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Is It Time For A Cascading, Mechanical Stock Selloff?
Is it time for a cascading stock selloff?
Maybe. Thursday's bear steepening in the US curve looked pretty onerous, and markets were in the process of paring back expectations for Fed cuts in 2024 consistent with the new dots. Spot equities looked shaky.
Stocks were dangerously close (and indeed through) key levels associated with dealer hedging flows and systematic de-leveraging.
"Rates continued to trade heavy into [Thursday], with the entire SOFR curve experiencing a parallel shift meaning
Many years ago after our daughter was old enough to be left alone, my wife and I got back to golf. We weren’t as good as we once were so we went to golf school for a week. Two of our fellow students were personable young men who worked as the trading managers for the Bank of Canada’s short-term treasury and FX portfolios. They actually worked in NY and were taking a pre-season vacay to tune up their games. They were both 32 with nearly snow white hair, a side-effect, they said, of being traders. I look at the activities described in this post and I can’t even imagine what big time CTAs cope with today on a daily basis. What a way to make a living.
I had an all to brief reunion with an FX trading desk co-manager from the mid 1980s. He remarked how computer trading system have totally replaced us all.
Today’s wimp CTAs just tend to their models, under strict instructions not to take any initiative counter to what the models signal
…on the bright side, if today’s action becomes the short to intermediate term trend we should see kinder gentler December FOMC dots, as opposed to today’s “Revenge of the Killer Dots” attack…
I take most market mantra and indicators with an (un)healthy dose of salt, but seasonality I respect, it almost always bites this time of the year.
So, if we all know how markets work today, then can’t a group of CTA’s or VOL sellers get together and manipulate the markets in the other direction? Of course, who could imagine such a thing happening. Momo begets momo in whatever direction despite whatever logic says should be happening.