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Stocks Suffer Second Largest Decline in History as VIX Extends Higher

Stocks Suffer Second Largest Decline in History as VIX Extends Higher

2020-03-16 20:40:00
Peter Hanks, Analyst
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Stock Market Crash Update:

  • The Dow Jones declined -12.93% (-2997 points), the second largest in history
  • Meanwhile, the Nasdaq 100 fell -12.32% and the S&P 500 -11.98%
  • Despite a series of Fed and governmental measures, volatility and losses may continue as the VIX extended higher into the close

Stocks Suffer Second Largest Decline in History as VIX Extends Higher

Stock losses continued this week despite a series of measures from the world’s major central banks and governments. Evidently, the monetary and fiscal policy changes were unable to undo the perceived impact of containment procedures which look to eviscerate the global economy. As a result, equities have suffered significantly with a few sectors and stocks enduring particularly acute pain.

Dow Jones Price Chart, Percent off High

dow jones price chart

Chart Created with YCharts

To that end, Boeing, once the largest component of the Industrial Average, has fallen precipitously as airlines cut new orders and ground flights. Coupled with their ongoing 737 Max issues, Boeing will have to weather a series of debilitating headwinds in the weeks and months ahead. Similarly, the XLE Energy ETF may also continue lower.

VIX Weekly Chart

vix price chart

Chart created with TradingView

As crude oil continues to fall, US shale producers may see profitability dry up and cash flows constrained. In turn, the entire energy sector will likely remain a laggard as the outbreak progresses. That being said, a staggering VIX close suggests further volatility is ahead.

US 500 MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 9% -4% 0%
Weekly 12% 16% 14%
What does it mean for price action?
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Although IG Clients are confident stocks have reached a bottom, further losses could materialize regardless of recent price action as the staggering declines are indicative of panic and do not necessarily suggest an end to bearishness despite the Dow Jones suffering its second worst performance in its 124-year history.

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To put this into perspective, Monday’s decline is larger than any single-day loss in 1929 and the Fed has already lowered interest rates to zero and initiated a quantitative easing program. Thus, it would be extremely presumptuous to suggest we are out of the woods. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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