The stock market faces heightened risk of another sell-off if the VIX fear gauge crosses 38, Fairlead’s Katie Stockton says
Matthew Fox – Markets Insider
Even after the S&P 500’s year-to-date decline of 23%, investors should prepare for more downside if the stock market’s volatility index crosses the 38 level.
That’s according to Fairlead Strategies’ Katie Stockton, who told clients in a Thursday note that another leg lower in the stock market is possible, and would likely be marked by capitulatory selling by investors if the VIX crossed the 38 level.
Pound Options Show Traders Bracing for Volatility as BOE Nears
Vassilis Karamanis and Greg Ritchie – Bloomberg
It’s looking like a busy day for pound traders.
Investors and economists are betting the Bank of England will increase its key rate a quarter point when it meets later Thursday, but decisions in the past 24 hours by the US Federal Reserve and the Swiss National Bank have raised the possibility that an even larger hike could be on the table.
Option Markets Signal More Volatility in Dollar-Yen Post BOJ
David Finnerty – Bloomberg
Dollar-yen has had a roller coaster ride and options market suggest there’s more turbulence ahead.
The pair’s one-week implied volatility is hovering near the highest since 2020 before the outcome of the Bank of Japan’s policy review on Friday. This indicates a 75% probability that spot will trade in a seven-point range of 131.05 to 138.08 during the period, with a reference level of 134.55.
**** JB: Also see the WSJ article Investors Bet One of the Biggest Trades on Wall Street Will Unwind.
Watch Global ‘Tightening Tsunami’ Coming, State Street Says
Gaurav Mallik, chief macro strategist at State Street Global Advisors, discusses monetary policies of central banks including the Federal Reserve, the implications for financial markets, and his investment strategy. He speaks with Shery Ahn and Haidi Stroud-Watts on “Bloomberg Daybreak: Asia.”
Stocks Imply 85% Chance of US Recession, JPMorgan Strategists Say
Sagarika Jaisinghani – Bloomberg
The S&P 500 now implies an 85% chance of a US recession amid fears of a policy error by the Federal Reserve, according to JPMorgan Chase & Co. strategists.
The warning from quant and derivatives strategists is based on the average 26% decline for the S&P 500 during the past 11 recessions and follows the US benchmark’s collapse into a bear market amid concerns about surging inflation and aggressive interest rate hikes.
How the 2022 Bear Market Is Different From the Last One
Michael P. Regan – Bloomberg
It’s time to navigate through what traders call a “sea of red,” the color used to signal declines in asset prices on their computer screens. Almost everywhere you look right now, it’s crimson.
The S&P 500 has fallen more than 20% from its high on Jan. 3, and the Nasdaq-100 has plunged 30% from its November record. Bitcoin has lost two-thirds of its value since it almost touched $70,000 per token seven months ago. Even a conservative investor, with a sober mix of 60% in stocks and 40% in bonds, is down about 17% this year. And US government bonds, long considered the safest harbor, have lost investors almost 12% in 2022, according to a Bloomberg index of US Treasuries that’s having its worst year ever.
Robinhood’s Stock Is Now Worth Less Than Its Cash on Hand
Annie Massa – Bloomberg
Robinhood Markets Inc. shares slumped to a fresh low on Wednesday, giving the beleaguered brokerage a market value that’s less than the cash on its balance sheet.
After posting more than $3 billion of losses since its initial public offering in late July, Robinhood’s shares have plunged more than 80%, cutting its market capitalization to as low as $5.99 billion. The firm had $6.19 billion of cash and cash equivalents at the end of the first quarter.
Expansion of the Block Trade Reporting Window for Gold, Silver, and Copper Futures Contracts such that the Reporting Window for all Metals Futures and Options Contracts Shall be Fifteen (15) Minutes
Effective on Sunday, July 31, 2022 for trade date Monday, August 1, 2022, and pending all relevant CFTC regulatory review periods, Commodity Exchange, Inc. (“COMEX” or “Exchange”) will expand the block trade reporting window for the Gold, Silver, and Copper futures contracts from five (5) minutes to fifteen (15) minutes as set forth below.
