Protect, and a good friday agreement. Mark he quoted it is important to tell the truth. A u. K. Decision to leave the Customs Union would make border checks unavoidable. Say two officials explosions at a mosque have and wounded 75le others. The blasts happened in morning prayer. A twin car bombing left 33 people dead. Ruling south african parties will bring it into jacob zumas presidency. The African National conferences trying to wrap up a deal for him to resign so that the party leader can restore public support as it gears up for elections next year. Global news 24 hours a day powered by 27 hundred journalists and analysts in 120 countries. This is bloomberg. Julia live in new york, im julia chesley. Im scarlet fu. Joe im joe weisenthal. Julia stocks going from positive to negative today. Major averages currently in the green. Joe what jim is . Scarlet rocky stocks at the end of a rocky week. Higher Interest Rate volatility could be partly to blame. Where are the deficit hawks . The flag that stole the spotlight at the Opening Ceremony at the Winter Olympics. Athletes marched under a flag of unity. The efforteans for to give up Nuclear Weapons in north korea. We are looking at the final 30 minutes of trading. It could get interesting because we have typically seen an acceleration to the downside if you judge by the recent history. Right now we are up by three quarters of 1 . We have been little changed. We have. It has been difficult to keep track. So many have been talking about they got up to get a coffee and then everything has changed. That is characteristic of trading this week. 1. 9 , risingalling as much and a half percent. As we say, it could change at any moment. Now it is lower but it was higher during the day. This higher volatility is likely here to stay for several months if previous volatility spikes in the aftermath are any indication. If you look at the five day charts of stocks, negative returns to say the least. On aesent, the decline weekly basis is the worst since 2011. We were admits the financial crisis. We backed off a little bit and most investors have said you are not paying a fundamental risk at this point causing this selloff. Something to keep in mind. I continue to watch the ranges we are seeing. The percentage spread between the low and high of the session. It was low for some time and now it is being characterized by these huge swings that we have been talking about leading to this interesting momentum. I cant get enough of this chart. This is a twoweek decline in momentum. Decline is here, the the quickest we have seen ever in terms of speed, velocity of the decline that we have seen. The other thing that is characterizing the selling, it is on high volume. We could be on track for Trading Volume by 500 of a billion shares. The last time i checked a few moments ago, 50 above the 20 day average. That is the chart you see on top and the 15 minute interval of the volume above the 20 day average. Wide swings. A lot of trades being executed in this market causing a surge in volume and no end to this volatility in the intermediate. Almost like it was organized. The perfect teaser. Lets get some context. Price, us now, Cameron Bloomberg intelligence rates strategist, i were jersey joins us. Great to have you with us. What a long week. Happy friday for now. Talk to us about the unprecedented momentum shift. January, the stock market seem to go up every day which led to an extraordinarily overbought condition. What it usually means, it is bright for a pullback but essentially we have never seen a pullback like this. The move from the highest overbought level and 50 or 60 years on the s p to oversold in the span of a couple of weeks, it basically never happened before. What does that do for sentiment . It kicks it in a sensitive place. Julia every day we have had someone tell us this is healthy. Is it . The fundamentals are healthy but the technicals have disintegrated. Any usefulhat have information of someone calls something healthy . Or things like panic. It is something of a cliche. Really when you hear healthy correction what you are referring to is an overdue correction. Is this the hallmark of a healthy pullback . Is that how the bond market sees it . One of the things that is going on, we are pushing down volatility. A lot of people were selling volatility, they thought this run of the markets was going to continue ad infinitum. What you have seen is this massive spike in volatility that cause things to go down. You look at what the vix did, in risk sensitive rate assets. You see that same thing. Swaptions on the market. Your maybe going back into a new paradigm where you are going to have somewhat higher volatility in almost every market. Joe why have we not been seeing much treasury buying like we did in previous ones . You have two factors. Plus ann expectations error turn term. The real yield has a lot to do with volatility. What is uncertain to be like . Moread uncertainty rising than Inflation Expectations. You actually have Inflation Expectations that have gone down because of worries about the stock market and the economy but then you have real yield so this war rate that has gone up. That is why you have seen 10 year treasuries near unchanged. Scarlet i have the chart that illustrates the volatility we are saying as well. Of the other note to have written, the momentum given the casino but we have seen over the last few days. We keep talking about the momentum players. What are you watching as far as the levels . Global,everything is you start to see market reversals. Where are the systematic stops . Ctas are basically models. The model says trade come of than you trade. I think of the quick trigger cpas would have been selling s p futures below 2600. Coincidently are not that is where the market went into freefall monday. One of the reasons, and it is always an autopsy afterwords but the x iv volatility blowup contributed to the meltdown. I think we are going to find ctas were selling at the same time which is why there were no bits. A joe we have the report coming out next week. I think it is going to be one of the more watch data points we have seen in some time. Which way is the way traders are leaning . Pushing