Stress Indicators.... panic is almost total - top-down view in charts...

My email box is flowing over with negative views on the market – the believers in central bank and QE has lost their religion – finally – there is a new reality, one where central banks are not relevant….…in 'normal' conditions a collapse in expected Fed hikes would have sent the market higher, but despite dropping from 3 hikes (75 bps) to less than one…the market continues to sell off!!!!!     Either the drug needs to get stronger or a cold turkey is needed!

 

 

Central banks is as dogmatic as anyone can get – they have a "plan"….. or path they believe in – ruled based guidance – never mind their forecasts is more wrong than right, its better to have a model not working than no model at all they claims…

 

Wednesday is Yellen day..

 

 

 

She WILL be fully compliant with DOVISH expected talk – nothing else will mean serious trouble for the market – this leaves an interesting 48 hours before she takes the podium – the market will have no new information prior to her testimony and all assets are correlated to one!  This is the correlation from early January till now….

 

 

The REAL RIKS is Yellen not delivering a dovish call on Wednesday, that will set the market back another 5% easily…CRITICAL support is 1813/18 if it goes…. 1588/90 next….including CREDIT EVENT risk in both oil, energy and banking sector….

 

This is either END OF debt cycle or huge correction inside final leg of pretend-and-extend … Q1 has proven to be as challenging as expected… I still cyclically see low end of Q1 into Q2 as the "positive impact" from low energy, lower financing rates and slight improvement in Main Street will kick in as we come into summer..  Price action rules and it cries: RISK OFF….

 

 

 

 

 

The real pain though is in financials…….

 

 

 

 

Markit iTraxx Europe – 125 eq. weighted credit default swaps on investment grade European Eq:

 

This move is equal to more than 3 stand. Deviations….  MAJOR alert signal.

 

 

Deutsche Bank  - 5 YR default sawap………

 

Same historically:

 

 

 

Cleveland FED – Financial Stress Index …… close to 2011 highs….

 

 

 

 

Market overall Europe Senior Financial Index – SPREAD……..

 

 

Even JP Morgan

 

 

 

Even the go to market – fixed income volatility is rising:

 

Credit still leads stock market:

 

15 trillion US$ worth of AUM has disappeared….

 

G-7 volatility…. Up and up.. FX

 

 

 

European BANK index down… 41% from top!!!

 

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