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Market Massacre: Oil Crashes 30%, VIX Explodes As S&P Craters Limit Down

Goldhedge

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#1
Market Massacre: Oil Crashes 30%, VIX Explodes As S&P Craters Limit Down

by Tyler Durden
Sun, 03/08/2020 - 20:40

Update (2020ET): And there it is: for the first time since the financial crisis, the emini S&P future has hit the limit down band of -5%, something it failed to do even during the May 2010 flash crash.



means that no more trade are allowed below the limit down level until the market opens at 9:30 am ET (assuming it opens of course). Trades higher are still permitted, naturally, however that will probably not be a great comfort to all those who are rushing to liquidate with reckless abandon. But fear not: with the S&P now down more than 17% from its all-time highs just two weeks earlier, and just shy of a bear market, those who want to sell will have ample opportunity to do so in the days ahead.



* * *
Following what may have been the most drama-filled weekend since "Lehman Sunday", in which we saw not only another major spike in covid cases around Europe and the US, but also the total collapse of OPEC after Saudi Arabia unilaterally decided to flood the market with deeply discounted oil in a desperate attempt to crush the competition (yet which may backfire and soon lead to riots in Riyadh), markets are reacting appropriately and just like during Lehman Sunday, everything is crashing:
  • S&P emini futures are down more than 4% in early trading, plunging as low as 2,845 and fast approaching their limit down price of 2,819 as investors around the world puke risk in an unprecedented fashion.

  • Dow futures are down more than 1,000 points unwinding all of Friday's remarkable late-day rally and then some...

  • VIX futures are up 16%, so one can only imagine where spot will be soon.


  • With everyone rushing into safety, rates are soaring and the Ultra bond future is already up a gargantuan 7 to 232-16 in a squeeze that will surely lead to the failure of more than one macro fund still short the long-end, while the 10Y yield is on pace to hit a record all time low of 0.50%, one which screams recession.

  • Naturally, the oil complex is imploding, with WTI down 27% to $30...


  • ... while Brent has dropped as much as 31%, to just $33 in early Sunday trading in what Bloomberg dubbed "one of the most dramatic bouts of selling ever"...


... and indeed, today's move is the biggest one-day drop in Brent on record.



... in line with Goldman's shocking price target cut, which now expected Brent dropping into the $20s.

FX, as discussed earlier, is in freefall, with carry trades getting unwound, while commodity pairs are getting anihilated:
  • NORWEGIAN KRONE FALLS TO LOWEST SINCE AT LEAST 1985 VS DOLLAR
  • FALLS EXTEND IN CANADIAN DOLLAR, NORWEGIAN KRONE, MEXICAN PESO

Finally, gold, also known to certain WSJ "experts" as a pet rock, it just spiked above $1,700 for the first time since 2012.



What happens now? Well, earlier today Morgan Stanley said that to stabilize markets, the Fed would need to announce not only a rate cut but also resume official QE...

We believe equity markets will struggle until policy-makers get back ahead of the curve with more interest rate cuts and an extension of the current balance sheet expansion and/or an official quantitative easing program – something we think is likely coming​
... and with spot VIX likely set to trip 60 or more, the Fed will need to do something or risk another Great Depression, although how sending nominal bond yields into negative territory across the board will help markets remains to be seen. Maybe the Fed's time has finally run out?

Or maybe Trump - who provoked the market gods one too many times with his relentless stock market boasts as stocks hit artificial high after artificial high - actually has something up his sleeve, because moments after futures opened, he tweeted a rather cryptic "nothing can stop what's coming."

Who knows what this means, but it sounds good to me! https://twitter.com/danscavino/status/1236519422917062656 …
105K
49.6K people are talking about this

We'll see about that: One thing is certain: markets and traders will be closely watching and waiting everything that is coming, after more than a decade of Fed-inspired complacency, as price discovery finally returns with a bang.
 

