On a day where intraday the Dow makes a 1400 point swing, I would expect nothing less.
Markets are flashing SEVERE SELL SIGNALS. There is evidence, confirmation the credit cycle has turned. We have been in a deflationary period since 2008 who's natural cycle was disturbed by central bank intervention. There has never been QE ZIRP, let alone the madness that is NIRP in human history. The inevitable fallout of this QE bubble is incomprehensible.
The low interest rates & QE created wild speculation with leverage use at unprecedented scales essentially creating a massive Boom in markets.
Leverage is great on the way up, when a bet is working favorably. However, leverage is a Double-Edged-Sword.
When everything is roses, people are rewarded for their highly-leveraged bets & so they ride them, add to them.
Greed Sets In.
However, it is not until the bet unwinds, when the bottom falls out that you discover the inherent hellish risks of leverage. Downdrafts, typically much more violent than slow drifts higher are magnified.
Suddenly, the leveraged speculator finds himself deeply underwater. People can very quickly find themselves bankrupted. Owing more money than they possess. We all saw this situation happen this year with the epic short-squeeze of KaloBios
What happens is the leveraged speculator is forced to create more collateral for the margin clerk. What this means is typically forced selling. Margin Calls
Greed turns into Fear.
Trading this market is a particularly trying endeavor but it never hurts to be a well-informed speculator.
The continuous destruction of Junk bonds and commodities confirms that the credit cycle has turned negative.
There will be massive defaults on the horizon.
When the Euro finally breaks and the Dollar breaks out to new highs, I speculate we will see this deflation, deleveraging, Bear market accelerate.
I believe that we could see a 1930s style deleveraging event that will shake the foundations of this financial system to it's core. The Fed fucked up. There is no such thing as a free lunch & we will most assuredly pay the price for the Banksters incompetence & greed.