Stagflation mood, a busier day than usual, with 4 of 13 markets above their normal range.
The mood
The Risk Pulse is at −8.5: the market is leaning cautious. The pattern right now is stagflation: equities falling, oil up. The three sources disagree today, so read the number with care. It describes the mood as it is now; it is not a forecast of direction.
- ① Mon 08:40 The pattern turned stagflation; the Risk Pulse was at −11.1.
Above 0 the mood leans toward risk, below 0 it leans cautious. It describes the mood as it was; it is not a forecast of direction.
The world
Asia: Nikkei −0.80%, Hang Seng +0.55%.
Europe: DAX −0.75%, FTSE MIB +0.36%, FTSE 100 −0.32%.
United States: Dow Jones −1.23%, S&P 500 −0.52%, Nasdaq −0.21%.
The biggest move on the board: Dow Jones −1.23%.
Noted overnight: 08:36 Regime shift: STAGFLATION: equities falling · oil up; 07:52 KOSDAQ -3.3%; 03:42 Shenzhen Component -2.1% (Milan time).
Today's weather
Of 13 markets we follow, 4 are expected to move more than usual today and 5 less than usual. The busiest: SPY (S&P 500), about 1.23× its usual move. The calmest: GLD (gold), 0.68×.
| MARKET | LEVEL | EXPECTED MOVE | VS USUAL | ||
|---|---|---|---|---|---|
| SPY | S&P 500 | 5 | lively | 0.62% | 1.23× |
| QQQ | Nasdaq 100 | 4 | normal | 0.82% | 1.06× |
| IWM | U.S. small companies | 4 | normal | 0.68% | 0.97× |
| DIA | Dow Jones | 3 | quiet | 0.41% | 0.80× |
| EFA | developed markets outside the U.S. | 4 | normal | 0.65% | 1.10× |
| EEM | emerging markets | 4 | normal | 0.76% | 0.97× |
| GLD | gold | 2 | calm | 0.65% | 0.68× |
| TLT | long U.S. Treasury bonds | 5 | lively | 0.47% | 1.19× |
| XLF | U.S. banks and financials | 5 | lively | 0.69% | 1.16× |
| XLE | U.S. energy | 3 | quiet | 0.69% | 0.74× |
| XLK | U.S. technology | 3 | quiet | 0.81% | 0.75× |
| VNQ | U.S. real estate | 5 | lively | 0.62% | 1.17× |
| SMH | semiconductors | 3 | quiet | 1.09% | 0.71× |
Level 1 is very calm, 4 is a normal day, 8 is a storm. The expected move is up or down: we never say which way.
Over the next days, volatility is expected to stay about where it is.
Rare moves
On Friday, 23 October: XLE (U.S. energy) +2.60%, a move seen about 1 day in 13; DIA (Dow Jones) −1.24%, a move seen about 1 day in 12; XLF (U.S. banks and financials) −1.32%, a move seen about 1 day in 10. Rare does not mean "about to bounce".
Our record
Forecasts written before the day and then checked: 447 right of 845 (53%). A coin would give about 50%. It is a strict test: a day counts as right only if we said in advance whether it would be busier or calmer than that market's usual day, and it really was. Every forecast is on the Track Record page, wrong days included, so you can judge it yourself.
Stress Test: the water now
Of 16 broad markets, 12 are calmer than their own usual, 4 about as usual and 0 rougher. The roughest compared with its usual: Nikkei 225 at 1.20×; the calmest: CNY / USD at 0.19×. The furthest below its peak: BRL / USD, 69.3% below (on 27.5% of its past days it was even further below).
The price of fear
Options work like insurance against big moves: their price tells how big the market thinks the next month's moves will be. Over the last year, the options on Oil asked for the most extra: on average 0.62% a day more movement than really came.
| FUND | OPTIONS EXPECT NOW | MOVED, LAST 21 DAYS | USUAL GAP | EXPECTED MORE |
|---|---|---|---|---|
| S&P 500 SPY | 1.23% | 0.60% | +0.35% | 97% of days |
| Nasdaq 100 QQQ | 1.78% | 1.15% | +0.31% | 90% of days |
| Dow Jones DIA | 1.08% | 0.63% | +0.27% | 96% of days |
| Gold GLD | 1.53% | 1.37% | +0.07% | 54% of days |
| Oil USO | 3.78% | 2.18% | +0.62% | 81% of days |
All values are the size of a typical day, up or down. Measured Fri 23 Oct, 23:10 (Milan). It says how big moves were priced, never which way.
How to read this
- Risk Pulse: one number for the mood of the markets, from −100 (everyone runs from risk) to +100 (everyone looks for it). Around 0 is neutral. It describes the mood now; it never says where prices will go.
- The pattern: what is moving together right now: risk-on, calm, neutral / mixed, crypto stress, risk-off or stagflation. The words after it are the moves that set it.
- The three sources: the Risk Pulse is built from three independent data feeds. When they agree, the number is sturdier.
- Level 1 to 8: how much a market is expected to move today, compared with its own history: 1 very calm, 4 a normal day, 8 a storm.
- Expected move: the typical size of today's move, up or down, in percent. 0.52% means a move of about half a percent either way.
- Vs usual: today's expected move divided by the market's usual one: 1.00× is usual, 1.12× is 12% more than usual, 0.66× is a third less.
- Rare moves: moves on the last market day that were unusually large for that market, and how often a move that size happens. Rare does not mean it will reverse.
- Our record: every forecast of the size of the move is written before the day and checked after the close: right means we called correctly whether the day would be busier or calmer than usual. A coin would score about 50%.
- The price of fear: options work like insurance against big moves. "Options expect" is the move their price asks for, as the size of a typical day; "usual gap" is how much more (or less) than what really came, over the last year. It never says which way.
- Stress Test: the water now: each broad market compared with its own long-run usual roughness: below 0.8× is calmer than usual, above 1.25× rougher. "Below its peak" is how far it stands under its highest point so far.
The level colours: 12345678 from very calm to extreme.
— Written by the Nostromo, our AI desk, from live data only; approved after automatic checks. Published 09:00 Milan time.