Capitulation: Equities and Rates

Forced selling

Today is a clear example of what forced unwind and blood in the streets look like.

We opened with the VIX above 60 on an intraday basis:

Both the standard deviation and speed of the move clearly indicate capitulation in the equity space:

Every equity index is in the red:

In addition to this, the yield curve uninverted on an intraday basis:

This was as the forward curve priced a 100% probability of a 50bps cut at the next FOMC meeting.

The question you should be asking is if this current move is reflective of the economic tensions in the economy or simply a positioning unwind? If this is simply a positioning unwind then we are likely to mean revert. If it is driven by the macro regime, then it can have persistence. This is exactly what I covered in the macro report and the views remain the same:

Stocks are already rallying off their lows as bonds turn red on the day. This is a key signal for what comes next. Please also review my comments in the chat function of the Substack:

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Trades:

Let’s breakdown some specifics: