Markets were clearly extended on many fronts and a correction was due. But nothing is normal about these liquidity soaked markets. The rally was historic with a 47.5% nearly vertical ascent following the March lows and the disconnect of valuations behind the size of the real economy has taken on historic levels. Markets reached nearly 152% market cap to GDP before the snapback as valuations suddenly dropped to 141.8% by Thursday's market close. And it happened fast as little support was built in a market that so heavily reliant on open overnight gap ups on the way up.

On Monday I made the case for Crash 2 highlighting narrowing patterns in the $VIX and $SPX that suggested another volatility event was shaping up and just 3 days later the $VIX wasted no time spiking to the 44 level filling its open gap in that area: