There is a pattern beginning to shape since the election and for the most part it is not good for equities. The day before the election was a near time high for stocks and the market has not sniffed that again.
I am always trying to teach my options mentoring students to find opportunity. The key is to understand what the opportunity, where the edge and what is are the risk. Take a look at FXE; the IV 30 of FXE just hit a 104 week low.
Livevol (R) www.livevol.com
As I mentioned in the Vol Report this morning, the market did not do much, and I did not expect it to. Between the budgetary haggling and the Greek financing issues, the market has plenty to keep itself on hold. The VIX did take a pretty good plunge down to around 16.94 to close near the lows of the day. Under any other circumstances, if the IEA said the USA was going to be oil independent in the next 20 years, a nice little rally might ensue. The tepid response means no relief rally until there is some, well, relief. Same brew of better economic news but simmering macro issues. At le
Our COO was on Bloomberg today see the video below. Then read our follow up analysis:
For the second day in a row, we have seen the SPX break a significant 'technical' barrier. Yesterday the SPX failed to hold 1400; today the SPX on another decent sell off broke the 200 day moving average. To some this would be considered a MAJOR bearish sign. Yet I think it could be different. Below you can see a chart of the SPX and its ugly day.
Livevol (R) www.livevol.com
The people have spoken and amazingly they don’t want to change a thing. I must have missed something in that the last 2-4 years were so good.
Tonight as I write this Intrade is predicting an Obama victory to the tune of about 70% or so. This will be bullish some assets and bearish others. The assets I would be bullish are:
- Non-Dividend yielding stocks
- Any currency relative to the dollar
I would be bearish
- The Dollar
- Dividend Yielding Stocks
If Mitt Romney does eke out a win I would be bullish:
By tomorrow night I am not going to miss all the election ads and political screeds brought forth from the Super PACs and the not so Super PACs. This time 30 hours or so from now some decisions will get made on who rules for the next 4 years. I am guessing the Fiscal Cliff solution will happen by Jan 1st since we cannot keep the $ 1 Trillion of spending going forever unless this country wants to emulate the cradle of democracy, Greece. This brings me to trading the FXE.
I like many market participants today saw the early rally and the employment report and thought that we would get a continuation of yesterday. No such luck though (more later on that).
The market got a bit of a relief rally today. The hurricane was manageable and the employment picture was a bit brighter according to ADP so we had a very pleasant rally. Today was the first real smack down in volatility since the day before GOOG reported underwhelming numbers a couple of weeks ago. Anytime the VIX drops near 2 points it is a big readjustment in the volatility perception. Even with the election looming it won’t make much difference for the market if today’s IV markdown was any indication.