Sell-off instead of the year end rally - CD Barometers warned over a period of 3 days prior to the sell-off in the last week of November 2021.
Macro economics - CD macro
The CD macro Barometer is indicating an uncertain situation since several months.
The major drivers of uncertainty are the raging commodity prices and the flattening treasury bond yields curve as shown on our CD macro dashboard. Compared with an average (green) the current yield curve is pretty much flat and the risk of inversion (which suggests an bearish environment) is growing.
Micro economics - CD micro
After a pretty straight forward October we've seen a spike and a small correction in the stock markets from November 9th. CD micro was showing uncertainty and recommended to consider de-risking.
The market recovered slightly, however, the situation remained uncertain and the barometer continued showing growing risk from Nov. 17th.
On November 22th the barometer jumped to 61% which is a clear warning. 2 Days later the market participants started massive hedging which lifted VIX and Put Call ratios on CBOE dramatically. On Nov. 26th the barometer showed 89% which has been the last warning. The following days were extremely volatile and all major indices lost value.
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Our algorithms detected even the small correction and reliably shown a warning sign while the stock indices continued recovery, grew slowly and went sideways.
CD micro suggested clearly not to buy the dip this time.
Moving to safety was clearly a good idea on Nov. 22nd for all risk sensitive traders and investors. The aggressive profiles among us de-risked their positions on Nov. 26th and watched the markets crashing.