Morning Note

Asian markets showed some calm last night after yesterday's global equity drubbing. Most markets closed in the red, but with the worst being a -2.23% (small only in comparison to yesterday) hit for New Zealand. India, Indonesia and China's Shenzhen Index actually closed up. European equities are rising a bit this morning and U.S. equity futures are pointing to a bounce that would recapture roughly a third of yesterday's decline.

The VIX (S&P 500 Volatility Index) is tanking this morning, -8.36%. But don't let that deceive you, a VIX at 37.20 (the level as I type) denotes a most dangerous investment setup for stocks.

Oil's up 1%, gold's up $7, silver's down .7% and copper's up .5%. Ag futures are mixed, ranging from the coffee contract, up 1%, to sugar, down .74%.

U.S. treasuries this morning jibe with an opening rally in equities; i.e., yields higher/prices lower. European sovereign yields, however, are down across the board. Asian yields are mixed...

So, while on balance positive, not the unambiguous pre-market setup we came into yesterday's session with.

While -5+% down days for U.S. stocks are indeed a rarity, they do tend to be followed by nice upside pops the next day -- as pre-market action would suggest (at least at the open) for today.

Note where the yellow bars in the lower panel pierce the red horizontal line. Those are your days, since 1928, when the S&P 500 moved more than 5%, up or down:
Click to enlarge...


As you can see, periods of high volatility tend to cluster. A phenomenon than in and of itself can be telling in terms of the risk/reward setup and go-forward probabilities at any given time. Something I'll have to explore with you in a video presentation at some point.

I'll save the rest for our macro update, which will come to you either later today or sometime over the weekend.

Happy Friday!
Marty