#117: How Low Can You Go

I am having a bad technology day. I am hoping that the images all display.

S2N Spotlight

Anyone with a pulse would have seen the carnage in the markets yesterday. I am going to spare you all the panic and hyperbole. If you have been reading me for a while you will know that I have said things have been off for some time.

The market is prone to bounce off its lows of the day towards the close of the market as the “plunge protector team” gets to work. Conspiracy theorists will say that this is a secretive team of traders who are financed by government (off the books) to buy the market to avoid a financial catastrophe.

I therefore decided to look at the lows for the day and see how big and often these moves occur. Some will surprise you I am sure.

I will start with Bitcoin as I think it was first and it certainly was the biggest. Bitcoin dropped a little more than -20% yesterday. It has done that 43 times in the past and as you can see has on average powered higher 1,3&6 months after.

Next, we look at the Japanese Nikkei this dropped a whopping -13% on the day at its lows. I cannot explain the 0% on the 6 months return below but don’t have the time to debug the issue.

Here is the S&P 500. It occurs on average about once a year but that is using averages you can see the it typically clusters. It went 692 days since the last -4% day.

The Nasdaq a similar story to the S&P 500.

This is a look at the Yen Strengthening 3% in a day. As you can see it is the only one that generates negative returns 1 & 6 months down the line if you buy on such strength.

S2N Observations

For some reason I cannot produce an up-to-date chart of the yield curve finally reversing its inversion. This is the best I can do for today. The updated chart would show it in the green. This usually means a recession in the next few months. Has been a very reliable indicator in the past.

Volatility goes wild. The VIX shot up 65% yesterday. The volatility of the volatility VVIX went up 27%. It is currently in the top 3 highest readings in its history.

It is late we will discuss Buffet another time but he is my hero. Sitting on a record pile of cash while markets tank. He has the perfect amount of maturity and wisdom to deploy that cash into quality assets at discount prices and likely to seal his legend / GOAT status to last many more generations before someone comes close to his record.

Performance Review

I think the tables below are pretty wild.

Chart Gallery

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