Is This 2018 Market Phenomenon Knocking on 2023's Door?!

[Image] Is This 2018 Market Phenomenon Knocking on 2023's Door?! Today, we’re hopping in a time machine… Fasten your seatbelts. And listen… Five years ago, in early 2018, a shocking move in a particular index had widespread implications on the entire U.S. stock market. The major benchmark indexes had some of their biggest single-day losses of all time while other exchange-traded products (ETPs) went bankrupt overnight. So, why am I telling you this now? Because the current market is bearing an uncanny resemblance to the days and weeks prior to this infamous event… By reading the tea leaves of this historic market move, we can potentially identify five-star trading opportunities (and steer clear of avoidable losses) in the near future. With that in mind, keep reading and I’ll show you the connection between the current conditions and one of the most insane market days in recent history… What Happened (and Why Did It Occur?) On February 5, 2018, the Volatility Index (VIX) jumped over 100% in a single day — its largest-ever one-day rise. This day is now infamous, often called “The 2018 VIX Shock” or "Volmageddon" due to its abrupt nature and its impact on volatility-based products. Take a look at these charts: As you can see, the 10-year Treasury yield rose from early December 2017 to the beginning of February 2018 — the trading day before the historic jump in the VIX. Meanwhile, from October to December 2017, the VIX was really low, at around 10 on average. Traders talked about this a lot, debating what was causing such suppressed volatility. However, the VIX began rising in late January 2018… Then…BOOM! The VIX went absolutely ballistic on February 5, spiking to 37.3! So, why did this happen? While no one knows for sure, there are three popular theories: - The market was already on edge due to concerns about inflation and potential interest rate hikes by the Federal Reserve. - A stronger-than-expected wage growth number was reported, increasing fears about inflation and tighter monetary policy. - A significant number of traders and investors had taken positions that would benefit from continued low volatility. When the VIX started rising, it led to a feedback loop as traders rushed to cover their positions — sort of like a ‘short squeeze’ for volatility. The Aftershocks The aftershocks of “Volmageddon” rippled throughout the entire market… Certain ETPs that were, designed to provide short exposure to volatility (i.e. they would benefit if volatility decreased), suffered massive losses. For example, the XIV (VelocityShares Daily Inverse VIX Short-Term ETN) lost over 90% of its value and was subsequently terminated. The sudden spike in volatility and the liquidation of certain volatility products had a cascading effect on the broader stock market. The SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA: DIA) experienced a drop of over 1,100 points on February 5 — its largest point drop in history at that time. The event served as a wake-up call for many traders about the risks associated with volatility trading and short-volatility strategies. But more importantly, it was also an incredible trading opportunity for anyone who was prepared… And speaking of being prepared… Current Conditions Resemble Fall 2018 Let’s look at the macro backdrop of the current market: The 10-year treasury yield has held a consistent uptrend, rising from 3.57% in early May to 4.91% — its [highest level since 2007]( — as of this Wednesday, October 18. Meanwhile, the VIX has been holding steady at around 15 through mid-September until it recently started rising to nearly 20. Sound familiar? That’s right … the current market conditions are resembling the 2018 VIX shock. You’re probably connecting the dots and wondering: are we setting up for another VIX shock?! Let’s not get ahead of ourselves. As intriguing as this historical parallel might be, remember that there are no guarantees in the stock market. Plus, because conditions are different now, we can't directly compare the current situation to what happened in 2017-2018. Think about how much liquidity central banks have supplied to the system since the regional banking crisis in March… With all that money being pumped into the market, using the past VIX trend as a guide might not work. It's hard to say exactly why the VIX jumped so much in 2018, so it's tough to understand what's happening now. But, if we assume that the 2017-2018 sustained rise in yields had some effect on trader positioning leading to the VIX shock, it goes without saying that the current market conditions require caution. Remember: History doesn’t necessarily repeat itself, but it usually rhymes. Closing Thoughts I’m not necessarily saying there’s gonna be another VIX shock. There are no guarantees in the stock market. However, I’d be remiss if I didn’t point out the unignorable similarities between today’s market and the conditions in early 2018. Do with this data what you will. And, as always… Stay Street Smart, Jeff Zananiri P.S. The latest overnight trade idea is out for Burn Notice Members. If you thought that was big, wait for the next one! [Be first in line – Click HERE!]( P.P.S. Expert Trader Ben Sturgill is about to unveil a market event like no other. Set a reminder for Tuesday, October 24th at 8 pm EST. Don't miss out – [Register NOW!](   66 West Flagler Street STE 900 Miami, Florida 33130 United States [Facebook]( [Twitter]( [Instagram]( [YouTube]( [Click Here to Unsubscribe]( **Our gurus teach skills others have used to make money. 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