7 Amazing Charts From Black Monday
The damage in the markets created by the decline since last Thursday, particularly on Monday, is significant. We have noticed 7 amazing facts on Monday August 24th, which will go into history books as another ‘Black Monday.’
The volatility index VIX registered a 6-year high, spiking ‘out of the blue’ to levels not seens since the great crash of 2008 / 2009. See the two red circles in the first chart.
The Dow Jones literally crashed in 3 trading days, a decline not seen in many, many years. The days of the October lows of last year were ugly, but that is nothing compared to the last 3 days. The Dow Jones lost more than 2,000 points in those 3 days, a loss of 11.4% from high to low.
The standout crash of the day in the U.S. market, when it comes to sectors, was the financial sector, represented by the XLF ETF. That instrument collapsed 21% on Black Monday, not seen before for such a major ETF.
Surprisingly, XLF closed the day only 4% lower. It seems that some market participants with deep pockets had a ‘Green Monday’, the ones who bought XLF at the lows, but we are convinced that is only a very select number of participants.
Meantime, the stock market optimism index has literally crashed to the lowest level since 2001. The chart below shows data going back to 2001, so this could be an all-time low. This week’s correction brought optimism down to levels even lower than the 2008 and 2009 collapse.
In Europe, things were not different. On the contrary, the German DAX index, the bellwether of European stocks, dipped below its breakout point, which is the announcement of the trillion Euro QE program in January of this year. In other words, all gains booked by the largest montery stimulus program in Europe are erased. Is more QE needed to lift the stock market?
On Black Monday, the price of crude oil continued its collapse. It closed the day below the peak of 1991. In other words, oil is cheaper today than it was 24 years ago! Talking about deflation.
And meantime, the yellow metal is sitting down, and watching the show. Gold barely moved on Black Monday, there even was an upward bias. And while commodities are crashing, gold is disconnecting from the commodity complex, as seen on the next chart (red circle).
What this all tells us: steer clear. Let this market rout work its way out. We will probably get more slicing and dicing before all is said and done. Avoid bottom picking, focus on deep oversold assets, like commodities or gold. Remember the lesson of your first investor class: sell high, buy low.
Disclosure: None.
The crash was more just like a selloff. Not that bad and little fear or fright. If this scares people too much they should lighten up on their holdings. Sadly, the market volume keeps aggregating to a fewer and fewer players making the market more and more unhealthy regardless of if the market rises or falls.
Gold is both money and commodity. So its value is hard to measure as one or the other. It could well be called quantum. We are in a deflationary cycle so the commodity is dragged down. It is not a currency. It is a weight so possession negates monetary value at times. However, I best describe precious metals as a lifeboat not an investment. An optional adornment just hanging around until time of need. Then its value leaves the realm of the finite and becomes infinite. Either you have one or you don't. When the ship founders as they do from time to time, you don't want to be without one and there's no going back. You have left the world of dollars. They went down with the ship. You have entered the world of ounces. The value of the lifeboat has manifested. Be glad you have one. You'll survive where others perish.