Market Journal: The "Crack" Cometh
High-velocity selling pressure is close at hand.
Discussion
The VOL market is lulling equity market participants to sleep, as VOL’s reaction to equity market movements is viewed as an infallible indicator of the future direction of equities. This is a dangerous line of thinking as risk-off signals continue to proliferate beneath the surface.
With breadth continuing to break down, CDXs breaking out, and the long end of the UST and TIPS curves moving relentlessly higher, the “crack” is coming (the crack being: high-velocity selling pressure that sees over 10:1 downside volume in equities over the span of a couple of days).
Exhibits
Yet another negative breadth divergence fired yesterday.
Breadth puked to new lows.
And IG CDX continues to break out.
The long end remains a huge problem for equities.
The “Crack” cometh.