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The fifty-point leap that lied — December 2015

Episode

The extreme

Look for the December 2015 event and you find it in seconds: the largest swing in reading of the half-year, a leap of more than fifty points in the system that measures where capital runs. After a November of flight, money seemed to be coming back — leaving the havens, rehabilitating the most battered assets. It looked like fear giving way. But one number, alone, was moving the other way: the banks, which tend to lead when risk appetite truly returns, were sinking even further. In numbers: the intermarket leapt from 12.19 to 65.25, crossing into moderate risk-on, while the Financials/IBOV ratio deepened from −1.47 to −1.82 of deviation — the component that worsened most in the month.

What happened next

The leap did not hold. In February 2016, two months later, the system was back to 22.43 — December's jump had evaporated, and the structure had relapsed into strong risk-off. The real recovery came slowly and by another road: in March 2016, three months later, it was the banks that finally turned — Financials/IBOV went from −1.65 to 0.18, nearly two deviations in a month —, and the intermarket rose to 43.29, a third month of improvement off the bottom. But not even that was a straight line. In June 2016, with domestic mood euphoric (89.7) and the Perene Risk Index pinned at 100, the structure stalled at 34.82, still in moderate risk-off: May had handed back the accumulated gains all at once. Only at year's end did the picture reconcile — December 2016 closed in strong risk-on, 73.54.

What did not happen

December 2015 was not the turn. The highest and loudest number of the month — that fifty-point leap — did not mark the return of risk appetite; February undid it. And the banks, the contradictor that was easy to ignore, were not noise: they were the warning. They deepened against the rally in December and only led the genuine recovery three months later. The 65.25 was flow off a very low bottom, not restored confidence — the month's own report called it "a technical truce."

The honest verdict

The loudest number lied; the quietest told the truth. The biggest move of the half-year was the least informative — a technical reaccommodation off the bottom. The real signal of what was coming lay not in what celebrated the rally, but in what contradicted it.

Continue reading: The 2015 crisis and the 2016 bottom · The 2016 bottom — structure before mood · Who bought at the scream →

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Characters: Structure (intermarket) · Flow (risk appetite) · Mood · Dollar