our attention again:
the only thing that has me scratching my head (and chewing on my finger nails) a little bit is that the Fed’s favourite measure of yield curve, the 10-year minus the 3-month yield spread turned negative:
Classical interpretation = recession around the corner 3 - 9 months …
The German Bund yield eased eight basis points during the session, but here it clearly more a digesting of the recent jump higher in yields than directly stock market related:
In another sign of a lesser panic, the USD-bashing has also slowed down somewhat over the past hours, though the trend remains clear, especially for the Euro and Euro-linked currencies:
The USD/JPY has been an especially volatile son of a gun currency pair over the past hours:
But of course, all attention has gone to the crypto-space over the past few hours.
It was less than a week ago when I quipped that this is your last chance to buy Bitcoin above 90k … well, yesterday it seemed like it was your last chance to buy this cryptocurrency above 80k!
Thanks to an overnight Asian rally however, we have just about reclaimed that level again. Very last chance?
And speaking of Asia and returning to equity markets, after a very weak start to the Asian session this morning, stocks have been recovering on the back of stronger equity index futures readings in Europe and the US. Here’s the intraday chart of the Nikkei as representative for the rest of the Asian market:
Time's up, more tomorrow - May the trend be with you!
It is probably a good time to put up this chart again. No further comment:
