Don here...
BlackRock just limited redemptions on a private credit fund. If you had a million dollars parked there, you can't get it back.
That's a $150 billion company telling investors the door is closed. Blackstone is in a similar position, now down 30% on the year.
Meanwhile, the S&P 500 is only 4% off its all-time high. Read that again. Four percent.
The VIX went parabolic into the closing bell today, spiking to levels not seen in nine months. The VVIX, which measures the volatility of the VIX itself, surged 17% in a single session.
But the real signal is in the volatility term structure. We've flipped into substantive backwardation, meaning 40-day volatility is now pricing above 74-day volatility by over a full point. That creates a feedback loop where traders short volatility are forced to sell S&P futures to hedge, which pushes markets lower, which pushes volatility higher.
Seeing backwardation this aggressive while sitting just 4% from all-time highs is near record-breaking territory.
Today's jobs number was the real catalyst. Economists expected 55,000 new jobs. We got negative 92,000. That's a miss of nearly 150,000 jobs, and the market responded immediately.
Oil climbed almost $10 on geopolitical risk overnight. But the S&P barely flinched until that jobs print hit. Geopolitical headlines make noise. Economic data moves prices.
In tonight's video, I break down every layer of what's building beneath the surface:
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The S&P closed within four points of the weekly expected move boundary, a display of market efficiency that continues to be almost unbelievable on a 7,000-point index
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Next week's expected move just jumped to $226, up from $144 this week, with volatility bumping another 10% in the final hour of trade alone
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The VIX is sitting right at the one standard deviation threshold of 27 to 28, the exact level where historically it either retreats or goes parabolic into 35 to 40 territory
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Junk bonds through HYG are starting to crack, but nowhere near the extent you'd expect given what's happening at BlackRock and Blackstone
The downside convexity is wide open. That doesn't mean we can't rally back. Geopolitical risk could calm over the weekend and give us a Monday bounce. But the volatility structure is telling you to prepare for hostility next week.
Click here to watch me break down every risk signal and what I'm doing about it
To your success,
Don Kaufman
Chief Market Strategist, TheoTRADE
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