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What a surprise, AAPL earns huge dough!

Look for the Option Pit Store to open soon!

 

The market did not like CAT or MSFT earnings today.  It actually felt good to know stocks could sell off on bad news instead of the heroin induced QE state of suspended animation that has taken over equity prices for the last couple of years.  I don’t think the MSFT earnings were 10% bad but the market did not agree with me.  We are not talking MSFT, we will talk AAPL.

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S&P downgrades Russian Debt….now?

 

The weekend provided little real excitement as the Greek elections turned out worse than expected and no one cared.  The leftists are in power but what they are going to realize is they have little choice.  That seems to be the consensus from the reaction in European and US stocks.  VIX managed to turn in a new short term low to close 15.58.

The news out of Russia is worse.  The civilian population is suffering in the Ukraine again and Standard and Poor’s downgraded Russian Debt.  In March of 2014 this news out of Russia would have tanked the market and sent the Russian equities into the tank.  VIX could care less but the RSX did sell off after a recent rally.

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Euro Bust

Stocks made a little run down today on bad UPS earnings and some worries about the weekend vote in Greece.  If folks are paying up for SBUX coffee, things cannot be that bad so we will blame the Greeks. Even after the ECB made their made policy announcement the Euro continued to sell off.  I guess the question is why would you buy European sovereign debt?  Spain yields nothing, you have to pay the Germans and Greece is always on the brink of default.  The 10 year Treasury is still looking pretty good even after the dollar rally.

 

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Draghi killed the VIX

The ECB finally announces a bond buying program of their own.  We will call it Euro QE.  At the rate the Euro is crumbling there won’t be much left of the bond buying program in dollar terms as the Euro rushes pack to parity with the US dollar.  Stocks love the QE since they takeoff after a whiff of it is announced.

Witness the 5 day demise of the VIX.  The near 23 handle on Friday last week was reduced to 16 today.  At least in the short term the big moves we have had in 2015 should start to subside.  It is hard to remember the 8% realized vol markets of 2014 since we have averaged over 14% since the beginning of the year.  Intraday realized is even higher.

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Our Founder's VIX Analysis on Mad Money

Mark Sebastian our Founder wrote up this analysis on VIX yesterday, in which he described the changes in market volatility over the last few months.

 

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VIX Set For Crazy Settle?

In August of 2013,  the day the VIX of VIX settlement also happend to be the day of the a FOMC announcment that many thought might be when they would announce the beginning of the end of QE in the US.  The night before the VIX cash settled 14.91.  With little to no movement in the SPX. the VIX opened up much higher and settled to almost EVERYONE's surprize at 16.42.  A huge pop.  Check out the intra-day range the index had.

Chart - ^VIX - CBOE Volatility Index_window_screenshot_6.png

LivevolX (r) www.livevol.com

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The Interest Rate Boogie with the Homebuilders

We are finishing a volatile week for global markets and it most likely will stay that way until the ECB comes up with some announcement on Jan 22nd and/or the Greeks decide to elect a new government by the end of the month.  Earnings reports so far have been mediocre and without the promise of domestic QE, stocks have not been able to recover.  Short term things will stay choppy.

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Seismic shifts in the Euro Zone

 Sign up for our next event on Jan 17th here

Any domestic news today was overshadowed by the Swiss pulling the currency peg on the Euro.  The old 1.2 SWF to Euro is gone as the two quickly swung to parity.  This led to a rip in the Swiss stock market to the tune of a 10% drop.  To put that in perspective the SPX would be down 200 handles on the open for a move like that.

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Stocks are in a ball of confusion, but not too much

I am not sure what the confluence of news was that made folks nervous but it seemed to be a combination of retail sales, no ECB QE and the latest weak data out of China.  That was enough to drive VIX into the 23 handle briefly and set the VIX future curve backward to Aug.  We did get a close of Jan VIX close Aug however.  The vol traders could not hold the Jan too backward overnight.  They could not push it lower however so a little more movement is still expected.

http://www.vixcentral.com/

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Say Good Bye to 11 VIX...For Now

There are many people smarter than us calling for a new vol regime.  While we are not 100% sold that is the case, we can say with certainty that a VIX with an 11 handle is going to be very difficult to get to in the next few months.  Why?  Realized volatility.  The market is moving again, something it did not do for months on end.  Take a look at 10, 20 and 30 day HV relative to SPX implied vol.

Chart - ^SPX - Standard & Poors 500 Index_window_screenshot_7.png

LivevolX (r) www.livevol.com

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