Having been trading the bonds for many years, the recent volatility has really caught my eye. The extent of the price swings in this market has been nothing short of breathtaking.
Whenever you see a market make swings of this magnitude, know that someone is in serious trouble.
Take a look at this short term price chart and imagine the carnage being inflicted on some traders as they swing back and forth from such huge extremes.
Do you see those big volume spikes? Someone got obliterated!
Try to imagine that you are a risk manager for a large banking or mortgage interest and are attempting to institute some sort of hedges! How in the world do you even read a market that is doing this sort of thing? I can tell you that hedgers and speculators both have been run over in this market the last couple of days.
This is what I am referring to when I caution traders out there. These markets can clean you out faster than a package of Ex-Lax if you let down your guard. Either trade smaller or stay on the sidelines but do not try to play the hero right now. It is just too dangerous!
Making predictions, postulating this or prophesying that, in dogmatic terms is very foolish and speaks more to hubris than it does to sound judgment. What I do know is that the entirety of the markets is very unsettled right now with the VIX having rising sharply and with the currency markets having been thrown into turmoil. Until the currency markets calm down, be careful.
By the way, crude oil is managing to hold above $80 for now and the XLE is up today. Maybe crude has gone down enough? I don't know but am monitoring it very closely.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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