Curtman

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#3
Shipings down cruise liners are all down flights are down freighters are down no demand And coronavirus. Wall street's in position get ready to rock and roll and I'm sitting out of the market no mon no fun
 

Curtman

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#4
Another injection into the market unprecedented will not stop it. UPS people long in the market better get short right now best things about the Creator
 

Buck

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#5
last i looked metals were tanking too

good times
 

TAEZZAR

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#7

TAEZZAR

LADY JUSTICE ISNT BLIND, SHES JUST AFRAID TO WATCH
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Buy into "the market" & pay big taxes if you hit it good.
Buy metals, I say no more ........................ !:secret::secret::secret::finished::finished::finished:
 

Goldhedge

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#10
U.S. stock futures sink by 5% down limit after crude rout

By Herbert Lash
Reuters
March 8, 2020

By Herbert Lash

(Reuters) - U.S. stock futures plunged 5% to hit their daily down limit and halt trading after the biggest single-day loss in oil futures in almost 30 years on Sunday exacerbated fears of a credit crunch across financial markets.

Saudi Arabia's plans to hike crude production and slash its official selling price came after Russia on Friday balked at steep production cuts proposed by the Organization of the Petroleum Exporting Countries to stabilize prices hit by economic fallout from the coronavirus.

The decline in S&P 500 futures contracts was compounded by fears the impact from the fast-spreading coronavirus will intensify, leading to a U.S. recession and sharp tightening in credit markets.

The depth of the recent sell-off in both equities and high-yield bonds reflected uncertainty about the virus' impact, but also indicated confidence that markets would eventually stabilize and resume their upward trend, said David Joy, chief market strategist at Ameriprise Financial in Boston.

The plunge in stock futures suggests confidence is being fractured and the impact of the coronavirus no longer is manageable, he said.

After-hours trading in the futures contract for the benchmark S&P 500 stock index <EScv1> saw it slip to its 5% down limit. The decline indicates how much the S&P 500 might fall when trading begins on Monday.

The collapse in U.S. Treasury yields signals a potentially more adverse economic impact, Joy said. "In my experience, the bond market is more prescient than equities."

The implied yield on the futures contract for the 10-year U.S. Treasury note fell below 0.5% for first time. The benchmark Treasury hit a historic low of 0.469%, having halved in just three sessions, as markets reacted to the coronavirus.

The 20% plunge in oil prices, which in normal times would be positive for global growth, led to panic selling in stock markets as the risks of loss in oil positions added to already rising fears of a U.S. recession and a freeze in credit.

John Lekas, chief executive and senior portfolio manager at Leader Capital in Vancouver, Washington, was blunt in his assessment.

"We are in an Armageddon situation," Lekas said.

Saudi Arabia said it plans to boost crude output above 10 million barrels per day (bpd) in April after the current deal to curb production between OPEC and Russia - known as OPEC+ - expires at the end of March, two people with knowledge of the matter told Reuters on Sunday.

Investors earlier were spooked after Italy, the country hardest hit by the virus in Europe, essentially locked down much of its wealthy north, including the financial capital Milan. The move was aimed at containing an outbreak that saw the number of deaths leap on Sunday.

More than 107,000 people have been infected worldwide and 3,600 have died, according to a Reuters tally.



(Reporting by Herb Lash and Alden Bentley; Additional reporting by Kate Duguid in New York; Editing by Diane Craft and Christopher Cushing)
 

Goldhedge

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#11
Oil Prices Crashed to $28. One Expert Says They Could Fall Below $20.

Lewis Braham
Barrons.com
March 8, 2020

Commodities trading veteran Renee Haugerud was already bearish on oil. Now she thinks it can get worse. Here’s why.

Pure retaliation—that’s the best way to describe Saudi Arabia’s response to the latest OPEC meeting. Russia, a non-OPEC member, refused to agree to OPEC’s demands to cut 1.5 million barrels of oil production a day, and that in turn led Saudi Arabian state oil giant Aramco to announce it would open the spigots and cut its oil prices by upwards of $6 a barrel. That’s what caused crude oil prices to fall some 32% Sunday night to about $28 a barrel, levels not seen since the bottom of the last crash in February 2016. The acrimony has been so bad Iranian Petroleum Minister Bijan Zangeneh called the meeting “one of the worst ever.”

“It’s a complete breakdown,” says Renee Haugerud, founder of the commodity-oriented hedge fund shop Galtere, about the meeting. “We could go down below $20 [a barrel].”

