A Weekend Nobody Asked For

A look at how liquidity was the main player in the weekend's bloodbath. You'll also see how the markets are setup for a bull market continuation in the next few weeks.

Steve

Oct 13, 2025

Transcript

Friday’s tape delivered a full-on liquidity pull in equities and a follow-through flash crash across crypto. Today I’m mapping the news into a liquidity framework—what actually broke, who got squeezed, and where the tradeable edges are this week.

Catalyst Chain: China Rare Earths → Tariff Saber-Rattling → Nasdaq Shock

A rare-earth export headline met 100% tariff chatter and knocked the Nasdaq into a ~6σ intraday dump (around 10:00 AM CT). In stressed regimes, the “liquidity” you think is there often isn’t; phantom, leveraged liquidity vanishes when the bid pulls, and price gaps through air pockets.

Liquidity = Volatility (When It Leaves, Vol Arrives)

Zero-DTE flow has been suppressing realized vol for months by injecting short-dated liquidity. On Friday, that leverage unwound: correlations snapped to 1, option writers covered, and the market couldn’t source fresh liquidity fast enough. Result: statistically meaningful downside in minutes—and even more post-close as offsides were forced to clean up.

Crypto’s Mirror: Perps as the Vol-Suppressor

In DeFi, perpetual futures played the same role: massive notional leverage enabling hedges, arb, and cross-venue trades that damped volatility—until it didn’t. Pipes cracked, perps malfunctioned, and sophisticated spread books got liquidated. Ugly prints don’t always equal new fundamentals; they often reveal plumbing failure.

The Contrarian Read for Alts

Pulling leveraged liquidity can expand volatility both ways. With less perp-driven arbitrage pinning breakouts, some alt setups may finally stick later—after the fear digests. Utility-driven tokens (think oracles) could re-rate once structural noise fades.

Why I’m Not Max Bear on Equities

Term structure matters. The Nasdaq “VIX” (VXN) spiked to mid-20s, but longer-dated implieds were already rich (premium vs realized). When everyone’s hedged into a known event stack (hyperscaler earnings, China trade milestones into mid-November), the decay of that risk premium can be a bid in itself. Structurally, this looks like a leverage shock, not systemic deterioration.

Positioning Lens: The Squeeze Isn’t “Irrational”—It’s Forced

Mid-cap “future-tech” strength (e.g., Rigetti, IonQ, Oklo) isn’t mystery demand; it’s shorts forced to finance losses elsewhere. With double-digit short floats, a macro rug in mega-cap can accelerate covers in crowded shorts. Until that pressure clears, squeezes stay sticky.

Mining Mania: Hot Narratives, Cold Timelines

Rare earths, gold, silver, antimony, tungsten—mining tickers are ripping. Just remember: drill bits don’t scale like software. Many management teams will use strength to sell equity and extend runway. I’m constructive on the theme and under-investment gap, cautious on cap-structure and dilution traps. Separate real assets from promo.

Oil Tail Risk: Venezuela as an Overlooked Catalyst

With military assets building in the Southern Caribbean, upside tails in crude aren’t priced like they used to be. If geopolitics heat up, OTM calls and defined-risk upside structures in oil proxies can be mispriced versus realized risk—especially if upside skew stays sleepy.

Single-Name Idea: Amazon’s Failed Breakdown/Remount

AMZN defended a well-traveled support zone after Friday’s flush, building energy between ~215–235. A sustained remount and clean push >235 into year-end comp + macro détente could open new highs. Cheap, time-buffered upside structures make sense into the November event stack.

Gold: Stretch Stats Say “Fade Tactically”

Gold’s behavior rhymes with squeeze dynamics elsewhere. The statistical stretch vs its 50-week doesn’t happen often; defined-risk short-side option structures out in November can pay without getting chopped by near-term headlines.

Framework > Forecasts (Yes, I’m “Bearish by Nature”)

I bias toward pessimism—but I try to trade liquidity, catalysts, and narrative flow, not moralize macros. If price action and positioning contradict the story, I adjust. The goal is edge, not prophecy.

Quick Hit: Ferrari (RACE)

Post-earnings gap and trend break triggered positional de-risking. This looks more like pressure from how players were set into the print than a clean macro tell. Likely a lower-then-sideways cleanup, not on my active list.

Bottom Line

Friday/Sat/Sun was a leverage shock across two ecosystems. Short-dated options and perps yanked liquidity; vol expanded exactly as the framework predicts. Into mid-November, the premium embedded in hedges can bleed back into prices. I’m planning around fake-outs and retests—but net, I’d rather buy selective dips than chase doomsday.

If you want the precise trade structures I’m using (timing, strikes, risk caps), that’s in the client feed.