inreally that direction and there is opportunity for a snap down . If you wind up with a relatively high inflation imprint people with say we three out three head rate hikes. That is going to reverse the front end of the curve. You have seen twoyear notes being bought a lot and twoyear notes have gone down. That can reverse a lot if you get above expectations. All right, thank you for joining us. Coming up, we spoke about volatility. It took center stage this week. E spoke to robert ingle he will be with us next. Julia we now are above 1 for all three majors. Not only in the green up more now. From new york my this is bloomberg. Julia a wild week for equities. Volatility firmly in the spotlight for investors. And the director of the Volatility Institute and professor of finance at the school of business, he joins us now from new york. Great to have you with us. You say the financial turmoil we have seen in the volatility derivatives is notable but not the story. What is the story here . The story is the volatility ofare seeing now is a result the movement we are expecting in , through the fed and the treasury is going to be selling these bonds over the next few years. Interest rates are going to rise. You expect the market to come down because it is discounting at a higher rate. We expect more volatility in Interest Rates and the stock market as well. It volatility, the effective is what we kind of expected. We did not know when it was going to happen. That is why it is a surprise. To the think it is due derivatives. It is due to the fundamental processes in the economy. Joe the way we talk about volatility is as if it is all placid and then it explodes and this pentup volatility unleashes out of nowhere. Is that how it is . Is there a relationship between the severity of the spike . Continuing tois change. Week, last at this week and then this week, you see the volatility was low. What i am talking about when i measure volatility is the volatility of the underlying assets. That shot up starting last week and is very high. It mirrors what the vix has done. I dont think that the derivative effects on the vix are actually dominant. It is volatility. Volatility after all is the natural response to new information and that is what we have got. Julia we have the vix volatility index back below 30. Scarlet looking at global volatility you can see across north america it is read relative to the past. We are talking a year ago where the vix was nowhere near those levels. If you look at the global volatility eight days ago it was a different story. I want to ask about correlation. Index volatility has risen more than average stock volatility. That suggests correlations have risen. Why do you think that is . The passive investment for instance . What has happened, if you look at the stock market indices, you see this incredible increase in volatility, well below 10 . Up until last week. Now it is maybe 30 . How does that happen . If you look at the volatility of individual stocks, you can look at the average in the market. It has only gone up very slightly. Muchan the index go up so in the individual stocks, they all start moving together. That is what we call correlation. Andelations have gone up that can happen subtly. The samely see economic drivers then all stocks move together. In markethis increase volatility but not individual stock volatility. Julia speaking of, i want to make the point that we are towards thely now final 10 minutes of the u. S. Trading session. Points. The dow up 380 we have seen a 900 plus point range in the trading session. Highs trading around the up 1. 6 . S p 500 and the nasdaq. 6 we were up for 50. That is how crazy volatility is. Seen thesewe have volatility spikes a few times in recent history. Early 2016 and the flash crash. How do they end . Do we have any idea of how long this can persist . Does something new comes in its way . New economic is information the market doesnt nowhere to go. It moves to a new equilibrium. , theis the volatility movement to a new equilibrium and fluctuating as it tries to find a new equilibrium. We saw with brexit the world orh was volatile for a month two. If you look at the effects of the u. S. Election, in our trading partners, we saw Something Like that. We are likely to see a couple weeks may be of high volatility. Stabilize ating to a new and lowerlevel of stock prices from what we had before. Scarlet perhaps a new regime. Professor robert ingle, thank you so much. Coming up, how quickly the good times have soured. We have the three charts you a zoomiss and there is higher in the final 20 minutes of trading. Joe we were say we were below where we are. Scarlet every sector now green as well. In positiveenergy territory. This is bloomberg. Scarlet s p and dow in correction mode. We have come back off of our lows of the session. We what to put this into context. We have had more than 20 sincetions from the peak 1940. It shows all the times the s p has seen a drawl down. I marked the 10 line here. It has happened fairly frequently. It was a month after the fed lift off. People were worried about a policy error. Before a long time another draw down. In the grand scheme of things we are still nowhere. We are now up 1. 6 . We are just slipping. 6 do you think we joe do you think we will close green . You cant be totally sure. Julia just to reiterate the choppiness, people changing their minds, you can see the prices, there is a great deal of uncertainty. Today is just the day to steal charts, he was talking about this earlier, ctas which have a momentum strategy, we show the chart earlier of one of the worst momentum reversals. Ere is how it shows up the biggest five session loss since 2007. You can see it speaks to how offsides they were because of the swift reversal of momentum. Extraordinary drawl down. One of the worst weeks in a long time. Scarlet momentum to the upside. We are looking at all 11 sectors as we head to the close. We are looking at gains. Off session highs, holding on to advances. Julia we have the 10 year yield, 2. 