Bears In Control As Markets in Full Correction Mode

The global equity market sell-off is showing signs of continuation into its 3^rd consecutive trading day. Asian markets were hit heavily overnight with The Nikkei 225 index sliding 4.7% as most Asian markets finished in the red. Hong Kong’s Hang Seng Index logged a 5.1% decline, following the lead from U.S. markets. In a deeply troubling session Monday, the Dow plunged more than 1,500 at the low point. The index finished down 1,175.21 points, or 4.6%, to 24,345.75, marking its biggest one-day point drop ever. The Nasdaq Composite Index shed 273.42 points on Monday, or 3.8%, to end at 6,967.53, but remains 0.9% higher for the year. The S&P 500 dropped 113.19 points, or 4.1%, to 2,648.94. Both the Dow and S&P 500 indexes have erased all of their gains year-to-date.

Volatility (VIX) spiked to levels not seen since August 2015 and was up greater than 100% in Monday’s trade and is trading higher still in early Tuesday trading hours to 43.72. The Credit Suisse VelocityShares Daily Inverse VIX Short Term ETN (XIV) plunged 85% in after hours action. Credit Suisse is the creator of the vehicle, and also its largest holder, with 4.79M units. There has been widespread concern that the fund had reached its daily IV value threshold and could possibly terminate. Credit Suisse has not offered a statement on the subject other than to say it is hedged against the losses experienced to date.

The narrative of the day will continue to center on the broad, global market sell-off until markets actually find stability. Earnings results are being brushed aside in this atmosphere of panic and even as earnings estimates for Q1 2018 are rising. Carter Worth has recently discussed on CNBC that he is looking for the market to swoosh out of a 12-13% correction with investors finding a bottom and expressing an outside reversal-trading day. Like anything else, this forecast or outlook remains to be seen. At the moment, the Dow equity futures are lower by nearly 600 points.

Bitcoin was not left without the selling pressure on Monday with the No. 1 cryptocurrency dipping below the $6,000 level yesterday. Bitcoin was last down close to 10% to $6,238.82 on Tuesday, according to CoinDesk, falling below $7,000 for the first time since mid-November. Ether slid 12.45% to $610.46, while Ripple fell 9.6% to 63 cents, and bitcoin cash fell 10% to $792.84, according to CoinDesk.

The yield on 10-year Treasury notes traded at 2.7070%, compared to 2.794% on Monday afternoon in New York and even as equities continue their decline. The benchmark yield had risen to a four-year high of 2.883% earlier on Monday.  The 2-year note yield fell 2.020% from 2.085% on Monday, while the 30-year rate fell to 3.010 percent.