Haugerud didn’t predict the crash, but she’s been prepared for it. She’s long believed that overproduction in the U.S. from fracking and the rise of alternative energy would put a damper on oil prices. Haugerud also manages the SilverPepper Commodity Strategies Global Macro mutual fund (ticker: SPCAX), and her bearish stance is largely responsible for the fund’s success. SilverPepper has beaten its peers since its 2013 inception, and the fund’s oil underweight led it to beat the average petrol-heavy commodity fund by 11.1 and 16.6 percentage points, respectively, in 2014 and 2015—two brutal years for oil. Any oil exposure she had in 2019 she largely hedged to protect the downside.

Coming into 2020, she expected oil prices to be range-bound after ending 2019 at $61 a barrel, projecting a price of $55 a barrel; after the coronavirus news first broke, she reduced her range to as low as $48. As the virus situation deteriorated, she anticipated the OPEC meeting as a make-or-break one with a “binary outcome.” If producers didn’t agree to the 1.5 million barrels a day cut, she thought, “we could go back down to 2015-16 lows.” Unfortunately, her predictions have come true.



Worse, Saudi Arabia may not be the only player waiting to glut the oil market. According to Warren Patterson, ING’s Head of Commodities Strategy: “The end of the deal risks bringing 2.1 [million barrels per day] of supply back to the market, and it is also not unrealistic to think that Libyan output may return to normal in the coming months, bringing a further 1 [million barrels per day] of supply.” With an extra 3.1 million barrels each day pouring into a slowing global economy full of consumers terrified of a pandemic, it will be rough sledding for the oil sector going forward.

Screen Shot 2020-03-08 at 11.09.55 PM.png


Oil prices dropped fast on Sunday after a difficult OPEC meeting.

Comments? E-mail us at editors@barrons.com
 

Goldhedge

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#12
Saudi Arabia Starts All-Out Oil War: MbS Destroys OPEC By Flooding Market, Slashing Oil Prices
March 8, 2020

With the commodity world still smarting from the Nov 2014 Saudi decision to (temporarily) break apart OPEC, and flood the market with oil in (failed) hopes of crushing US shale producers (who survived thanks to generous banks extending loan terms and even more generous buyers of junk bonds), which nonetheless resulted in a painful manufacturing recession as the price of Brent cratered as low as the mid-$20’s in late 2015/early 2016, on Saturday, Saudi Arabia launched its second scorched earth, or rather scorched oil campaign in 6 years. And this time there will be blood.
 

Cigarlover

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#13
Silver finally took the lead. Unfortunately it's in the wrong direction.

Last week there was a post asking for opinions for the week ahead.. I said everything down.. Looks like I missed it by a day. :).
 

dacrunch

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#14
selling metals to pay margin calls, as usual...
 

Voodoo

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#15
A lot of "money" simply evaporates in these selloffs. Now, gold certainly isn't evaporating but this is a huge money supply change when everything is so leveraged.
 

the_shootist

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Uncle

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#17
What a fkn blowout. DJI down 7 and change.

Looks the same all over.

Yo. Tomorrow is another hard day down in Souf Effrica.

Golden Regards
Uncle
 

the_shootist

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#18
What a fkn blowout. DJI down 7 and change.

Looks the same all over.

Yo. Tomorrow is another hard day down in Souf Effrica.

Golden Regards
Uncle
Most of us here knew the market has been over valued for some time now. This is the start of the correction most of us have been saying was necessary to bring the stock market back to earth again. No one should be surprised. We've been expecting this, have we not?
 

Goldhedge

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#19
This might could be how they planned to 'remove' all that liquidity from the market....
 

Voodoo

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dacrunch

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the_shootist

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dacrunch

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#26
I just learned how to make $1 million in the stock market. Start with 2.
Short it, but probably too late now... should've started a month ago...
 

Voodoo

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#27
Short it, but probably too late now... should've started a month ago...
I bought a single DIA put for $3 or so. Really wish I had bought more and held a little longer. I traded it before the first bounce really well but I underestimated how the premium skyrocketed during the bounce and couldn't buy it back. That one 275 put was like 40 in the money today.