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9 apr. 2017

“It’s Now A Matter Of When, Not If, Markets Break Down”

After yesterday’s sudden last hour swoon, in which the DJIA tumbled over 200 points after the FOMC Minutes, the biggest intraday reversal in 14 months, suddenly the bears – especially those who until recently were on the fences – are getting more vocal, such as Mark Cudmore, Bloomberg’s former FX trader who this morning writes that “it’s now a matter of when, not if, markets break down into a proper bout of risk-aversion.” As for timing, he sayd that “we’re debating the hour rather than the week.”

The key remains the 2.3% yield level in 10-year Treasuries. With the Fed intimating that balance sheet reduction may come sooner than investors expected, thereby potentially reducing the pace of rate hikes, that market is fundamentally fragile as well.

I’d be surprised if the levels survive Thursday, let alone until the weekend. The tide has already turned and we’re soon going to see who is swimming naked.