Monday Massacre Brought To You By Kazuo’s Carry-Chaos, Kamalanomics, & Jump’s Crypto Dump

Well it started with a Japanic… but really Asian markets were just playing catch down to Friday’s moves. Yen strength (carry trade unwind accelerates post-BoJ) weighed on stocks and TOPIC had its worst day since the 1987 collapse…

Source: Bloomberg

How much more pain will Kazuo Ueda unleash on the Japanese public before he pivots dovish once again

“You can’t unwind the biggest carry trade the world has ever seen without breaking a few heads. That is the impression markets give us this morning,” Kit Juckes, chief foreign exchange strategist at Societe Generale, said in a research note published Monday.

In the US, the narrative transition from ‘soft landing’ to ‘hard landing’ stoked the flames of the sell-off and some pointed to Kamala Harris overtaking Trump in the prediction markets as exacerbating equity weakness.

Source: Bloomberg

At their worst, Small Caps and Nasdaq were down 6% today, before dip-buyers stepped in and lipstick’d this pig of a day. By the close, all the majors were down around 3-3.5% on the day…

Goldman Sachs trading desk noted tht overall activity levels are surging up +63% vs. the trailing 2 weeks in line with market volumes up +99% vs the 10dma. Our floor tilts +6% better to buy, driven by HFs while LOs just flipped from net seller to net buyer.

• HFs are +11% better to buy and shockingly are better to buy in every sector ex-REITs.  Demand heaviest in Tech, Cons Disc, Comm Svcs & Fins which are all +$100mm net better to buy

• LOs are now flat on the day after starting out -10% better for sale.  A bit more dispersion in their sector skews, buying Comm Svcs, Cons Disc, HCare & Fins while selling Tech, Staples, Mats & Macro Products

The S&P closed below its critical CTA pivot threshold…

The S&P 500 broke below its 100DMA…

Nasdaq broke below its 200DMA but found a supportive bid there…

“Most Shorted” stocks were slammed again at the open

Source: Bloomberg

Mag7 stocks are now down a stunning $3 trillion from their record highs…

Source: Bloomberg

NVDA is now down 35% from its record highs…

Source: Bloomberg

The ‘Ai trade’ is rapidly unwinding, breaking below its 200DMA…

Source: Bloomberg

VIX surged to 65 intraday – its highest since COVID lockdown chaos – before vol-sellers stepped in (but it ended up around 35 still!)…

Source: Bloomberg

VVIX exploded higher – near all-time record highs…

Source: Bloomberg

The Treasury market was chaotic today (but you’d barely notice if you were checking close to close). Yields collapsed by almost 20bps intraday… twice… before squeezing back higher and ending pratically unchanged. The long-end ended up outperforming on the day (30Y -4bps, 2Y +1bps)…

Source: Bloomberg

The yield curve (2s10s) briefly dis-inverted today for the first time since June 2022…

Source: Bloomberg

The dollar dropped again, testing the mid-May lows…

Source: Bloomberg

Crude oil plunged back to test its lows since February today ($71 handle for WTI)…

Source: Bloomberg

Gold was monkeyhammered lower today too, breaking below $2400 before finding support…

Source: Bloomberg

Crypto markets were clubbed like a baby seal overnight amid reports that Jump Trading was liquidating its holdings. Bitcoin crashed below $50,000 for the first time since February (basically erasing all the post-ETF gains), then bounced notably off those lows…

Source: Bloomberg

Finally, the market appears to be testing The Fed – demanding almost 140bps of cuts in 2024 at the peak today (as 2025 cuts are brought forward)…

Source: Bloomberg

Now, don’t forget that this is the third time the market has gone to the limit on Fed rate cuts in the last year. Will Powell fold and unleash the Put?