Day Traders Diary


Global equity markets began the last full week of August with a broad-based tumble that began overnight in Asia and continued into the U.S. session. When the dust settled, the S&P 500 ended lower by 3.9% after opening with a 5.3% loss while the Nasdaq Composite lost 3.8% after starting the day with an 8.8% decline.


The Monday retreat began unfolding shortly after Asian markets opened for action with continued concerns about global economic growth weighing on investor sentiment. China's Shanghai Composite paced the overseas weakness, plunging 8.5%, after the weekend went by without direct policy intervention from the People's Bank of China. Instead, pension funds managed by local governments were allowed to invest in the stock market, but that development was all but ignored.


There was no respite during the European session as equity indices across the old continent faced daylong pressure with France's CAC, Germany's DAX, and UK's FTSE losing between 4.7% and 5.4%. Notably, an extension of recent selling in the DAX resulted in the index widening its slide from record highs to 22.0%, representing bear market territory.


Once the U.S. session got going, a chaotic first hour ensued, featuring wide spreads, low liquidity, and a mad dash for volatility protection. In fact, the CBOE Volatility Index (VIX 40.03, +12.00) did not produce any quotes during the first 30 minutes of the session, but once quotes resumed, the index soared past levels seen during the May 2010 flash crash. The VIX notched its high just below 53.50%, but retreated into the 40.00% area by the close.


Today's selling was far-reaching with just 136 NYSE listings ending in the green while 3079 names posted losses. Given that dynamic, it wasn't surprising to see all ten sectors end the day in negative territory with losses ranging from 3.1% (telecom services) to 5.2% (energy).


The energy sector finished the day behind other groups, widening its Q3 decline to 20.5% as crude oil contributed to the persistent weakness.The energy component was clipped by the overarching global macro concerns, tumbling 5.4% to $38.25/bbl.


Crude was unable to draw support from greenback weakness even as the Dollar Index fell 1.7%. Most notably, the dollar slid 2.8% against the yen (118.60) and surrendered 1.8% to the euro (1.1595) as the unwinding of carry trades took a toll on the dollar. Meanwhile, Treasuries rallied overnight, hitting their best levels around 9:30 ET before retreating from those highs. The 10-yr note ended the day with a gain, sending its yield lower by four basis points to 2.04%.


The intraday retreat in Treasuries occurred as stocks attempted a recovery, but the market met renewed selling and returned into the lower half of its trading range by the close.


Monday's aggressive selloff invited above-average participation with more than 1.6 billion shares changing hands at the NYSE floor.


Investors did not receive any economic data today, but a few reports will be released tomorrow. The Case-Shiller 20-city Index for June ( consensus 5.1%) and the June FHFA Housing Price Index will both be released at 9:00 ET while July New Home Sales (consensus 511K) and August Consumer Confidence (expected 93.1) will be reported at 10:00 ET.


Nasdaq Composite -4.4% YTD

Russell 2000 -7.6% YTD

S&P 500 -8.0% YTD

Dow Jones Industrial Average -10.9% YTD

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