[ [ [ bloggin space w i k i ] ] ]The Stock Market
The US equity market known more familiarly to the average SUV driving American as the stock market is a nebulous system of money harvesting, hedging, betting, buying, selling, and general fuckery that abounds perhaps our wildest imaginations.
The derivatives market
Unknown to the average mom and pop, the derivatives market of futures, options, swaps, and god knows what other satanic instrument pulls the true strings of the market, due to its inherently leveraged and occasionally illiquid nature. After the rise of payment for order flow and heavy commission reductions with US brokers, parts of this market have become more accessible to the general public, who predictably treat it as a legal glorified casino. Users like BallSac constantly search for the next 1000x instrument, which sadly is a criteria that happens daily in some part of the casino market.
The equity futures market, spanning the overnight hours between the markets close and opening bell, is responsible for nearly all movement of stocks in the last 10 years. How the entire market cap of most of the globe moves wildly in price due to an instrument that trades less than 10 contracts a minute remains a mystery.
Events
Election of Trump and 2017
In the latter part of 2016, equity markets were mostly done pricing in the victory of Hillary "the Hilldog" Clinton, given the relative absurdity of the Republican front runner. With a weak Chinese economy and general non-excitement for Democratic leadership, the indices entered a lethargic period of cooling off as November loomed. As election night carried on, the sudden revival of Donald Trump kicked open a surge of volatility in the futures market, as participants now had to actually consider such an actor winning the presidency. As the nail in the coffin for Dems panned out, the sudden realization that Republican policies could revitalize the economy gave way over the uncertainty of having a reality show host as president, and led to a general rally into year's end.
The following year was a period of unprecedented slowness and grind in the markets. Volatility fell to levels not seen in decades, prices barely moved on a day to day basis, and options premiums were non-existant. In the words of rapper Future, life was good for long holders of equities, especially those collecting large dividends. Even Fed hikes and budget struggles toward the end of 2017 could not stem the upward flow as companies reveled in the new environment. However, all things eventually come to an end.
Volpocalypse
January 2018 saw more aggressive upward moves in equities across the globe, continuing the trend set the previous year. In February however, several companies began to warn of the eventual effects of Fed hiking, combined with potential future slowdowns. Later that month, the markets experienced some down days. As volatility picked up, vendors of volatility products who normally rolled their underlying derivatives across expirations, had to do so under stressful and illiquid conditions. As it became apparent there were simply no offers for these products, panic selling and hedging in equities led to a huge run on the VIX, effectively flash crashing the Dow and eliminating a month of gains in the span of 30 minutes. Some products such as XIV lost so much value in the roll they were essentially delisted, and the suckers investors woke up to almost nothing in their coffers.