“For the fourth time this year, the Nasdaq Composite had a one-day freak out, with the move initially looking like a key reversal day, meaning the end of the run,” Bloomberg’s Andrew Cinko wrote earlier today, recalling last Thursday’s abrupt, lunchtime dive in equities.
Whatever you want to attribute the move to – there’s been no shortage of speculation about whether a “Gandalf” sighting was the proximate cause – it was indeed notable:
As was the spike in the “Nasdaq VIX” which was one of the largest of the year:
That was a stark reminder for folks who, much like the hordes of bored Chinese house wives who became leveraged day traders in China’s 2015 equity “miracle”, were under the impression that high-flying equities can only go up.
It was, poignantly, a Captain Picard moment:
And it underscored some of the points Howard Marks recently made about tech.
Well guess what? It turns out that retail investors fled in droves, as the 5-day outflow from QQQ was the largest since early November 2007:
Again, you can attribute that to whatever you like, but it did coincide with this from Kolanovic:
Volatility sellers and other levered investors [have] a limited window to position for a seasonal pick up in volatility and Central bank catalysts in September.
Bloomberg’s Luke Kawa has a simple message for investors:
Pigs get fat, hogs get slaughtered.
Indeed. But as the above-mentioned Andrew Cinko went on to write on Monday, “prior freak-outs were all fake-outs as the Nasdaq stabilized and rebounded to new highs.”
Just be careful out there.