The bottom that wasn't the bottom: when August's extreme still had a basement

Derivative

The extreme

In August 2015, the Perene Risk Index closed at 0.0 — the absolute floor of the scale. It had come from 79.1 the month before, that is, from appetite to dread in a single turn. The intermarket structure shrank from 21.3 to 14.6 and crossed into the most acute form of aversion. It was the kind of reading that usually makes the observer think: it can't get past here.

What happened next

It got past. September brought a deceptive relief — the Perene Risk Index came off the floor to 52.2, neutral territory, and cyclicals sketched a recovery. But it was surface relief: that same month the banks sank even further (Financials/IBOV at -2.65) and the dollar broke its edges again, closing at R$ 3.9065. And then November belied the rehearsal. The intermarket, which had risen close to 20.6, plunged to 12.2 — below August. Commodities were dumped in a hurry (from -1.01 to -2.13 in deviation) and Utilities climbed to the highest point of the reading, 2.64. Only in February 2016 did the intermarket rise again, to 22.4, and even so without leaving strong risk-off.

What didn't happen

The August reading did not mark the bottom. Anyone who bought "the scream" that month bought early: three months later the structure was worse, and the real thaw only came in 2016. Touching the floor of an indicator's scale does not stop the cycle from finding a basement beneath it. The anchor number describes today's state; it does not promise that tomorrow can't be colder.

Honest verdict

August's extreme got the diagnosis right — aversion of regime, not a one-day scare. Wrong was whoever treated it as a price bottom. Touching the floor of the scale is not the same as touching the bottom of the fall; between the two, there was November.

Continue the story: The three alarms of August 2015 · Crisis of 2015 × the 2016 bottom · What intermarket is →

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Characters: Flow (risk appetite) · Structure (intermarket) · Statistical anomaly