Major averages sold off on higher volume as fears over the dismal state of the global economy intensified. The fall in the price of oil and nervousness over the June 23 BREXIT vote also contributed to the selloff.

Interest rates fell further after the ECB fueled its QE program, buying bonds that pushed Germany's 10-yr Bund yield down as low as 0.01%, a record low, while all shorter term German bonds have negative yields. The Bank of Korea then unexpectedly cut its key interest rate to a record low of 1.25% from 1.5%. Adding further concern, China reported deflationary conditions as its CPI dropped -0.5% in May.

Bill Gross of Janus cautioned that record-breaking low yields and negative interest rates emerging in places like Japan and parts of Europe could have explosive implications. He tweeted:

"Global yields lowest in 500 years of recorded history. $10 trillion of neg. rate bonds. This is a supernova that will explode one day."

Indeed, the crippling effect negative yields can have on pension funds and insurance companies among other issues accelerates the pace of the sovereign debt crisis.

Nevertheless, central banks are on a mission to continue to push rates lower as their vigorous money printing campaigns remain on full tilt. The odds of a June hike dropped to just 1.9% according to Fed funds futures, and fell across the board as futures now place the odds of a rate hike above 50% all the way out to December.

The contest continues between QE-based capital which has been finding a home in hard assets, stocks, and bonds vs. the growing fear of failure in our central banks to revive the global economy. At the end of the day, while the market may have further sharp corrections as confidence falls, such as the two we have witnessed since last August, central banks will push QE-capital into stocks, bonds, and hard assets which will send markets higher until they finally break.

Periods of excessive volatility such as we saw in real-time in early 2016, in mid to late 2011, and in backtests in 2008 and 2000-2002 were highly favorable to both the Market Direction Model and the VIX Volatility Model. That said, always remember that change is the only constant, so never assume that what has happened in the past will happen in the future. Stay tuned.