KW: Here is a good summary of the market volatility, mostly computer driven algorithms and all the talk about what traders are thinking is a waist of breath. Nothing to fear just yet I suspect unless the logos really swing into action, then who knows. Gold has been hit this time a day after the carnage as possibly many traders have to sell something to meet margin calls on derivatives out of the money. What we do know now is that the DOW was very volatile with alogos snaping between masive losses to surging gains. Logic? No where to be seen. Check the intra day volatility here: https://www.zerohedge.com/news/2018-02-06/volmageddon-sparks-6000-pt-swings-dow-liquidity-evaporates

“The truth is the market has grinded higher without a correction for too long,” writes our Greg Guenthner in today’s Rude Awakening. “Stocks were too hot. Volatility was dead. Something had to give.

“You can clearly see the upward channel the S&P 500 carved out during 2017. It was a historically smooth run, with no significant shakeouts spooking investors — just a slow, orderly grind higher.

“But look how the trend accelerated in January. Stocks went parabolic as they blasted through the roof almost every single day. Toward the end of the month, the major averages were all higher by at least 7%. That’s clearly unsustainable.”

As Greg’s trading buddy Jonas Elmerraji emailed me last night: “A week and a half ago, we were staring down a stock market that was on track for annualized total returns of around 100%, which is totally berserk.”

Indeed. The other takeaway from that chart is that as long as the S&P 500 holds above 2,600, the post-Election Day rally remains intact. As we check our screens, it’s at 2,629.

OK, but what about the speed of the drop? Well…

There’s something to that. The selling accelerated yesterday afternoon when the S&P 500 broke below the 2,700 level. There were surely many computer models and automated sell orders kicking in at that moment.

Of course, volatility went off the charts — at least by recent standards. Here’s the VIX, otherwise known as the market’s “fear gauge,” based on the action in S&P 500 index options. As we write this morning, it stands at 46.6. Again, the most recent analogue is August 2015…