Credit, especially European credit, iTraxx main, is crashing today. We are seeing iTraxx main put in the biggest move lower in a long time. We have been pointing out for the past week that European credit has been trading too rich to most other assets.

Below is the updated Eurostoxx 50 (orange) versus iTraxx main (white inverted) chart. Note the bounce in both assets and the relatively bigger move in credit. Credit continues being one of the most important macro risk on/off drivers here, so watch it carefully.

The move lower in credit is feeding through to volatility as well. Note how credit (white) moving lower is accompanied with the Eurostoxx 50 “VIX”, V2X (orange), moving lower as well.

US credit, CDX IG, continues down as well, although the move lower is less violent than the European version.

Credit and volatility collapsing, has reignited the equity move higher, which is actually rather violent. Gamma continues to be king, but be sure to hedge those deltas.

For the non-hedged investor, the frustrating habit of buying high and selling low seems to continue. Just as we pointed out on recent lows in SPX, the crowd once again loaded up on puts just in time for the bounce.

Markets don´t crash when people are long puts.

Chart showing SPX index (orange) versus put call ratio (white).

Source; charts by Bloomberg