The Dow Jones Industrial Average plunged 400 points after the market opened this morning, and then slightly pared its losses to sit at around 350 down, as traders got an opportunity to react to changes in oil prices and a big selloff in China.
Below are visualizations showing the value of the Shanghai Composite Index, the price of oil, and an exchange traded fund that tracks the performance of the Dow throughout the day.
In an email this morning Jones Trading opined:
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Looking at my ‘Capitulation Checklist” – We are sooo oversold…
· SKEW nearing Dec 11 highs.
· Heavy Volume – Getting there. 1.5x normal y’day, 2x normal in EU today
· Forced selling – Felt like it everywhere. Massive Sell Programs
· Panic – Kinda, more shock
· Violent, Gappy – 100%
· TRIN – No, Well below 3
· VIX backwardation – VIX-VXV is there
· Citi Oversold -50 or worse: Almost
· Drawdown – SPX down over 10% from peaks, 6%+ in 2016 alone
· Institutional – DSIs
· Retail: AAII bulls to 2005 lows; “Fear and Greed
” at “Extreme fear” – Definitely
· Options – Put/call over 1, but needs to get 1.5+
· McClellan Oversold – YES
· RSI – 14day SPY < 30. Yes
GS Update on gamma positioning ahead of expiry (from Yesterday): Below 1900, the street likely leans short with 1875 and 1850 each holding > $5 billion of outstanding notional – Between current spot and ~2.5% lower, there is $25 billion of outstanding notional to the downside, and $18 billion between current spot and ~2.5% higher. – “selling could accelerate particularly as SPX approaches 1875”
Shanghai Composite Index (Closing) – 1 Year
Crude Oil Spot Pricing
Spdr Dow Jones Industrial Average ETF (DIA) Stock Price