02/05/2018 Live Update

[Cobra]

members only update at 3:47 pm
http://www.cobrasmarketview.com/2018/02 ... ay-update/

[Al_Dente]

[save for later]
Prepare for two important changes to the CPI
Sometime in “Spring 2018”
https://mikeashton.wordpress.com/2018/0 ... o-the-cpi/

[Cobra]

members only update at 3:52 pm
http://www.cobrasmarketview.com/2018/02 ... ay-update/

[Cobra]

well, guess that's it for today. Tuesday tomorrow has been mixed recently. thank you guys, I'll see you tomorrow.

before the close, please take a little time to vote for me, thanks. https://stockcharts.com/public/1684859/tenpp

[Trades with cats]

OK some already showing that the last time this happened weas fall of 2015. Will we get another Bullard Bottom?
Ready for more gap down open tomorrow? No way without intervention this thing bounces straight up overnight.

[fehro]

and just like that 2 months of work erased in 2 days.

[daytradingES]

ES -127 nice!

[brokebybernacke2]

and just like that 2 months of work erased in 2 days.

how bout that! vix unwind pretty wild concern...market will be in headlines tonight. crazy prices on premium in options, even on the bull side! weak close, again waiting to hear top is in chatter.

[Trades with cats]

Daughter is sad today because her 401k got hit. Told her welcome to a straight up parabolic blow off top with just about every major trading house ringing to bell that the top was in for two weeks.

As the old timers say "you can lead a horse to water but you can't make them drink"

[fehro]

Not stopping.. pushing for the 200d SMA in the after hours.. ugliness 2600 SPX

[fehro]

Not stopping.. pushing for the 200d SMA in the after hours.. ugliness 2600 SPX

https://www.zerohedge.com/news/2018-02-05/it-traders-panic-xiv-disintegrates-after-close

XIV $18.. VXX $65 in the AH


In the prospectuses for XIV, there are some disconcerting discussions about termination events. For XIV the termination event is triggered if the daily percentage drop exceeds 80%. I did some digging into these events to try and figure out how likely they are to occur. If you’d like to read a more general discussion about this ETN you can read this post.

...Just to be clear, this fund isn’t tied directly to VXX, but rather the underlying futures contracts, but I believe VXX is a good proxy for the situation.

The termination risk for XIV appears to be limited to market crashes worse than the Flash crash. Two examples that come to mind are the 2009 crash and the October 1987 crash. VXX didn’t exist for either of these. I have analyzed VIX data (or simulated data) since 1992—there were 20 days with VIX jumping over 30% (previous day close to intraday high) during that period. The highest percentage jump over that period was 70.5% on February 27, 2007. There were three days with VIX jumps over 30% in the 2008/2009 crash, and during the Flash Crash.

[fehro]

Not stopping.. pushing for the 200d SMA in the after hours.. ugliness 2600 SPX

https://www.zerohedge.com/news/2018-02-05/it-traders-panic-xiv-disintegrates-after-close

XIV $18.. VXX $65 in the AH


In the prospectuses for XIV, there are some disconcerting discussions about termination events. For XIV the termination event is triggered if the daily percentage drop exceeds 80%. I did some digging into these events to try and figure out how likely they are to occur. If you’d like to read a more general discussion about this ETN you can read this post.

...Just to be clear, this fund isn’t tied directly to VXX, but rather the underlying futures contracts, but I believe VXX is a good proxy for the situation.

The termination risk for XIV appears to be limited to market crashes worse than the Flash crash. Two examples that come to mind are the 2009 crash and the October 1987 crash. VXX didn’t exist for either of these. I have analyzed VIX data (or simulated data) since 1992—there were 20 days with VIX jumping over 30% (previous day close to intraday high) during that period. The highest percentage jump over that period was 70.5% on February 27, 2007. There were three days with VIX jumps over 30% in the 2008/2009 crash, and during the Flash Crash.

https://www.cnbc.com/2018/02/05/xiv-exchange-traded-security-linked-to-volatility-plummets-80-percent.html

[fehro]

https://www.zerohedge.com/news/2018-02-05/tradestation-halts-all-overnight-futures-trading-due-extreme-volatility

[Al_Dente]

fehro: thank you for posting all of that

[Al_Dente]

“Gandalf” admits he was wrong (for predicting that Friday’s plunge in stocks was nothing to be worried about).
He now hopes the crash will turn out to be just a flesh wound, and “we think that the ongoing market selloff ultimately presents a buying opportunity.”
BTFD
He thinks there’s a “strong probability of policy makers [THE FED] stepping in to calm the market.”
He was well aware of the after-hours volatility-ETP catastrophe when he wrote this, which is probably why he thinks the FED will have to step in.
https://www.zerohedge.com/news/2018-02- ... halt-crash

[Al_Dente]

Meanwhile back on the NY at the close:
2/5 NY new lows 452 (today, Monday, dow down -1178 points) ...When was the last time we had so many lows? Feb 2016.
2/2 NY new lows 338 (Friday, dow down -666 points)
2/1 NY new lows 131
1/31 NY new lows 114
1/30/ NY new lows 251
1/29 NY new lows 204, the warning signal

[fehro]

https://www.zerohedge.com/news/2018-02-05/credit-suisse-tumbles-fears-massive-xiv-loss

Which, now that the ETN appears fated for termination, is suddenly a very big problem for Credit Suisse since according to the latest public filings, the Swiss bank owned 4.79 million units, or over $550 million, worth of XIV at yesterday's close of $115.55, and roughly $480 million less at today's after hours closing tick of $15.43. Of course, if the ETN is redeemed - and with its NAV at $4.22 according to the VelocityShare website - the loss could be total.

[fehro]

/GC spikes. not yet updated pops to 1345 Futs UGLY

[fehro]

/GC spikes. not yet updated pops to 1345 Futs UGLY

nibble long sm pos.. 2555ish

[fehro]

https://www.zerohedge.com/news/2018-02-05/vol-market-finally-broke-quant-explains-what-happened-today-and-what-coming

The ETNs are the “patient zero” of this current market meltdown. It is estimated that there was anywhere from ~$125mm to $200mm of vega / VIX futs to BUY on the close from the two main “short VIX” ETNs that rebalance daily (XIV and SVXY). As S&P traded -50 handles AFTER the cash close from 4:00pm to 4:15pm into the market’s anticipation of the massive rebalancing of volatility (buy to cover) on the close, XIV then saw a delayed and terrifying ~-87 PERCENT move after the close, as some who owned XIV puts as crash protection sniffed this potential and speculated liquidation from the ETN, which is set per a rules-based system to buy back short vega after an 80% “crash trigger”(which again isn’t a certainty because they use a blend of 1st and 2nd month). The asset pool nonetheless was seemingly / largely wiped-out and the note is guaranteed to “pay out” to their shareholders as set per their prospectus. It is likely that this thing has indeed been “triggered” and will be forced to liquidate. SVXY doesn’t have the firm 80% “trigger” but too is seeing its NAV “wiped out” and is trading ~-80% post-close as well.

The issue NOW is the pile-on going-forward across assets, as the systematic “short vol” community’s models are now completely toast, and they too will be forced to cover remaining “short vol” positions that didn’t trade today—i.e. BE PREPARED FOR A MAJOR VIX FOLLOW-THROUGH TOMORROW.