Markets Scream ‘Panic’ To Powell As 2022’s Tech-Wreck Is Worst In Over 30 Years


The market is sending The Fed some very clear signals as it prices in an aggressive rate-hiking trajectory this year (just as the economic data starts to gravely disappoint) warning that it is ‘panicking’ and deserves ‘more’…

Panic Signals include….

1) Indices puking hard

This the 3rd straight weekly loss for the S&P (its longest weekly losing streak since Sept 2020) with every bounce hit hard. Nasdaq and Small Caps were the hardest hit this week with The Dow the best of a bad bunch. This was the worst week for Nasdaq Since March 2020, Russell 2000’s worst week since June 2020, and S&P and Dow’s worst since Oct 2020…

Nasdaq is now suffering its worst start to a year in at least 30 years (it is very slightly worse than 2008)

The Nasdaq Composite is down 14% from its highs, but the Russell 2000 is worst, down over 18% from its highs (S&P -8.1% from its highs and Dow -6.75%)

2) Headline stock names have been clubbed like a baby seal (PTON, NFLX, ZM, etc…)…

Retail Favorite stocks have been routed

…and Bubble markets (unprofitable tech, SPACs, Crypto…) all monkeyhammered

All of which looks like this…

3) VIX term structure inverted.

While typically projected as a ‘bottom’ indicator, this inversion seems particularly focused into The Fed meeting next week…

4) HY Bond prices at 14 month lows.

Credit leads, equities follow…

5) Fed rate expectations pricing in 4 hikes by Dec 2022.

…and given that 2Y yields dropped back below 1.00% today, the market is exclaiming to The Fed that a reversal in their policy is imminent…

6) The market is implying The Fed will fold by the end of 2025

Not a good sign for Powell and his pals when the market is screaming at them not to even start because they’ll be forced to lose all credibility with a year or two…

7) Yield Curve inverting hard (policy error warning).

The yield curve is the flattest since April 2020, screaming out to The Fed that they won’t be hiking rates like they think for long…

8) Fed Repo facility usage hits YTD high.

Yes, there is $1.7 trillion in excess liquidity being thrown into this facility and not being leveraged to buy any dips…

Source: Bloomberg

9) Put-Call ratios are surging.

We suspect a lot of this is hedging into The Fed (but also note that today’s OpEx would have wiped out some of the P/C strength)…

10) ‘Panic’ is accelerating (but has more to go yet before it reaches the scariest levels)…

Source: Bloomberg

TICK was really ugly the last two days with the biggest ‘sell programs’ since Sept 2021…

Source: Bloomberg

All signals that the market knows The Fed looks at for signs of stress as they put pressure on Powell to fold and strike his Put…

“Into the open today, we were looking for indications of panic readings for a more tradeable bottom ahead,” said Alon Rosin, Oppenheimer & Co.’s head of institutional equity derivatives.

“Between the TICK/TRIN readings during the morning flush and VIX inversions, it is possible that fear, panic has finally arrived.”

The problem – of course – is, as we noted earlier, the hope that this is a resumption of the Q4 2018 playbook – i.e. Fed tries to tighten, market pukes and forces Powell to fold) – is missing the fact that this time, with just so much more extensive speculative & valuation excess as a starting point the problem is the inflation issue – now a political imperative too – means the “Fed Put” is now struck much lower below spot…

…meaning no “dovish pivot” relief unless things get much, much worse from the markets-side.

Some more thoughts…

A violent intraday reversal like the Nasdaq’s yesterday is rare and most often happens during a crisis. This was the 21st time since 1972 that the benchmark rose more than 2% during the session only to decline 1% or more at the close.

The majority of those episodes occurred during the bursting of the Internet bubble and during the 2008 financial crisis. Before yesterday, the most recent example was in early days of the Covid pandemic in March 2020.

It takes time for volatility to wane. On average the index fell the following day and traded sideways in the next five days.

The S&P 500 closed below its 200DMA. As Jim Bianco notes, this ends a 409 trading day streak above it – the longest streak in 8 years…

In fact, all the US majors closed below their 200DMAs…

FAAMG-T stocks puked this week – the worst week since March 2020 (AMZN is in a bear market)…

Source: Bloomberg

Bank stocks had an ugly week with GS and JPM now significantly lower YTD…

Source: Bloomberg

Value stocks continued to outperform (this is the 4th straight week of outperformance and Value just broke above the downtrend relative to Growth…

Source: Bloomberg

Treasury yields ended lower on the week (apart from 2Y) with 30Y outperforming…

Source: Bloomberg

2Y Yields dropped back below 1.00%…

Source: Bloomberg

The dollar ended the week higher – its best week in the last 5 – finding resistance at the YTD unchanged line once again…

Source: Bloomberg

Cryptos cratered this week, with Ethereum underperforming (-17%, the worst week for ETH since Jun 2021) and Bitcoin the least bad horse in the glue factory (-11%)…

Source: Bloomberg

Pushing Bitcoin’s RSI into deeply oversold territory that marked a local low last time…

Source: Bloomberg

Oil rallied for the 5th straight week with WTI topping $87 (highest since 2014)…

Gold rallied for the 5th week in the last 6, holding above $1800…

Finally, if you think you had a bad week, take a look at Biden’s approval rating (now barely better than Trump’s was)…

Source: Bloomberg

But worse still, Trump has overtaken Biden as the most ‘favored’ politician in America…

Source: Bloomberg

US Macro data disappointed this week again and has dropped back into negative territory…

Source: Bloomberg

And Stagflation is imminent…

Source: Bloomberg

We suspect more than just Ed Norton need a hug after this week…

RIP Meatloaf.





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