17.10.2022 – Traders, listen to the signals: fierce rally, massive sell-off. The market is becoming increasingly unpredictable, nerves are on edge. And already Goldman Sachs is warning of a new global financial crisis.
Gobstopper for all traders with the right nose: Violent volatility on Wall Street. We hope that you always found yourself on the right side of this turbulence. Pars pro Toto we have picked out the daily chart of JPMorgan – you can see that even this heavyweight has recently been whirled around violently.
And this was the reason for the recent roller coaster ride: last week, something unique apparently happened in the entire options market. Jason Goepfert of Sundial Capital pointed out that in the retail market, the volume of puts bought tripled the volume of calls bought for the first time ever: “Last week, retail traders bought $19.9 billion worth of puts to open. They bought only $6.5 billion in calls to open. This is the first time in history that puts were 3x calls.”
This was of course an invitation for large hedge funds to trigger a short squeeze. They obviously still have some ammunition, because according to the financial blog “ZeroHedge”, the net investment ratio is at its lowest level since March 2020. The result: despite the horrible consumer prices, futures had shot up in a massive short covering, only to be shot down again on Friday. In other words, the short rally had no sustainable fundamental bottom. There could be more to come.
The mother of all crashes
If Goldman Sachs super-bear Matt Fleury has his way, the mother of all crashes is yet to come – the Global Financial Crisis. The trader just released a report titled “Adult Swim” – and in it, he conjures up a new 2008. Specifically, Fleury warned: “I said ‘this reminds me of 2008’ more times this week than I can remember. The velocity of moves is increasing. The pace of tremors quickening.” Meaning: In a normal bear market, there is only a slight current, the feet can still reach the bottom and there is a lifeguard on the shore – the Federal Reserve. In this market, however, there are violent currents in deep water, he said, and the Fed will not intervene. That’s because the Fed’s hands are tied because of high inflation, the Goldman expert judged.
The Fed will eventually make a U-turn on tightening – but that pivot won’t happen until the economy has gone into cardiac arrest. The worst is yet to come, according to Fleury: “Where are the bankruptcies? Where are the private mark downs? Who owns too much illiquid assets that haven’t had a real mark in years? Where are the over leveraged homebuilders going under?” Especially since, for the first time ever, OPEC is no longer an ally of the U.S.; tensions with China also rose. We are curious to see if this gloomy prediction will become reality – good thing you can make money short with CFDs during the crisis. Berstein Bank keeps an eye on the situation for you!
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7