"Volatility Trade" Biggest Factor In Sell-Off?

With volatility this high, it's little wonder that last week's 20 percent rally in the S&P 500 is being met with aggressive selling today.

We have noted that while the "volatility trade" is still the best way to play the market, other factors also influenced stocks today: the bond blow-off (which has all the elements of a bubble) and the big drop in commodity prices are adding to the volatility.

To summarize:

1) Retail sales were generally stronger than expected, but retailers sold off because so many had big runups of over 20 percent last week. Citi cut its rating on Limited on valuation because it had moved up 31 percent last week.

2) Commodities were down big:

Palladium down 9.9%
Silver down 8.6%
Gasoline down 8.2%
Gold down 5.9%

And as a result all the big commodity names in steel, agriculture, metals and oil service were down, many double digits. Crude and energy commodities were weak after OPEC ministers couldn't reach an agreement on a production cut.

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3) Coal names were down double-digits, as poor economic news from China and weaker commodity prices weighed on the group.

4) Waiting for turnaround plans from the auto companies; tomorrow will be a good day for it. November auto sales will be horrendous; 10.2 million estimate seasonally adjusted sales vs. 16 m last year.

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