Shortly after the nightmare of the 2018 midterm elections, the entire US equity markets cratered due to idea that the Federal Reserve would no longer be the buyer of last resort and allow, gasp, free markets to actually return to price discovery.
Fast forward two years to a lame duck President, an out of control pandemic which was supposed to be cured by several new vaccines and the unicorn drug induced idea that a socialist administration for the United States will be bullish in 2021.
The United Kingdom is pretty much 100% isolated and cut off from Europe and the world due to a mutation which will soon spread or has already mutated itself in other locations. The reaction by markets this morning is stunning:
This particular screen grab is a 20 point improvement of just 15 minutes ago and with the VIX approaching 30, look for a wild day in equities. If volume on all exchanges is north of 15 billion with a solid 3%+ decline, the Santa rally is seriously in doubt.
Gold is in trouble without a solid break above the $1920 price point so at this moment, if it fails to recover by the first of next year, a retest of the $1700ish price levels is a possibility.
With fewer people working, economic data deteriorating, and a hostile to the petrochemical industry administration heading into office in all likelihood, why in God’s name would anyone invest in oil futures? That slow sinking realization will soon become widespread.
The 2 year US Treasury yield is approaching a major price point of 0.10%, kissing it a few times this morning already. A solid break below the 0.07% level should send off major warning signs to all markets.
In the mean time, enjoy the show. Powell, McConnell, nor Trump can bail this sucker out this time.
They are out of ammo and for once, thanks to a Chinese virus, we might actually get some honest price discovery.