The last time this index collapsed to these levels, the Fed was about to launch Operation Twist to provide additional liquidity to the markets.
Today, the Fed is about to start WITHDRAWING liquidity from the markets. And not a little: $10 billion per month this quarter, and $20 billion per month in 4Q17.
What’s the deal here?
The Fed is “taking away the punchbowl” from the markets. Sure, stocks might hold up relatively well today or tomorrow, but the reality is that the $14 trillion market rig of the last seven years is ending. Globally Central Banks are going to begin withdrawing stimulus from the system, as global credit is already decelerating at a pace not seen since the Great Crisis.