Crypto Currency Online: Daily Analysis: Volatility Disaster Drives Stock-Crash

Monday Market Recap

Asset	Current Value	Daily Change
S&P 500	2611	-4.10%
DAX	12,687	-3.75%
WTI Crude Oil	63.61	-2.61%
GOLD	1344.00	0.47%
Bitcoin	7080	-15.12%
EUR/USD	1.2382	-0.51%

What we have been speculating on Friday, namely the possible implosion of the short-volatility strategies, played out today, as Friday’s decline turned into an outright crash in late trading. The Volatility Index (VIX) skyrocketed to almost 40, nearly tripling in value, and triggering a huge drop in the major indices, and an even bigger move in the volatility-related ETFs.

The S&P 500, the DOW, and the NASDAQ were all down by about 4%, and the losses mounted further after-hours, with the international equity futures following the US markets lower as well, pointing to an ugly open tomorrow. The bond market that has been highly correlated in recent days with stocks, is also in turmoil, as yields first continued higher, then collapsed across the board amid the accelerating market sell-off.

S&P 500 Futures, 4-Hour Chart

The VIX hit a new multi-year high during the move, and given the systemic nature of the possible effects, the implosion could very well continue in the coming days and weeks, even as no evident trigger is present. On a positive note, the other major asset classes didn’t react in dramatic fashion, but the next few sessions will provide more clues regarding the damage done among leveraged players and the possibility of further liquidations.

VIX, 4-Hour Chart

Among commodities, gold gained ground in the chaotic environment, while oil finished lower, driven by the risk-off turn. Despite the positive day, precious metals are still in correction mode, with gold trading below $1350, while oil’s sell-off barely penetrated last week’s low, leaving the uptrend intact for now.

Currencies were relatively stable during the steep decline in stocks, although the after-hour session saw some notable Dollar strength, while the recently surging Pound lost ground compared to all of its major peers. The Greenback was probably pushed higher by investors who started betting on a possible intervention by the Fed and other central banks that could halt the global tightening cycle, reversing the recent trends in Forex markets.

EUR/USD, 4-Hour Chart Analysis

Cryptocurrencies

The major coins had another day of carnage, albeit with some encouraging divergences, with most of the coins plunging to new lows, taking out the levels set during Friday’s panic. As the turmoil in stocks intensified, the crypto segment turned even more volatile, but interestingly, Bitcoin and the rest of the majors held up above the prior intraday lows. With the declining trend still being intact in the sector, further volatile trading is expected, even as the oversold momentum readings point to a coming bottom, and as the majors already lost more than 60% on average compared to their record highs.