Why did the markets tank and recover so quickly overnight? Ask 100 people this question today and you'll likely get 100 different answers. But here's the truth.... All day yesterday we had indications on our systems of strange activity in #USDJPY and #US10Y. Not knowing what to make of it at the time and putting it down to election noise we merely used the information to cut a long in $TER that we had from Monday. No big news, no huge alpha capture, just another day in market paradise. Well, it turns out that the strange activity was in fact a precursor to the fourth largest hourly down move in USDJPY since the the end of July sell off in the global markets. This is nothing to do with elections. Along side this as one might expect , the #nikkei sold off very abruptly and as we have been saying for weeks now the Kospi is old news for the Nasdaq, it is the Nikkei that has been running the $NQ show all summer and all fall. Anyhow, with the abrupt collapse in the Nikkei which sank around 4% in a couple of hours, the Nasdaq surely followed, along with it $SMH which took out the July lows while NQ held above its own, and the Nikkei also made a liquidity sweep below its July lows. All risk on assets have since made a vertical straight line recovery from those lows in what looks like the end of some forced selling and JPY related mechanics, combined with levels that will have been a target entry points for a buyers to step in and squeeze the shorts. What else is interesting regarding the elections however is the timing of the double bottom just as the Senate was mathematically secured around 04:30 UTC. To add to the picture even further we said to members that 27,850 - 900 was a key level to hold on a daily basis from another system that focuses on medium term pivot points, again nothing to do with elections, and that we would be very surprised if we didn't see a strong rally. How long it lasts is another matter but know this: Markets do not move around on one single outcome. This is a living breathing organism comprised of tens of thousands of funds and institutions, all running with fund mandates and position limits and understanding market mechanics is crucial to not being caught with your pants down in the markets. Simplicity and outcomes of abc = xyz do not exist in the financial markets. The market is instead comprised of millions of tiny such equations, from a fund in Abu Dhabi, to the Vatican, to CALPERs to Auntie Joan's 401k in Chicago. Don't try to pigeon hole market events into one simple sentence. It doesn't work like that and anybody who says it does is telling you lies, or more likely doesn't really know what they are talking about. So there you go folks, a perfect filter conversation piece for anybody looking to suss out who's real on here and who is making shit up as they go along for $200 a month.
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