Wave 3-of-3 in treasuries has begun. Expect very sizeable moves in currencies, EUR-crosses, stocks.. everything.
All ingredients of a crash are there:
- Rising yields
- Turkish Lira ready to weaken sharply after a refreshing pause
- Hedge funds begin to liquidate (Archegos is an early bird and their margin call is an important sign).
It's always like that: first the market conditions become right, then an institution fails, or two, or three, and everything is blamed on those. But in reality the market simply follows the gradient of pain, picking direction which would cause as much damage as possible. Archegos who needed to liquidate today simply was on the wrong side of the trade. And because everyone is on the wrong side of the trade today (long stocks, long bonds, short dollar) an avalanche of liquidations will create a crisis in the market very soon.
All ingredients of a crash are there:
- Rising yields
- Turkish Lira ready to weaken sharply after a refreshing pause
- Hedge funds begin to liquidate (Archegos is an early bird and their margin call is an important sign).
It's always like that: first the market conditions become right, then an institution fails, or two, or three, and everything is blamed on those. But in reality the market simply follows the gradient of pain, picking direction which would cause as much damage as possible. Archegos who needed to liquidate today simply was on the wrong side of the trade. And because everyone is on the wrong side of the trade today (long stocks, long bonds, short dollar) an avalanche of liquidations will create a crisis in the market very soon.
