Last week we asked (and answered) whether capitulation was close (the answer - no). Earlier this week, we noted that the equity market remains stubbornly in denial that things could get much worse (even as credit and eurodollar markets suggest otherwise). Today we get a double whammy of confirmation as Goldman warns that the current drawdown could be significantly worse than August's (and markets are not pricing in the risk) and then DoubleLine's Jeff Gundlach warning that "this is not stopping any time soon."
Capitulative volume is not here yet...
And the volatility of VIX is entirely unphased...
And despite the record skews, the cost of downside tail-risk protection in stocks is still notably lower than in credit...
Which leaves Goldman warning that the ongoing equity drawdown is heasding for as bad as August...
And while it was short-lived in August, this time equity volatility has not spiked enough to be capitulative...
And furthermore, equity risk remains notably adrift relative to credit risk...
Which as DoubleLine's Jeffrey Gundlach explained to Reuters is why - until he sees VIX jump over 40, "This is not stopping anytime soon."