Markets Panic Lower in Atypical High Volatility Squeeze

Today’s 50% spike in the VIX to 50% is especially curious because these standard deviation blowouts typically occur when paired with news. If you look at the market, and not just $NVDA, and see where the carnage has been focused, it would suggest recession.

OR, an alternative theory: The Bank of Japan is blowing up in their Yen carry trade.

The mechanics of the carry trade is to borrow in yen and then buy US treasuries. This trade is dependent upon the yen remaining weak or at least flat. Should the yen continue to trade up, then we have a scenario where the BOJ will either be forced to sell treasuries or cut rates in order to weaken the yen.

Whether you’re bearish or bullish, the recent price action has been excessive, conducive with previous mean reversion moves higher. You don’t get 30% moves lower in names like $DELL, $ARM, $MU, $AMD and $LRCX without a reason. There is a reason why this is happening and it’s not pricing in a war with Iran, given the weakness in WTI. The only logical conclusion to the spike in the VIX and total collapse of the market is the notion we are heading into recession, supported by the fact we are now pricing in multiple rate cuts.

I’ve seen markets panic like this many times, but very rarely do you see it happen with the mega spike in VIX. That’s all I’ll say about that.

How I am positioned:

I had a portfolio 90% long and was using the cash to trade/hedge. I did not sell anything but did initiate a 17% position in $SQQQ because this sort of action almost demands caution.