Markets continue moving extremely fast, mostly down, but the spike higher in Europe today so far is as extreme as the move lower we saw yesterday. This kind of market usually confuses most people as they are thrown between greed and fear on a daily basis.

We would like to point out a few random charts as our “theme” today.

FX people say “their” risk off occurred earlier this year, but we are not sure we buy that argument. JPY 1-month ATM vol (white) versus VIX have moved in tandem YTD, but note the recent gap. JPY is telling a different story to the VIX.

Equity markets have sold of partly due to the Brexit and the Italian situation. Note how VIX has spiked much more than the European “VIX”, V2X. Also note how European vol usually trades above US vol.

Euro Stoxx 50 is a rather dull index seen over longer time periods and has mean reverting features. Time for a mean reversion here?

Equity markets have sold off partly due to the Chinese implosion. Note the Chinese ETF, FXI, has performed much better than the SPX since October 10th.

Not only have volatilities exploded, but the tilt in term structure of the SPX has also gone totally inverted. The entire volatility curve has shifted, and even more is the massive shift higher in short-term option maturities. (orange yesterday, blue 2 days ago, green 1 week ago).

The question is if the fear itself has got ahead of itself?

Source: charts by Bloomberg