Regulation & Enforcement
SEC looks at stricter rules for index providers
Chris Flood – Financial Times
Wall Street’s top watchdog is examining whether to impose stricter rules on providers of financial indices that now guide trillions of dollars of investments globally.
The Securities and Exchange Commission on Wednesday formally requested information from the market on whether to impose tougher standards on companies such as S&P Global, MSCI and FTSE Russell, which are considered data publishers at present.
BitMEX Co-Founder Sentenced to Probation on U.S. Compliance Charge; Benjamin Delo also paid a $10 million fine after pleading guilty to violating anti-money-laundering law
Richard Vanderford – WSJ
Benjamin Delo, a co-founder of cryptocurrency derivatives exchange BitMEX, was sentenced to 30 months probation for violating U.S. anti-money-laundering law. Mr. Delo, who was sentenced Wednesday in federal court in New York, has also paid a $10 million penalty as part of a deal with prosecutors and the U.S. Commodity Futures Trading Commission. He pleaded guilty in February to a single count of violating the Bank Secrecy Act.
Keynote Address of Commissioner Christy Goldsmith Romero at the Chicago Bar Association’s Futures & Derivatives Law Seminar, Chicago
Good afternoon. I want to thank the Chicago Bar Association for the warm welcome of me as a new CFTC Commissioner. I only wish I could join you in person. I started my law career in Chicago as a young associate at Jenner & Block with a view of the river from my office. I instantly fell in love with the city, including Gold Coast hot dogs, summer concerts at Ravinia, and baseball games. Although I won’t tell you which team because half of you will likely be upset.
LedgerEdge appoints former Nex Markets chief executive in strategic advisory role
New advisor at LedgerEdge previously served at Nex Markets, BrokerTec, ICAP, and currently serves as the chairman of the board at Tradefeedr.
Annabel Smith – The Trade
LedgerEdge has appointed the former chief executive officer of Nex Markets, the electronic execution division of CME Group’s Nex Group, as a new strategic advisor. Industry veteran Seth Johnson has joined LedgerEdge as a strategic advisor after almost four years with Nex. Prior to joining Nex, Johnson served as the chief of BrokerTec – also now part of CME Group – and in various roles across ICAP including as its head of strategy and global head of derivatives for ICAP Electronic Broking. He also currently serves as the chairman of the board at Tradefeedr.
Don’t be tricked by any swift rallies in the S&P 500 — this is still a bear market
Lawrence G. McMillan – MarketWatch
The S&P 500 index broke down out of the trading range that we had noted last week (4070-4170) and that is marked with a red square on the accompanying SPX chart. That breakdown unleashed some of the most aggressive bearish activity seen to date: three monster down days – down 98, 117, and 151 in a row.
First and foremost, this was a move to new lows, so the pattern of lower highs and lower lows on the S&P remains intact – and that is the definition of a bear market (not the “20% down” definition you hear on TV). As long as the SPX chart is in a bearish mode, a “core” bearish position should be maintained.
An age of real wealth destruction
Whitney Baker – Financial Times
We’re at the sort of inflection that only strikes once or twice a century. That’s what makes it tricky.
Most people alive today grew up alongside a simply historic rise in financial wealth. We know nothing but relentless asset appreciation, propelled by disinflation and falling rates. Liquidity outpaced the economy. So did asset prices. But violent financial and geopolitical regime change is upending that status quo and the bubbly valuations that hinge on it.
When Crypto’s Own Hedge Fund Geniuses Failed
Lionel Laurent – Bloomberg
Cryptocurrencies were supposed to teach traditional financiers a thing or two about how to avoid collapses and crises. Yet it feels like we’re simply repeating history. Specifically, the messy hedge-fund humiliation captured in “When Genius Failed.”