Things are really moving fast these days. Investors are dealing with panic one day, only to see the biggest short squeeze in a long time occur the day after.

On Monday, when the world felt it was going to end, we pushed our bounce logic note. We wrote;

“This is not a tactical fundamental bullish call, but we think the odds for a sharp reversal higher are setting up across equity indices. Expect to see credit and vols come in as well.”

Since Monday afternoon, all indices are up massively, vols have imploded and the move lower in credit has been epic, all this without a “trigger” really.

The SPX went from trend channel lows to trend channel highs. Given the move and the low liquidity environment, we would not be surprised if this bounce goes further than many think.

There is a level at 2820 as well as 2850 worth watching.

SPX is up bi time, but the bounce in DAX has been absolutely brutal. DAX futures +3.6% from Monday lows. The magical level in DAX remains the huge 12k level. Watch the close today carefully.

Vols have imploded quickly. Below is the VIX chart since Monday, -15%.

The sharp bounce did occur. Chasing “em” longs here is a bit tricky, same goes for shorts. The prudent thing would probably be to shave off some longs and wait for the next opportunity. Depending on how volatility plays out in the coming days, we could be looking for some interesting options plays, but for now we will be grateful for having caught the violent bounce.

Source, charts by Bloomberg