85 earlier in the session. Scarlet a lot of choppiness still in the markets. The dow up. This is bloomberg. Julia the quarter major averages holding after it soared from red to green today. Yields pushing up. I am julia chatterly. Scarlet im scarlet fu. Weisenthal. M joe if youre joining us live on twitter, we want to welcome you to our closing bell coverage every day. Scarlet we begin with our market minutes. Welcome to the end of a very volatile week. We have the s p, dow, and nasdaq 1. 4 . G higher, up is hard to tell what direction it would close and even an hour ago. We have been up, down, little changed. We fell 2 and rose 2 . In the end, we finish on the upside. Joe an extraordinary day. The fact we are sitting here talking about the dow up for 4. 50, dow down. Julia how do you trade these markets . Scarlet you sit on your hands. For a lot of people, it has been a painful couple of days. We sold off right into the close on three of the previous days. At one point, the s p and dow fell as much as more than a percent for their biggest weekly decline since november 2008. Back and will close out the week with the biggest declines since june or 2016. Julia we have to put in perspective the runoff and activities we have seen in 2018. Boys giving it some perspective here. Thenificance are always giving it some perspective. Scarlet the individual names almost a matter of this point. The Energy Stocks were the big decliners. By bay, were talking about 0. 3 . The highs of the level or higher as well. All and real estate leading better than 1. 9 . For the week, this is the trends people will remember, which is energy down right 8. 5 . Utilities off by 2. 8 . Losses all across the board. Joe a pretty ugly week, even if today is a little bit of a rally. Let us talk about the Government Bond market steepening. Yields the twoyear down again. People are starting to find expectations for rate hikes. But the 10 year yields are continuing to climb. It is close to the highs for the week. We have been a little higher earlier in the week. Dominant theme right now. The fact that there is not much of a bid at the long end of the treasury curve. 10 year yield, 2. 85 . Lets look at currency land. The dollar bill changed on friday even as we watched the significant gyration over in the equity markets. This you can see, we have dollar yen inflows into the swiss and yen. Mirroring a snapshot at the end of the equity sessions. Losses in the swissie and yen relative to the u. S. Dollar. Let us look at eurodollar. Have a look over at the last two weeks to get a sense of what is going on. Given the losses we have seen in the European Equity markets, more than 5 losses over the ,ast week for the German Market we have to remember the global theme going on overall here and that is significant losses in europe despite guests telling us over and over again the places to be outside of the United States and the likes of europe and emerging markets are worth bearing in mind. Do we have some currency stuff to give you a snapshot of what is going on . Scarlet ask and you shall receive. Julia nicely times, guys. Unchanged for one dollars 30 here. Emerging markets getting on some of the recovery are paring of risk, if youre looking at the losses we saw earlier in the gains today, same story for emerging markets. Joe finally come of those commodities. Oil down below 60 a barrel. It is amazing how quickly the story has flipped on oil. People are super were super bullish a few weeks ago. Now it went down another 3 below 60 a barrel. As scarlet was mentioning earlier, the big bloggers today did this partly explains why gold is not doing much and copper down 1. 2 . In the Energy Complex today. One often seen as an industrial bellwether. Those are todays market minutes. Scarlet for more on todays Market Action, let us bring in jim swanson. Jim, great to speak with you. Thank you for joining us. If you were to look at what happens today and in particular, the final hour of trading, when we came right back up, how much could you read into that price action, the recovery, the sharp rebound . Thidoes this suggest the shakeout is nearing the end . Not yet. Historically, these corrections and this is officially a last 30, 40, 50 trading days. The market was looking up and down in dramatic fashion and it tells me that machine training is really a big part of this and positioning and passive funds back and forth. I think that is what you are seeing today. To market does not know how calibrate this. I think that is what is behind it. Through the steps here. Using the main anxiety people are feeling or the machines that were programs by people is trying to recalibrate for a potentially new rate regime . Yes. I think so. Remember the setup. The olympics start tonight. Im a big skier and i use the word set up. In skiing it means snow conditions, light, condition. This week was one of the two were. Of, positions long everywhere everyone was buying on dips. People were not buying puts are trying to buy market protection by going along the vix. Believed the market just on one way, directional up and that cannot last forever. You know that. The fundamental story did begin to tilt and rates started to move up. Wages started to move up in the west. That is an inflationary trigger. That is the cause and set up. Julia we have had years and years and years of a bull market effectively and lower volatility, unprecedented. How does the structure change significantly, whether it is lower liquidity and fx and bond markets or the structure of someng, funds and products weve seen put on in the market . Exchangenk these traded products are based on derivatives. You touched on an important one, the bond structures. You have to remember the bonds world is not exchange traded. It is overthecounter. When you look at how that has developed. How much money has gone into these structures. It used to develops, how much money has gone into these structures, it used to be you buy around and they had capital devoted to trading bonds. Buds are huge part of the capital markets. They do not do that. They have been restricted. Program a lot more trading. A lot less liquidity and more passive buying of indexes. When the fish in the aquarium start to go that way instead of this way, everyone starts to move at once in all these machinedriven or algorithmdriven programs chip in. A lot of them have simu