Yesterday in this space I posted a chart of the S&P 500 (SPX) which, without being able to draw an intelligent conclusion, highlighted an occurrence in Wednesday’s trading that had not happened since mid August:
Yesterday (Wednesday Dec 9th)……SPX crossed and closed below its 200 and 50 day moving averages in the same session. The last time it did that was August 19th:
Likely more instructive to what comes next, is the move in the Chinese currency, making new 4 year lows vs the Dollar, below the levels of their epic devaluation of Aug 10th, which preceded some pretty funky volatility in global risk assets:
And Crude is also doing what it did in August, crashing, making new 7 year lows:
Oh and look at the yield on the 10 year treasury, sitting now on its 200 and 50 day moving averages, nearly 20 bps from the November high. Safe haven trade anyone?:
The lower all this goes into the Fed’s meeting next week, the greater the potential for a violent snap-back, especially given the fact that we will little more than two weeks left in the year. As I said in Wednesday’s MorningWord (Revolving Credit) we are not entering a new crisis, we are merely in the third wave of a revolving credit crisis that started here in the U.S. in 2007 that this time is manifesting itself in emerging markets, specifically in commodities and related debt.
And there has been a lot of talk about the weakness in the high yield markets a likely canary in the coal mine with the HYG (high yield etf) approaching massive long term support:
I think it is safe to say that 2016 sees heightened periods of volatility in risk assets as hundreds of billions of dollar denominated debt comes due in emerging markets at a time where the Fed is about to end ZIRP and commodity prices see few signs of stabilization.