The Worst Of The Stock Market Crash May Be Yet To Come, According To Wall Street’s ‘Fear Gauge’ Signal

May 10, 2022

Observations & Insight

Options Industry Conference Celebrates 40th Anniversary
Anna Lyudvig – MarketsMedia
The Options Clearing Corporation (OCC) will host its 40th annual Options Industry Conference on May 10-12, 2022 at La Cantera Resort & Spa in San Antonio, one of America’s most picturesque cities.
The conference focuses on the key topics facing the options industry, from the regulatory shifts in the U.S. and Europe to the technological developments that are driving monumental change in markets around the globe.


FIA’s International Derivatives Expo is returning to The Brewery in London this coming 6-8 June. Standing still is not an option in today’s evolving cleared derivatives environment. Without adapting to new products, processes, technologies and regulations, your business won’t meet the needs of tomorrow’s industry. We’re bringing together industry leaders, vendors and policymakers to discuss what’s “now” in derivatives, and what lies ahead. Sign up here.

Lead Stories

The Worst Of The Stock Market Crash May Be Yet To Come, According To Wall Street’s ‘Fear Gauge’ Signal
Jonathan Ponciano – Forbes
As investors grapple with the worst-performing market in years, some experts have zeroed in on Wall Street’s so-called fear gauge as an indication that stocks have more room to fall—even as major indexes flirt with bear market territory.

Dennis Gartman Says Stocks in Bear Market Until a One-Day, 5%-6% Drop
John McCorry and Nathan Hager – Bloomberg
Dennis Gartman says U.S. stocks are and will be in a bear market until a one-day “violent, downward movement” signals that prices have reached bottom.
“We’ll have one day when we’ll be down 5% or 6% and that’ll be the final selling pressure,” the chairman of the University of Akron Endowment told Bloomberg Radio on Monday. “That’ll end the bear market.”

Fed Warns Wild Swings in Commodities Are Ramping up ‘Contagion’ Risks
Harry Robertson – Business Insider
The wild volatility in commodities prices is raising the risk of contagion that would hit global financial institutions hard, the Federal Reserve has warned, as it rang the alarm bell over worsening trading conditions in major markets.
Commodities such as oil, metals, and wheat have been on a rollercoaster in 2022, while stocks and bonds have fallen dramatically, as investors digested rising interest rates, Russia’s invasion of Ukraine, and red-hot inflation.

US stocks attempt to rebound after huge sell-off that sent S&P 500 to lowest level in a year
Matthew Fox – Business Insider
US stocks attempted a rebound on Tuesday after the market fell 4% between Friday and Monday as investors fear an economic recession is around the corner.
Helping fuel the rally in risk-assets on Tuesday was a considerable decline in interest rates, with the 10-year US treasury yield falling 12 basis points to just under 3%.

Fed warns sharp rise in interest rates poses risk to US economy
Colby Smith and Eric Platt – Financial Times
A sharp increase in interest rates to tame fresh inflation shocks would pose a risk to the American economy, the Federal Reserve said on Monday as it reported a “higher than normal” chance that trading conditions in US financial markets will suddenly deteriorate.

Investors haven’t begun to price in recession — Here’s how far the S&P 500 could fall
Christine Idzelis – MarketWatch
The battered S&P 500 index is not pricing in a recession, according to DataTrek Research.
“At 4,000, the recession odds imbedded in S&P are close to zero,” said DataTrek co-founder Nicholas Colas in a note emailed Tuesday. “By our math, 50:50 odds of a recession equate to an S&P at 3,525.”
The S&P 500, a stock benchmark measuring the performance of large U.S. companies, has dropped more than 16% this year after closing Monday at 3,991.24. That marked its lowest closing value since March 31, 2021, which was the last time the index ended below 4,000, according to Dow Jones Market Data.


Amendment to Russian Ruble Futures and Options Contracts
CME Group
Effective immediately, temporarily suspend trading and clearing of the July 2022,
August 2022, October 2022, November 2022, January 2023, February 2023, April 2023
and all subsequent contract months in the Russian Ruble/U.S. Dollar (RUB/USD)
Futures, and all expiries in the Monthly and Weekly Options on Russian Ruble/U.S.
Dollar (RUB/USD) Futures until further notice.

Amendments to the Russian Ruble/U.S. Dollar (RUB/USD) Futures and Options on Russian Ruble/U.S. Dollar (RUB/USD) Futures Contracts and the Temporary Suspension of Trading of Certain Contract Months
CME Group
Effective Sunday, June 5, 2022, for trade date Monday, June 6, 2022, and pending all relevant Commodity Futures Trading Commission (“CFTC”) regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will implement various amendments to the Russian Ruble/U.S. Dollar (RUB/USD) Futures (Rulebook Chapter 260; Commodity Code: RU) and Options on Russian Ruble/U.S. Dollar (RUB/USD) Futures (Rulebook Chapter 260A; Commodity Code: RU; RU1-RU5) contracts (the “Contracts”).

Effective May 9, 2022, MIAX Options And MIAX Emerald Options 2X Opening And Intraday Valid And Priority Quote Spread Relief In All Symbols
Please be advised, effective May 9, 2022, the MIAX Regulation Department has granted 2 times opening and intraday quote parameter relief for all symbols on MIAX Options and MIAX Emerald Options.

Regulation & Enforcement

CFTC, SEC Considering Plan B If Congress Fails to Act on Crypto Regulation
Allyson Versprille – Bloomberg
Financial market regulators are considering steps they could take to rein in the crypto market if Congress doesn’t pass legislation, the head of Wall Street’s top derivatives regulator said.
“In the absence of clear direction from Congress, which I know they’re working on, it’s our responsibility to work together and to come up with solutions to the extent that we’re able to within the authority that we currently have,” Commodity Futures Trading Commission Chairman Rostin Behnam said Monday in an interview with Bloomberg News.


‘Buy the Dip’ Believers Are Tested by Market’s Downward Slide
Gunjan Banerji and Caitlin McCabe – WSJ
This year’s stock market volatility has turbocharged a favorite strategy among individual investors: buying the dip. The dramatic plunge in major indexes will test their resolve.
On Thursday, when the stock market had one of its worst days of the year, individuals rushed in, setting a one-day buying record. In March, they invested the largest ever monthly sum, according to Vanda Research data beginning in 2014, and continued to pour money into the markets in April.

Premarket stocks: The ‘everything rally’ is now the ‘everything sell-off’
Julia Horowitz – CNN
As the recovery from the pandemic took off last year, everything investors touched turned to gold.
The US stock market leaped 27%. Bitcoin rocketed to a record high. Commodities like oil and copper soared. Even alternative investments, from trading cards to wine, experienced a boom.

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